<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1999
REGISTRATION NO. 333-80221
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WINK COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 94-3212322
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1001 MARINA VILLAGE PARKWAY
ALAMEDA, CALIFORNIA 94501
(510) 337-2950
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARY AGNES WILDEROTTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WINK COMMUNICATIONS, INC.
1001 MARINA VILLAGE PARKWAY
ALAMEDA, CALIFORNIA 94501
(510) 337-2950
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
ARTHUR F. SCHNEIDERMAN, ESQ. CARY K. HYDEN, ESQ.
HERBERT P. FOCKLER, ESQ. R. SCOTT SHEAN, ESQ.
BETSEY SUE, ESQ. LATHAM & WATKINS
WILSON SONSINI GOODRICH & ROSATI 650 TOWN CENTER DRIVE, SUITE 2000
PROFESSIONAL CORPORATION COSTA MESA, CALIFORNIA 92626
650 PAGE MILL ROAD (714) 540-1235
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
---------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value
per share................... 4,830,000 $16.00 $77,280,000 $21,484
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</TABLE>
(1) Includes 630,000 shares of common stock issuable upon exercise of the
underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
Registration Fee in accordance with Rule 457(a) of the Securities Act of
1933, as amended.
(3) Of this amount, $16,680 was previously paid by the Registrant pursuant to
Rule 457(o) of the Securities Act in connection with the initial filing on
June 8, 1999. Pursuant to Rule 457(b) of the Securities Act, such previous
payment is being credited against the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION -- JULY 29, 1999
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PROSPECTUS
, 1999
LOGO
4,200,000 SHARES OF COMMON STOCK
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WINK COMMUNICATIONS:
- - We provide a complete end-to-end system for low-cost electronic commerce on
television.
PROPOSED SYMBOL & MARKET:
- - WINK/Nasdaq National Market
THE OFFERING:
- - We are offering 4,000,000 shares of our common stock and existing stockholders
are offering 200,000 shares.
- - The underwriters have an option to purchase an additional 630,000 shares from
Wink to cover over-allotments.
- - This is the initial public offering of our common stock. We anticipate that
the initial public offering price will be between $14.00 and $16.00 per share.
- - Closing: , 1999.
<TABLE>
<CAPTION>
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Per Share Total
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<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Wink:
Proceeds to the selling stockholders:
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</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
FACILITATOR OF INTERNET DISTRIBUTION
DLJDIRECT INC.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
GRAPHIC IN TWO PARTS
TITLE: [Wink logo] Wink Enhanced Broadcasting (TM)
PART 1: End-to-End System
Wink logo and series of pictures depicting viewer use of the Wink system
with the following captions:
1. Our symbol indicates show or ad has Wink;
2. Viewer interacts & responds with remote control;
3. Sent for fulfillment by advertiser;
4. Viewer receives order via mail; and
5. Wink supplies advertisers/programmers with a variety of reports.
PART 2: Production, Delivery and Response Collection
Diagram of pictures depicting various components of the Wink system with
the following captions:
o Wink Software is used to create enhanced TV applications;
o Wink Broadcast Server manages the scheduling and insertion of
applications;
o Video Integration Wink enables networks & advertisers to add Wink
to their video;
o Data Insertion integrates broadcast programming with Wink
applications;
o Satellite;
o Cable;
o Broadcast;
o Wink Engine enables TV to display Wink; and
o The Wink Response Network collects & aggregates viewer responses.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Forward-Looking Statements............ 12
Use of Proceeds....................... 12
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Consolidated Financial
Data................................ 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Business.............................. 27
Management............................ 39
Certain Transactions.................. 49
Principal and Selling Stockholders.... 54
Description of Capital Stock.......... 57
Shares Eligible for Future Sale....... 60
Underwriting.......................... 62
Legal Matters......................... 65
Experts............................... 65
Additional Information................ 65
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.
WINK COMMUNICATIONS
Wink Communications provides a complete end-to-end system for low-cost
electronic commerce on television. Our system, Wink Enhanced Broadcasting,
allows advertisers, merchants and broadcast and cable networks to create
interactive enhancements to traditional television advertisements and programs.
With a click of their remote control during an enhanced program or
advertisement, viewers can purchase merchandise, or request product samples,
coupons or catalogues. Similarly, viewers can use Wink to access program-related
information, such as news, sports and weather, participate in votes and polls,
and play along with gameshows.
Our business plan is to derive the primary portion of our future revenues
from transaction fees charged to advertisers and merchants for each purchase
order or other request for information. Several national advertisers have agreed
to create and air Wink-enhanced advertisements. In order to encourage these and
other advertisers and merchants to use Wink, our immediate goal is to maximize
the presence of Wink Enhanced Broadcasting in television households. To this
end, we have established relationships with, and licensed our technology to, 60
key participants from many segments of the television industry. For example:
- the four largest broadcast networks and 16 cable networks have agreed to
air Wink-enhanced programming and advertising;
- five of the six largest cable operators in the United States have agreed
to distribute Wink-enhanced programming and advertising in some of their
local markets, and the largest direct broadcast satellite operator in the
United States, DIRECTV, has agreed to distribute Wink-enhanced
programming and advertising nationwide;
- Microsoft Corporation has agreed to develop, market and distribute
Wink-enhanced programming and advertising on Microsoft's television
platforms; and
- several of the leading set-top box and television manufacturers have
agreed to incorporate Wink's technology into their products.
A number of key strategic and financial investors have invested in Wink,
including set-top box and television manufacturers, such as General Instrument,
Scientific Atlanta and Toshiba, as well as Microsoft, GE Capital, Vulcan
Ventures (controlled by Paul Allen) and Hughes Electronics Corporation, the
parent of DIRECTV.
We began the roll-out of our service in the United States in June 1998, and
we currently serve viewers in select cable markets in California, Connecticut,
Illinois, Missouri and Tennessee. In addition, Wink Enhanced Broadcasting has
been offered by Wink licensees in Japan since October 1996.
1
<PAGE> 6
MARKET OPPORTUNITY
Television is one of the most pervasive communications media in society
today. As a result, television advertising is considered to be one of the most
effective methods of building brand recognition and general consumer awareness
of products and services. Despite the fact that traditional television
broadcasting, cable and direct broadcast satellite television systems do not
provide an integrated means for viewers to respond to programs and
advertisements, the Direct Marketing Association estimates approximately $91
billion of goods and services were purchased through direct response television
programming and advertising in 1998. Many advanced analog and digital set-top
boxes and television sets already in consumers' homes can provide a platform for
interactive television. We believe that an opportunity exists for a simple,
immediate, inexpensive and automated method of responding to direct response
advertising on television.
BUSINESS STRATEGY
Our objective is to capitalize on the pervasiveness and popularity of
television to create a mass market medium for sales lead generation and
electronic commerce by:
- increasing the presence of Wink Enhanced Broadcasting in television
households by promoting the deployment of Wink software to set-top boxes
already in consumers' homes and promoting the deployment of new
Wink-enabled set-top boxes and television sets;
- offering viewers a free, easy-to-use, entertaining and informative
interactive television experience;
- expanding the availability of Wink-enhanced direct response offers by
working with our broadcast and cable network partners to enlist
advertisers to add Wink enhancements to their television advertisements;
and
- benefiting multiple participants in the television industry by offering
new opportunities for generating revenue and cost savings while
preserving traditional revenue streams and customer relationships.
Our success will depend upon the broad acceptance of the concept of
enhanced broadcasting by industry participants. To date, we have derived
substantially all of our revenue from license and engineering fees and charter
advertising fees. We have not derived any revenue from viewer response
activities.
Wink was incorporated in California in October 1994 and will be
reincorporated in Delaware prior to the closing of this offering. Our principal
executive office is located at 1001 Marina Village Parkway, Alameda, California
94501 and our telephone number is (510) 337-2950.
2
<PAGE> 7
THE OFFERING
Common stock offered by:
Wink........................... 4,000,000 shares
Selling stockholders........... 200,000 shares
---------------
Total..................... 4,200,000 shares
Common stock to be outstanding after
this offering....................... 28,600,646 shares
Use of proceeds..................... For working capital and other general
corporate purposes, including expansion
of our sales and marketing efforts, our
research and development activities and
our viewer response system, the Wink
Response Network. We will not receive
any proceeds from the shares sold by
the selling stockholders. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol.............................. WINK
The number of shares of common stock to be outstanding after this offering
is based on:
- shares outstanding as of June 30, 1999; plus
- 1,260,000 shares of convertible preferred stock issued in July 1999;
plus
- 988,200 shares of common stock which are expected to be issued on
exercise of warrants that expire upon completion of this offering.
The above number excludes:
- 4,069,314 shares of common stock issuable upon exercise of outstanding
options at June 30, 1999;
- 3,000,000 shares reserved for future issuance under our employee stock
plans after this offering; and
- an aggregate of 1,692,500 shares of common stock subject to warrants
that are expected to remain outstanding after this offering.
See "Capitalization," "Management -- Employee Benefit Plans" and Notes 2,
7, 8 and 9 of Notes to Consolidated Financial Statements.
Generally, unless otherwise indicated, all information in this prospectus:
- gives effect to the conversion of all outstanding convertible
preferred stock to common stock upon the closing of the offering,
including the convertible preferred stock issued in July 1999;
- gives effect to our reincorporation in Delaware, which will be
completed prior to the date of the closing of this offering; and
- assumes no exercise of the underwriters' over-allotment option.
3
<PAGE> 8
SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The following table summarizes the consolidated financial data for our
business. You should read the data set forth below together with our
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements and related Notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------
1995 1996 1997 1998 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................... $ 100 $ 348 $ 619 $ 517 $ 290 $ 620
Operating expenses..................... 2,320 6,484 10,275 15,212 6,383 11,360
Loss from operations................... (2,220) (6,136) (9,656) (14,695) (6,093) (10,740)
Net loss............................... (2,148) (5,884) (9,166) (14,036) (5,777) (9,201)
======= ======= ======= ======== ======= ========
Net loss per share:
Basic and diluted.................... $ (0.37) $ (0.91) $ (1.25) $ (1.57) $ (0.66) $ (0.92)
======= ======= ======= ======== ======= ========
Weighted average shares.............. 5,860 6,432 7,337 8,954 8,695 9,965
Pro forma net loss per share:
Basic and diluted.................... $ (0.92) $ (0.52)
======== ========
Weighted average shares.............. 15,198 17,832
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1999
-----------------------------------------
ACTUAL PRO FORMA
(IN THOUSANDS) AS ADJUSTED
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $73,456 $80,609 $135,559
Working capital........................................... 55,432 62,585 117,535
Total assets.............................................. 76,717 83,870 138,820
Convertible promissory note -- related party.............. 15,120 -- --
Long-term obligations, less current portion............... 140 140 140
Total stockholders' equity................................ 57,392 79,665 134,615
</TABLE>
In reviewing the above data, you should consider the following:
- - Operating expenses include non-cash charges for stock compensation and warrant
amortization totaling $283,000, $4,000, $455,000, $1,256,000, $622,000 and
$2,952,000 for the years ended December 31, 1995, 1996, 1997 and 1998, and for
the six months ended June 30, 1998 and 1999, respectively. See Notes 7, 8 and
9 of Notes to Consolidated Financial Statements.
- - See Note 2 of Notes to Consolidated Financial Statements for a discussion of
the computation of historical and pro forma basic and diluted net loss per
share and weighted average shares outstanding. Share information for all
periods presented has been retroactively adjusted to reflect a 10-for-1 split
of common stock and preferred stock in July 1995.
- - The Consolidated Balance Sheet Data for the period ended June 30, 1999 is
presented on a pro forma basis to reflect the issuance of convertible
preferred stock in July 1999 and the anticipated exercise of warrants that
expire upon completion of this offering. See "Capitalization."
- - The Consolidated Balance Sheet Data for the period ended June 30, 1999 also is
presented as adjusted to reflect the sale of shares of common stock offered
hereby, at an assumed initial public offering price of $15.00 per share and
the application of the net proceeds therefrom. See "Use of Proceeds,"
"Capitalization" and "Underwriting."
4
<PAGE> 9
RISK FACTORS
You should carefully consider the risks described below before buying
shares in this offering.
WE EXPECT TO INCUR SUBSTANTIAL OPERATING AND NET LOSSES
We have a limited operating history, which makes the prediction of future
results difficult. We have incurred significant net losses since inception and,
at June 30, 1999, had an accumulated deficit of $40.5 million. To date, we have
recognized minimal revenue and our ability to generate revenue is subject to
substantial uncertainty. In addition, we currently intend to incur substantial
operating expenses to fund additional technological development, sales,
marketing, transaction processing and general activities. For example, we expect
that our total operating expenses for the year ended December 31, 1999 will be
$20 to $25 million.
OUR LIMITED OPERATING HISTORY AND THE EMERGING MARKET FOR INTERACTIVE TELEVISION
MAKE OUR FUTURE FINANCIAL RESULTS UNPREDICTABLE
Our future revenue prospects, particularly those derived from viewer
response activities, are subject to a high degree of uncertainty. Currently, we
derive revenue from license fees and engineering fees. In the future, however,
we anticipate that our revenues will depend substantially on the level of viewer
response activity. Our experience with viewer responses is extremely limited. In
addition, our expense levels are based largely on our operating plans and
estimates of future revenue. We may be unable to adjust spending in a timely
manner to compensate for any unexpected shortfall in revenues. As a result, a
shortfall in actual revenues as compared to estimated revenues could have an
immediate material adverse effect on our financial performance.
IF TELEVISION VIEWERS DO NOT RESPOND TO WINK ENHANCEMENTS, WE WILL NOT GENERATE
SUFFICIENT REVENUES TO CONDUCT OUR BUSINESS
Our success will depend heavily upon broad acceptance of Wink Enhanced
Broadcasting by television viewers. If significant numbers of viewers do not
request information or purchase goods and services in response to Wink-enhanced
programming and advertising, advertisers and merchants are likely to terminate
their use of Wink-enhanced advertising or never adopt Wink Enhanced
Broadcasting. Viewers may not react favorably to Wink Enhanced Broadcasting for
various reasons, including:
- they may feel that responding to Wink-enhanced programming and
advertising is too complex or interferes with viewing television; or
- they may be concerned about security or privacy issues relating to the
transmission of their personal information through an electronic medium.
IF ADVERTISERS AND MERCHANTS DO NOT CREATE AND USE WINK-ENHANCED ADVERTISING, WE
WILL NOT GENERATE REVENUES SUFFICIENT TO CONDUCT OUR BUSINESS
Since our business plan is premised upon receiving the primary portion of
our revenue directly from advertisers and merchants, our business will suffer if
advertisers and merchants do not create and use Wink-enhanced advertising. In
addition, if advertisers and merchants are unwilling to pay on
5
<PAGE> 10
a fee-per-transaction basis, we will not be able to execute our business plan,
as it currently exists. To date, we have received no commitments for
advertisements that provide for a fee-per-transaction.
Under our "Charter Advertiser" program, our charter advertisers have agreed
to use only reasonable efforts to add Wink enhancements to a specified number of
their advertisements through various dates in 1999 and 2000. We do not currently
have any commitments for advertising beyond 2000. If we are unable to
successfully negotiate favorable agreements with our charter advertisers and
additional advertisers for periods beyond 1999, our business will suffer.
IF CABLE AND DIRECT BROADCAST SATELLITE SYSTEM OPERATORS DO NOT IMPLEMENT WINK
ENHANCED BROADCASTING, WE WILL BE UNABLE TO DISSEMINATE WINK-ENHANCED
PROGRAMMING AND ADVERTISING TO CONSUMER HOMES
If Wink Enhanced Broadcasting is not broadly accepted by cable and direct
broadcast satellite system operators, our business plan will not succeed. These
operators may choose not to implement Wink Enhanced Broadcasting for a variety
of reasons. Operators typically have numerous potential new services to offer
their subscribers and limited resources with which to implement these services.
They may not offer Wink Enhanced Broadcasting if it is not more attractive than
other available services. Also, because some older model Wink-capable set-top
boxes have insufficient memory capacity to include Wink enhancements without
limiting the operation of existing or contemplated services, operators may be
unwilling to offer the Wink services for these set-top boxes. In addition, Wink
Enhanced Broadcasting responses and purchase requests by cable subscribers can
only be returned to cable operators if the cable operators have deployed systems
that enable transmission on a two-way basis. Cable operators are under no
obligation to deploy systems on a two-way basis. If these operators are unable
or unwilling to deploy systems on a two-way basis, responses to Wink Enhanced
Broadcasting cannot be collected.
Our agreements with cable and direct broadcast satellite system operators
do not ensure that they will deploy Wink Enhanced Broadcasting. Our agreements
with cable system operators are limited and generally set forth only a framework
and pricing for the operators' local cable systems to adopt Wink Enhanced
Broadcasting, should they choose to do so. In many cases, actual deployment of
Wink Enhanced Broadcasting may be subject to additional negotiation and
agreement with each local system. As a result, we cannot predict with any
certainty whether Wink Enhanced Broadcasting will be deployed in any new cable
markets or, if deployed, the timing of the deployment. Similarly, our agreement
with DIRECTV does not require DIRECTV to make Wink Enhanced Broadcasting
available on all models of DIRECTV-compatible set-top boxes, or to any
particular number of households or set-top boxes during the term of the
agreement. In addition, to deploy Wink Enhanced Broadcasting through DIRECTV, we
must enter into separate agreements with the manufacturers of DIRECTV-compatible
set-top boxes. Although we have reached an agreement with the two leading
manufacturers of DIRECTV-compatible set-top boxes, we may not be able to
negotiate agreements with other manufacturers on favorable terms, or at all.
IF BROADCAST AND CABLE NETWORKS DO NOT AIR WINK-ENHANCED ADVERTISEMENTS, WE WILL
NOT GENERATE REVENUES FROM ADVERTISERS AND MERCHANTS
Because Wink enhancements are only available to viewers of networks that
have adopted Wink Enhanced Broadcasting, we must rely upon networks to air
Wink-enhanced advertising and programming in order to execute our business plan.
While we have entered into agreements with 16 cable networks and four broadcast
networks, these agreements generally commit the networks to use only reasonable
efforts to air a specified amount of Wink-enhanced programming and do not
require a
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Wink programming enhancement to be available at all times during this
programming. In addition, NBC's commitment to air Wink-enhanced programming has
expired, although NBC continues to air such programming. Moreover, our
agreements allow the networks to select the programming to be enhanced at their
discretion, and do not require the networks to employ enhanced broadcasting for
all types of programming. Our agreements with networks are short-term (generally
one to eight years) and generally can be terminated after one year. Some
networks can also terminate their agreements with us early upon the occurrence
of certain events, including our failure to achieve specific performance
requirements. The termination of one or more of these agreements, or our failure
to enter into additional agreements and to increase programming commitments
substantially, may prevent us from generating sufficient revenues to conduct our
business.
IF SET-TOP BOX AND TELEVISION MANUFACTURERS DO NOT INCORPORATE OUR SOFTWARE INTO
THEIR PRODUCTS, WE WILL BE UNABLE TO DISSEMINATE WINK-ENHANCED PROGRAMMING AND
ADVERTISING TO CONSUMERS' HOMES
Because Wink programming enhancements can only be viewed with an advanced
analog or digital set-top box or Wink-enabled television set, the success of our
business will depend heavily on the wide-spread availability and use of these
products. Currently, in the United States, there are only a limited number of
Wink-enabled televisions and Wink-enabled set-top boxes deployed. Accordingly,
if set-top box and television manufacturers do not significantly increase the
availability of Wink-enabled set-top boxes and television sets, Wink-enhanced
programming and advertising will not be available to large numbers of consumers.
While we have licensed Wink technology to General Instrument, Scientific
Atlanta and Pioneer for incorporation into their digital and advanced analog
cable set-top boxes and to Thomson Consumer Electronics and Hughes Network
Systems for incorporation into their DIRECTV-compatible set-top boxes, these
agreements do not commit these parties to incorporate our software into their
products. In addition, our existing and future agreements with cable and
DIRECTV-compatible set-top box manufacturers may not result in the production,
marketing, distribution or sale of a significant number of Wink-enabled set-top
boxes. Moreover, any of these agreements may be terminated.
WE WILL INCUR SUBSTANTIAL LIABILITY IF WINK ENHANCED BROADCASTING FAILS TO
GENERATE SUFFICIENT REVENUE TO MEET OUR REVENUE GUARANTEES AND OTHER OBLIGATIONS
We have entered into agreements with Microsoft, cable and direct broadcast
satellite system operators and other market participants to share with these
entities a portion of revenues, if any, we generate from viewer responses to
Wink Enhanced Broadcasting. For certain cable and direct broadcast satellite
system operators, we have provided a minimum revenue guarantee if the operator
meets a minimum volume threshold for Wink Engines deployed. These guarantees
range from $2 to $5 per year per Wink-enabled home. In addition, we have made
minimum revenue guarantees to Microsoft ranging from $2 to $4 per year per
Wink-enabled device in which Microsoft controls the operating system,
application environment and content and data services, in exchange for certain
rights to process viewer responses to enhanced television offers. If Wink
Enhanced Broadcasting fails to generate sufficient revenue to meet the
guaranteed amount per Wink subscriber, we are required to pay the difference
between the guaranteed amount and the amount actually earned by the operator or
Microsoft. These liabilities may be substantial. See Notes 6 and 9 of Notes to
Consolidated Financial Statements.
We have also agreed to provide marketing and technical development funds to
a number of cable and direct broadcast satellite system operators, contingent
upon the commercial launch of Wink
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Enhanced Broadcasting, including in some cases a per set-top box fee of up to
$3.50. See Note 6 of Notes to Consolidated Financial Statements.
OUR ABILITY TO GENERATE REVENUES WILL SUFFER IF CREATORS OF PROGRAMMING OR
ADVERTISING DO NOT CREATE HIGH-QUALITY CONTENT
In order for Wink to motivate viewers to interact with Wink-enhanced
programming and advertising, creators of programming and advertising must
develop and integrate high-quality Wink Enhanced Broadcasting content. If they
fail to do so, viewers may not respond to Wink-enhanced programming, which would
impair our ability to generate revenue.
THE FAILURE OF THE WINK RESPONSE NETWORK TO PERFORM EFFECTIVELY AND RELIABLY
WILL AFFECT OUR ABILITY TO EARN TRANSACTION FEE REVENUES
An essential part of our strategy is the generation of high volumes of
commercial transaction traffic through the Wink Response Network, in conjunction
with related information systems at broadcast and cable networks, cable and
direct broadcast satellite system operators, advertisers and merchants.
Consequently, the inability by us or our strategic partners, to operate and
maintain the required transaction-processing systems and associated
infrastructure for the Wink Response Network or the subsequent occurrence of
significant system interruptions or errors, would affect our ability to:
- consistently execute viewer response transactions;
- maintain satisfactory levels of customer service; and
- attract and retain strategic relationships in the television industry.
We have only recently begun capturing and routing transaction responses
through the Wink Response Network on a very limited basis. We have no experience
routing large numbers of transactions. We may not be able to accurately predict
and prepare for significant increases in response transactions, if any, or to
effectively implement any necessary system changes, expansion and upgrades in a
timely manner. We may also be required to change or upgrade the Wink Response
Network in order to respond to changes in the information systems used by
advertisers, merchants, networks or cable or direct broadcast satellite system
operators.
THE EMERGING NATURE OF THE MARKET FOR INTERACTIVE TELEVISION MAY CREATE
SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS, WHICH COULD RESULT
IN A DECLINE IN THE TRADING PRICE OF OUR COMMON STOCK
Our future quarterly operating results may fluctuate significantly due to a
number of factors related to the emerging market for interactive television,
including:
- the amount of transaction-processing activity through the Wink Response
Network;
- the timing and success of infrastructure upgrades necessary to support
deployment by industry participants;
- the timing of the change, if any, in the basis of our relationships with
advertisers and merchants from a fixed flat fee arrangement to a
fee-per-transaction arrangement; and
- the effect of stock-based incentives provided to various industry
participants.
8
<PAGE> 13
Due to these factors, it is possible that our operating results in one or more
future quarters will fail to meet or exceed the expectations of securities
analysts or investors. In such event, the trading price of our common stock
would likely decline. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
WE FACE COMPETITION FROM A NUMBER OF COMPANIES WHICH MAY BE IN A BETTER POSITION
TO COMPETE IN OUR INDUSTRY
Many of our competitors may be in a better position to produce and market
their services due to their greater financial, technical, manufacturing and
marketing resources. As a result, we may not be able to compete effectively. Our
competitors may also have the support of, or relationships with, important
industry participants which could adversely affect the extent of support these
market participants give to Wink Enhanced Broadcasting.
Current and potential competitors in one or more aspects of our business
include television and other system software companies, interactive television
system providers and multimedia authoring tool providers. We also face
competition from other providers and companies operating in the direct marketing
business, especially operators of toll-free response call centers. See
"Business -- Competition."
WE NEED TO ADAPT TO TECHNOLOGICAL CHANGE IN A MARKET THAT MAY NEVER FULLY
DEVELOP OR MAY DEVELOP WITH STANDARDS THAT ARE NOT COMPATIBLE WITH OUR
TECHNOLOGY.
The emerging and unsettled market for interactive television will require
that we continually improve the performance, features and reliability of Wink
Enhanced Broadcasting, particularly in response to competitive offerings. We may
not be successful in responding quickly, cost-effectively and adequately to
these developments. The introduction of new technologies or standards for
enhanced broadcasting could render Wink Enhanced Broadcasting obsolete or
unmarketable. In addition, the widespread adoption of new television
technologies or standards, cable-based or otherwise, could require us to make
substantial expenditures to modify or adapt our technology, products, services,
network or business model.
WE ARE DEPENDENT ON THE SERVICE OF OUR CHIEF EXECUTIVE OFFICER, AS WELL AS OUR
TECHNICAL PERSONNEL
Our future success and performance is substantially dependent on the
continued services and performance of our senior management and other key
personnel, especially our chief executive officer. Our performance also depends
on our ability to retain and motivate our officers and key employees. The loss
of the services of any of our executive officers or other key employees could
materially adversely affect our business. We do not have long-term employment
agreements with any of our key personnel. Our future success also depends on our
ability to identify, attract, hire, train, retain and motivate other highly
qualified technical, managerial, sales, marketing and customer service
personnel. Competition for such personnel, especially software programmers and
film engineers, is particularly intense in the San Francisco bay area.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH COULD IMPAIR OUR
ABILITY TO COMPETE
Because our ability to compete is dependent in part upon our internally
developed, proprietary intellectual property, our competitive position will
suffer if we do not adequately protect our intellectual property rights. We rely
on patent, trademark, trade secret and copyright law, as well as
9
<PAGE> 14
confidentiality procedures and licensing arrangements to establish and protect
these rights. Despite these precautions, a third party could copy or otherwise
obtain and use our products or technology without authorization, or develop
similar technology independently through reverse engineering or other means.
Litigation may be necessary in the future to enforce our intellectual property
rights. Such litigation could result in substantial costs and diversion of
resources.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS MAY BE ASSERTED AGAINST US, WHICH
COULD DISRUPT OUR BUSINESS.
If third parties assert claims of infringement of their proprietary rights
against us, we will incur significant costs and a diversion of resources with
respect to the defense of these claims. If any claims or actions are asserted
against us, we may seek to obtain a license under a third party's intellectual
property rights. However, a license under such circumstances may not be
available on reasonable terms, if at all.
On August 6, 1998, John L. Berman, an individual, filed suit against us in
the U.S. District Court in the Northern District of California, alleging that we
infringed his patents for an interactive television graphics interface and for a
method and apparatus for applying overlay images. If we fail to defend these
allegations successfully, our business and financial performance may be
adversely affected.
OUR COMPUTER SYSTEMS AND SOFTWARE AND THOSE OF OUR SOFTWARE AND HARDWARE
PROVIDERS AND THIRD PARTY NETWORK PROVIDERS MAY NOT BE YEAR 2000 COMPLIANT,
WHICH MAY DISRUPT OUR OPERATIONS
We face risks associated with the fact that many electronic devices,
systems and applications may not recognize calendar dates beginning in the Year
2000. This could result in system failures or miscalculations causing
disruptions of our operations, including a temporary inability to transmit our
enhancements and receive and process viewer responses. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
WE MAY NOT BE ABLE TO MAINTAIN THE SECURITY OF VIEWER TRANSACTION RESPONSES,
WHICH COULD ADVERSELY AFFECT OUR REPUTATION AND ABILITY TO ATTRACT VIEWER
RESPONSES
A significant barrier to communications and commerce through Wink Enhanced
Broadcasting is the need for secure transmission of confidential information,
such as credit card numbers, over public networks. A party who is able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. We may be required to expend significant
capital and other resources to protect against these security breaches or to
alleviate problems caused by these breaches. We intend to rely on third parties
for call center operators and data center processing under confidentiality
agreements, and we have no direct control over the confidentiality or security
practices of these parties. Negligent or hostile actions by third parties or
other events or developments may result in a compromise or breach of our current
or future systems designed to protect customer transaction data. Any such
compromise of security could materially adversely affect our reputation and
ability to attract viewer responses and may expose us to a risk of loss or
litigation and potential liability. Moreover, concerns over the security of
communications and commerce through enhanced broadcasting may inhibit the growth
of enhanced broadcasting, especially as a means of conducting commercial
transactions.
10
<PAGE> 15
GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT OUR ABILITY TO BROADLY TRANSMIT WINK
ENHANCED BROADCASTING AND CAPTURE MARKETING DATA
Governmental regulation of the telecommunications, media, broadcast and
cable television industries may adversely affect the ability of Wink and other
market participants to transmit Wink Enhanced Broadcasting. In addition, future
legislation or regulatory requirements regarding privacy issues could be enacted
to require notification to users that captured data may be used by marketing
entities to target product promotion and advertising to that user.
OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS WILL BE ABLE TO
CONTROL SIGNIFICANT CORPORATE MATTERS AS A RESULT OF THEIR CONCENTRATED
OWNERSHIP OF WINK COMMON STOCK
Our current directors, executive officers and principal stockholders and
their affiliates will beneficially own approximately 38.1% of the outstanding
common stock of Wink upon completion of this offering, based on shares
outstanding as of June 30, 1999, plus shares of convertible preferred stock
issued in July 1999 and shares that are expected to be issued upon exercise of
warrants that expire upon completion of this offering. If the underwriters'
over-allotment option is exercised in full, these persons will own 37.3%. Thus,
the directors, executive officers and principal stockholders may be able to
control all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing a change in
control of Wink. See "Principal and Selling Stockholders" and "Description of
Capital Stock."
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
The market price of our common stock could decline as a result of sales of
a large number of shares in the market after this offering or the perception
that such sales could occur. These factors also could make it more difficult for
us to raise funds through future offerings of common stock.
There will be 28,600,646 shares of common stock outstanding immediately
after this offering. The 4,200,000 shares sold in this offering will immediately
be transferable without restriction in the public market, unless these shares
are held by affiliates. Also, an additional 87,800 shares will become eligible
for sale on the date of this prospectus or within 180 days after the date of
this prospectus. The holders of the remaining 24,312,846 shares are subject to
agreements with the underwriters or us that restrict their ability to transfer
their stock for 180 days after the date of this prospectus without consent of
the underwriters or us. After these agreements expire, an additional 18,034,511
shares will be eligible for sale in the public market. See "Shares Eligible for
Future Sale."
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS
Our management may spend most of the proceeds from this offering in ways
with which the stockholders may not agree. The majority of the net proceeds of
this offering are not allocated for specific uses other than working capital and
general corporate purposes. We cannot assure that the proceeds will be invested
to yield a favorable return. See "Use of Proceeds."
11
<PAGE> 16
ANTITAKEOVER PROVISIONS OF OUR CHARTER DOCUMENTS MAY AFFECT OUR STOCK PRICE AND
INHIBIT A CHANGE OF CONTROL DESIRED BY SOME STOCKHOLDERS
There are provisions in our charter documents, such as the elimination of
stockholders' ability to take actions by written consent and limitations on
stockholders' ability to raise matters at a meeting of stockholders without
giving advance notice, that may delay or prevent a change in control or
management. In addition, our Certificate of Incorporation authorizes the Board
of Directors to issue preferred stock and to fix its rights and without any
approval of the stockholders. The issuance of preferred stock, could make it
more difficult for a third party to acquire a majority of the outstanding voting
stock of Wink, thereby delaying, deferring or preventing a change in control of
Wink. Furthermore, preferred stock may be given other rights, including economic
rights senior to the common stock, that affect the market value of our common
stock. See "Description of Capital Stock -- Antitakeover Effects of Delaware Law
and Certain Provisions of Wink's Certificate of Incorporation and Bylaws."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements regarding whether and
the extent to which Wink Enhanced Broadcasting will be adopted by industry
participants, and plans for the introduction of new products and services. We
use words such as "anticipates," "believes," "plans," "expects," "future,"
"intends" and similar expressions to identify such forward-looking statements.
This prospectus also contains forward-looking statements attributed to certain
third parties relating to their estimates regarding the growth of advanced
analog and digital set-top box use, increases in spending on direct response
television advertising and the growth of electronic commerce. You should not
place undue reliance on these forward-looking statements, which apply only as of
the date of this prospectus. Our actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including the risks faced by us described under the caption "Risk Factors" and
elsewhere in this prospectus.
USE OF PROCEEDS
The net proceeds we will receive from our sale of 4,000,000 shares of
common stock offered hereby are estimated to be approximately $54,950,000. This
is based on an assumed initial public offering price of $15.00 per share and
after deducting underwriting fees and expenses payable by us. We will receive
additional net proceeds of up to approximately $8,790,000 if the underwriters
exercise their over-allotment option. We will not receive any proceeds from the
sale of shares by the selling stockholders.
We intend to use the net proceeds of this offering for working capital and
other general corporate purposes, including expansion of our sales and marketing
efforts, research and development activities, and our viewer response network,
the Wink Response Network. If necessary, we may also use a portion of the net
proceeds of this offering to fund revenue guarantees to industry participants.
The amounts actually expended by us for these purposes will depend upon a number
of factors, including future revenue growth, the amount of cash generated by our
operations and the progress of our efforts to establish Wink Enhanced
Broadcasting as a television standard. We may also use a portion of the proceeds
to acquire or invest in businesses, products or technologies that are
complementary to Wink's, although there are no current commitments regarding any
such acquisitions or investments.
12
<PAGE> 17
Pending such uses, we intend to invest the net proceeds from this offering
in investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
do not currently anticipate paying any cash dividends on our common stock in the
foreseeable future and we intend to retain any future earnings for use in the
expansion of our business and for general corporate purposes.
13
<PAGE> 18
CAPITALIZATION
The following table sets forth our actual, pro forma and as adjusted
capitalization as of June 30, 1999. Our pro forma capitalization gives effect
to:
- the issuance of 1,260,000 shares of convertible preferred stock in
exchange for cancellation of indebtedness in July 1999 and the
anticipated issuance of 988,200 shares of common stock upon exercise of
warrants that expire upon completion of this offering; and
- the conversion of all outstanding shares of preferred stock into
12,764,333 shares of common stock and certain amendments to our
certificate of incorporation to be effected prior to the offering.
Our as adjusted capitalization gives effect to:
- the issuance and sale of 4,000,000 shares of common stock offered by us
in this offering; and
- the application of the estimated net proceeds from the sale of our common
stock based on an assumed initial public offering price of $15.00 per
share and after deducting estimated underwriting fees and other offering
expenses.
<TABLE>
<CAPTION>
AT JUNE 30, 1999
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalent and short-term investments............ $ 73,456 $ 80,609 $135,559
======== ======== ========
Convertible promissory note -- related party................ $ 15,120 $ -- $ --
======== ======== ========
Capital lease obligations, less current portion............. $ 140 $ 140 $ 140
-------- -------- --------
Stockholders' equity
Convertible preferred stock, $0.001 par value: issuable in
series; 13,001,250 shares authorized actual, 5,000,000
pro forma and as adjusted; 11,504,333 shares issued and
outstanding actual, none pro forma and as adjusted..... 12 -- --
Common stock, $0.001 par value: 35,000,000 shares
authorized actual, 100,000,000 pro forma and as
adjusted; 10,848,113 shares issued and outstanding
actual, 24,600,646 pro forma, 28,600,646 as adjusted... 11 25 29
Additional paid-in capital................................ 105,936 128,207 183,153
Stockholder notes receivable.............................. (2,801) (2,801) (2,801)
Unearned compensation..................................... (5,306) (5,306) (5,306)
Accumulated deficit....................................... (40,460) (40,460) (40,460)
-------- -------- --------
Total stockholders' equity............................. 57,392 79,665 134,615
-------- -------- --------
Total capitalization.............................. $ 57,532 $ 79,805 $134,755
======== ======== ========
</TABLE>
Outstanding shares in the above table excludes:
- 4,069,314 shares of common stock issuable upon exercise of outstanding
options at June 30, 1999, at a weighted average exercise price of $5.22
per share;
- 3,000,000 shares reserved for future issuance under our employee stock
plans after this offering; and
- 1,692,500 shares of common stock subject to warrants that are expected to
remain outstanding after the offering, at a weighted average exercise
price of $9.73 per share.
See "Management -- Employee Benefit Plans" and Notes 2, 7, 8 and 9 of Notes to
Consolidated Financial Statements.
14
<PAGE> 19
DILUTION
As of June 30, 1999, our pro forma net tangible book value was $79,665,000
or $3.24 per share. Pro forma net tangible book value per share represents the
amount of our total tangible assets reduced by the amount of our total
liabilities divided by the pro forma number of shares of common stock
outstanding after giving effect to the conversion of all outstanding preferred
stock into common stock upon the completion of this offering. After giving
effect to the issuance and sale of the shares of common stock offered in this
offering at an assumed initial public offering price of $15.00 per share (after
deducting estimated underwriting fees and other offering expenses payable by
us), our adjusted pro forma net tangible book value as of June 30, 1999, would
have been $134,615,000 or $4.71 per share. This represents an immediate increase
in the pro forma net tangible book value of $1.47 per share to existing
stockholders and an immediate dilution of $10.29 per share to new investors. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Pro forma net tangible book value per share before the
offering............................................... $3.24
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.47
-----
Adjusted pro forma net tangible book value per share after
the offering.............................................. 4.71
------
Dilution per share to new investors......................... $10.29
======
</TABLE>
The following table summarizes, as of June 30, 1999, the difference between
the existing stockholders and the purchasers of shares of common stock in this
offering (at an assumed initial public offering price of $15.00 per share) with
respect to the number of shares of common stock purchased from us, the total
consideration paid and the average price paid per share.
<TABLE>
<CAPTION>
AVERAGE
PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
--------------------- ----------------------- ---------
NUMBER PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 24,600,646 86.0% $118,271,000 66.3% $ 4.81
New investors................ 4,000,000 14.0 60,000,000 33.7 15.00
---------- ----- ------------ -----
Total.............. 28,600,646 100.0% $178,271,000 100.0%
========== ===== ============ =====
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options
after June 30, 1999 and no exercise of those warrants that will remain
outstanding after this offering. As of June 30, 1999, we had outstanding:
- options to purchase 4,069,314 shares of common stock at a weighted
average exercise price of $5.22 per share; and
- warrants to purchase 1,692,500 shares of common stock that are expected
to remain outstanding after this offering, at a weighted average exercise
price of $9.73 per share.
In addition, we have reserved 3,000,000 additional shares for future
issuance under our employee stock plans after this offering. To the extent that
any of these options or warrants are exercised, there will be further dilution
to new investors. See "Management -- Employee Benefit Plans" and Notes 2, 7, 8
and 9 of Notes to Consolidated Financial Statements.
The tables on this page give effect to the issuance of 1,260,000 shares of
convertible preferred stock in July 1999 and the anticipated issuance of 988,200
shares of common stock upon exercise of warrants that expire upon completion of
this offering.
The second table on this page does not, however, give effect to sales of
shares by the selling stockholders. Sales by the selling stockholders in this
offering will reduce the number of shares held by existing stockholders to
24,400,646 shares, or 85.3% of the shares outstanding, and will increase the
number of shares held by new investors to 4,200,000 shares, or 14.7% of the
shares outstanding.
15
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and notes
thereto and other financial information included elsewhere in this prospectus.
The consolidated statement of operations data set forth below for the years
ended December 31, 1996, 1997 and 1998 and the consolidated balance sheet data
as of December 31, 1997 and 1998 are derived from, and are qualified by
reference to, our audited Consolidated Financial Statements included elsewhere
in this prospectus. The consolidated statement of operations data for the period
from October 7, 1994 (inception) through December 31, 1994 and for the year
ended December 31, 1995 and the consolidated balance sheet data as of December
31, 1994, 1995 and 1996 are derived from audited Consolidated Financial
Statements, which are not included in this prospectus. The consolidated
statement of operations data for the six months ended June 30, 1998 and 1999 and
the consolidated balance sheet data as of June 30, 1999 are derived from
unaudited Consolidated Financial Statements included in this prospectus, which
have been prepared on the same basis as the audited Consolidated Financial
Statements and, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments) necessary for fair presentation of
such information. Historical results are not necessarily indicative of results
for any future period.
<TABLE>
<CAPTION>
OCTOBER 7,
1994
(INCEPTION)
THROUGH SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED DECEMBER 31, JUNE 30,
------------ -------------------------------------- ------------------
1994 1995 1996 1997 1998 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses -- related parties....... $ -- $ -- $ -- $ 384 $ 174 $ 78 $ 97
Licenses -- third parties......... -- -- -- -- 224 113 201
Services -- related parties....... -- 100 155 148 -- -- 198
Services -- third parties......... -- -- 193 87 119 99 124
------ ------- ------- ------- -------- ------- --------
Total revenues............. -- 100 348 619 517 290 620
------ ------- ------- ------- -------- ------- --------
Costs and expenses:
Cost of services -- related
parties......................... -- 98 323 162 -- -- 142
Cost of services -- third
parties......................... -- -- 235 376 513 133 63
Research and development.......... 4 786 2,595 4,313 6,345 2,644 4,060
Sales and marketing............... 10 689 2,263 3,198 4,732 2,154 2,335
General and administrative........ 11 464 1,064 1,771 2,366 830 1,808
Stock-based costs and
expenses(a)..................... -- 283 4 455 1,256 622 2,952
------ ------- ------- ------- -------- ------- --------
Total costs and expenses... 25 2,320 6,484 10,275 15,212 6,383 11,360
------ ------- ------- ------- -------- ------- --------
Loss from operations................ (25) (2,220) (6,136) (9,656) (14,695) (6,093) (10,740)
Interest and other income........... -- 72 279 684 813 394 1,590
Interest expense.................... -- -- (27) (194) (154) (78) (51)
------ ------- ------- ------- -------- ------- --------
Net loss............................ $ (25) $(2,148) $(5,884) $(9,166) $(14,036) $(5,777) $ (9,201)
====== ======= ======= ======= ======== ======= ========
Net loss per share(b):
Basic and diluted................. $(0.01) $ (0.37) $ (0.91) $ (1.25) $ (1.57) $ (0.66) $ (0.92)
====== ======= ======= ======= ======== ======= ========
Weighted average shares........... 5,100 5,860 6,432 7,337 8,954 8,695 9,965
Pro forma net loss per share(b):
Basic and diluted................. $ (0.92) $ (0.52)
======== ========
Weighted average shares........... 15,198 17,832
</TABLE>
16
<PAGE> 21
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
------------------------------------------ -----------
1994 1995 1996 1997 1998
(IN THOUSANDS) 1999
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................ $184 $2,909 $4,157 $ 8,530 $16,892 $44,794
Short-term investments............................... -- -- -- 5,452 4,441 28,662
Working capital...................................... (83) 2,218 2,886 11,367 17,443 55,432
Total assets......................................... 260 3,317 5,642 15,629 23,920 76,717
Convertible promissory note -- related parties....... -- -- -- -- -- 15,120
Long-term obligations, less current portion.......... -- -- 1,114 767 365 140
Stockholders' equity (deficit)....................... (9) 2,530 3,135 11,925 19,125 57,392
</TABLE>
- ---------------
(a) Stock-based costs and expenses include non-cash charges for stock
compensation and warrant amortization. See Notes 7, 8 and 9 of Notes to
Consolidated Financial Statements.
(b) See Note 2 of Notes to Consolidated Financial Statements for a discussion of
the computation of historical and pro forma basic and diluted net loss per
share and weighted average shares outstanding. Share information for all
periods presented has been retroactively adjusted to reflect a 10-for-1
split of common stock and preferred stock in July 1995.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with, and is qualified in its entirety
by reference to, our Consolidated Financial Statements and the related Notes
thereto appearing elsewhere in this prospectus. This discussion contains
forward-looking statements relating to future events and our future financial
performance, each of which involves risks and uncertainties. These events and
our actual results could differ materially from those described in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors," "Business" and elsewhere in
this prospectus.
OVERVIEW
Wink Communications was founded in 1994 and our activities to date have
consisted of:
- developing and adapting our technology for operation in televisions and
advanced analog and digital set-top boxes;
- licensing our Wink Studio authoring tool software to major broadcast and
cable networks, third-party developers and advertisers to enable them to
develop Wink Enhanced Broadcasting;
- licensing our Wink Server software to broadcast and cable networks and
cable system operators to incorporate Wink enhancements into their
television programming;
- developing the Wink Response Network for collecting and managing
responses to Wink Enhanced Broadcasting;
- marketing the concept of Wink Enhanced Broadcasting and establishing the
Wink brand; and
- establishing relationships with and licensing our technology to key
television industry participants.
Revenues. Through June 30, 1999, our revenues were derived from license
fees relating to the Wink Engine and Wink Studio software, non-recurring
engineering services under agreements to port the Wink Engine software to
various televisions and set-top boxes, charter advertising fees and service fees
relating to software installation and post-installation customer support. We
recognize software license revenues relating to the Wink Engine on a
"sell-through" basis upon notification of shipment of Wink-enabled products by
the original equipment manufacturer. License fees from Wink Studio software are
recognized ratably over the term of the subscription license agreement.
Non-recurring engineering services are recognized using the
percentage-of-completion method, using labor hours as a measure of progress
towards completion. Fees from installation services are recognized as services
are provided, and post-installation customer support fees are recognized ratably
over the term of the support agreement. Fees received in advance of revenue
recognition are included on the balance sheet as deferred revenue.
Our business plan is to derive the primary portion of our future revenues
from the Wink Response Network by charging transaction fees to advertisers and
merchants for each information request or purchase order obtained from viewers
who respond to Wink Enhanced Broadcasting. We may also derive revenue in the
future from sales of products by Wink through our dedicated interactive
channels. As a result, we do not expect that non-recurring engineering services
will represent a significant component of future revenues. The Wink Response
Network has been developed and was activated on a limited basis in the second
half of 1998. However, no transaction fee revenue has been recognized to date.
All advertising agreements in place as of June 1999 provide
18
<PAGE> 23
for a flat fee to be paid to Wink without any per transaction fees. These fees
are recognized ratably over the life of the agreement, generally one year.
We expect that, in future periods, revenues may also be derived from the
Wink Broadcast Server and Wink Server Studio applications. These applications
are being offered to customers under monthly license fee arrangements with terms
ranging from one to five years, with periodic fee increases based upon changes
in the Consumer Price Index and other events. Revenues derived from such
arrangements will be recognized ratably over the term of the subscription
license agreement.
We have incurred net losses since inception and, at June 30, 1999, had an
accumulated deficit of approximately $40.5 million. We may never achieve
favorable operating results or profitability. See "Risk Factors -- We have a
history of losses and expect future losses." In addition, our future quarterly
operating results may fluctuate significantly due to a number of factors, many
of which are outside of our control. See "Risk Factors -- The emerging nature of
the market for interactive television may create significant fluctuations in our
quarterly operating results, which could result in a decline in the trading
price of our common stock" and "Risk Factors -- Our limited operating history
and the emerging market for interactive television make our future financial
results unpredictable."
Cost of Services. Cost of services is composed primarily of direct
engineering labor and materials associated with our arrangements to provide
non-recurring engineering services. In future periods, cost of services is also
expected to include costs of providing installation services, the portion of
transaction fees shared with third parties, cost of merchandise sold directly by
Wink through dedicated interactive channels and the costs of operating the Wink
Response Network, including processing and telecommunication costs.
Research and Development. Research and development expense includes costs
associated with our engineering and operations departments, including personnel
costs, allocated facilities-related expenses and payments to third-party
consultants. We expect research and development expense to increase in the
future as additional personnel are hired to support anticipated growth.
Sales and Marketing. Sales and marketing expense includes salaries,
consulting fees, travel-related costs, advertising expenses and allocated
facilities-related expenses associated with our cable sales, consumer marketing
and content departments. In future periods, sales and marketing expense is
expected to increase significantly and to include costs incurred by our customer
service center to register and respond to inquiries from Wink television
viewers, costs of marketing materials, commercial spots and training for the
launch of Wink Enhanced Broadcasting in new cable systems, as well as costs of
sales performance incentives to various consumer electronics retailers to
encourage them to register their customers as Wink users.
General and Administrative. General and administrative expense includes
administrative and executive personnel costs, allocated facilities-related
expenses and other administrative costs. We expect general and administrative
expense to increase in the future as additional personnel are hired to support
anticipated growth.
Stock-Based Costs and Expenses. Stock-based costs and expenses include
compensation charges associated with the amortization of unearned compensation
related to certain stock option grants, sales of restricted stock to employees,
issuance of common stock to employees for bonuses and warrants granted for
services rendered to Wink.
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RESULTS OF OPERATIONS
Since inception, we have been engaged primarily in the development and
licensing of Wink Enhanced Broadcasting. Accordingly, our historical results of
operations are not indicative of and should not be relied upon as an indicator
of future performance.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
REVENUES
Total revenues increased 114% to $620,000 for the six months ended June 30,
1999, compared to $290,000 for the six months ended June 30, 1998. The increase
was related primarily to a $198,000 increase in non-recurring engineering
revenue from a related party as certain development agreements were completed
and a $88,000 increase in license revenues from third parties. During the first
six months of 1999, transactions with Toshiba and a subsidiary of Thomson
Multimedia S.A. accounted for 44% and 18% of our total revenues, respectively.
COSTS AND EXPENSES
Total costs and expenses increased 78% to $11.4 million for the six months
ended June 30, 1999, compared to $6.4 million for the six months ended June 30,
1998. The increase was primarily a result of increased stock-based costs and
expenses and additional operating costs associated with the development, testing
and deployment of Wink Engine software, the Wink Broadcast Server software and
the Wink Response Network, as well as increased research and development
expenses, sales and marketing expenses and general and administrative expenses
to support anticipated future growth. We believe that costs and expenses will
continue to increase as we expand our operations and sales and marketing
efforts.
Cost of Services. Cost of services increased 54% to $205,000 for the six
months ended June 30, 1999 from $133,000 for the six months ended June 30, 1998,
reflecting the recognition of non-recurring engineering expenses related to the
performance of such services.
Research and Development. Research and development expense increased 54% to
$4.1 million for the six months ended June 30, 1999 from $2.6 million for the
six months ended June 30, 1998, as additional engineering and operations
personnel costs were incurred to support increased product deployment
activities.
Sales and Marketing. Sales and marketing expense increased 8% to $2.3
million for the six months ended June 30, 1999 from $2.2 million for the six
months ended June 30, 1998. The increase was primarily due to increased
personnel costs in 1999.
General and Administrative. General and administrative expense increased
118% to $1.8 million for the six months ended June 30, 1999 from $830,000 for
the six months ended June 30, 1998. The increase was primarily related to the
hiring of administrative and executive personnel to support anticipated future
growth.
Stock-based Costs and Expenses. Stock-based costs and expenses increased
375% to $3.0 million for the six months ended June 30, 1999 from $622,000 for
the six months ended June 30, 1998. The increase was primarily due to the 1999
issuance of warrants to purchase common stock to a broadcast company and to an
affiliate of another broadcast company and to the 1999 issuance of common stock
to employees as an incentive bonus. Unearned compensation at June 30, 1999
totaled $5.3 million, which will be amortized in future periods over the vesting
periods of certain restricted stock and stock options.
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During the six months ended June 30, 1999, we granted fully exercisable
warrants to purchase 325,000 shares of common stock at $12.00 per share, subject
to adjustment, as incentive for signing definitive software licensing
agreements. The fair value of these warrants on the measurement date totaled
$1,980,000 and was recognized as a stock-based cost and expense as there were no
remaining performance obligations on behalf of the holders and no significant
license revenues are expected to be derived from the agreements.
In May 1999, we granted to Microsoft a fully exercisable warrant to
purchase 500,000 shares of common stock at $12.00 per share, subject to
adjustment, in connection with the signing of a 10 year definitive software
distribution agreement. The fair value of this warrant on the measurement date
totaled $4.1 million and will be recognized as a stock-based cost and expense
over the period of benefit of five years. During the six months ended June 30,
1999, amortization recognized totaled $68,000.
In June 1999, we issued an aggregate of 50,000 shares of common stock to
employees as incentive bonuses. The fair value of these shares of common stock
on the issuance date totaled $600,000 and was recognized as a stock-based cost
and expense as the shares were fully-vested on the date of grant.
Interest and Other Income, Net of Interest Expense. Net interest and other
income increased 387% to $1.5 million for the six months ended June 30, 1999
from $316,000 for the six months ended June 30, 1998. The increase was primarily
due to the 1999 recognition of other income totaling $1.0 million resulting from
a settlement with a customer for cancellation of a development and license
agreement. This increase was also due to interest earned on increases in the
average cash and investment balances as well as lower interest expense
associated with borrowings under the Company's lease financing facility.
Income Taxes. We have not generated taxable income since inception and, as
a result, the provision for income taxes consists solely of the California
minimum franchise tax of approximately $1,000 per year, which is included in
general and administrative expenses. At June 30, 1999, we had federal and state
net operating loss carryforwards of approximately $34.5 million available to
reduce future taxable income. Due to a cumulative change of our ownership of
greater than 50% in December 1995, March 1996 and March 1998, the amount of loss
carryforwards that can be utilized to reduce our future taxable income for
federal and state income tax purposes will be limited to approximately $8.0
million per year. Based on a number of factors, including the lack of a history
of profits, management believes that there is sufficient uncertainty regarding
the realization of deferred tax assets such that a full valuation allowance has
been provided.
Net Loss. We have incurred net losses since our inception. The net loss
increased 59% to $9.2 million for the six months ended June 30, 1999 from $5.8
million for the six months ended June 30, 1998. The increase in net loss was due
primarily to significant increases in stock-based costs and expenses from
warrant grants and increases in operating expenses as a result of our efforts to
expand business activities, partially offset by an increase in revenue over the
same period.
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
REVENUES
Total revenues were $517,000, $619,000 and $348,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. The decrease of 16% from the
year ended December 31, 1997 to the year ended December 31, 1998 was related
primarily to a decline in non-recurring engineering fees from related parties,
as certain development agreements were completed in 1997, and to a decline in
royalties from Wink Engine software from related parties, resulting from lower
shipments of Wink-
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enabled television sets. These decreases were partially offset by an increase in
software license fees with third parties totaling $224,000. During 1998,
transactions with Toshiba, Pioneer and a subsidiary of Thomson Multimedia S.A.
each accounted for at least 10% of our total revenues. The increase of 78% from
the year ended December 31, 1996 to the year ended December 31, 1997 was related
primarily to Wink Engine royalties earned on shipments by Toshiba of
Wink-enabled televisions, partially offset by a decline in non-recurring
engineering fees, as certain development agreements neared completion. During
1997, transactions with Toshiba, Scientific-Atlanta and General Instrument each
accounted for at least 10% of our total revenues. Revenues in 1996 were derived
primarily from three development agreements with Scientific-Atlanta, Pioneer and
Matsushita to port the Wink Engine software to their respective set-top boxes or
televisions. During 1996, transactions with Scientific-Atlanta, Matsushita,
Pioneer and General Instrument each accounted for at least 10% of our total
revenues.
COSTS AND EXPENSES
Total costs and expenses were $15.2 million, $10.3 million and $6.5 million
for the years ended December 31, 1998, 1997 and 1996, respectively. The
increases of 48% from the year ended December 31, 1997 to the year ended
December 31, 1998, and 58% from the year ended December 31, 1996 to the year
ended December 31, 1997 were primarily a result of additional operating costs
associated with the development, testing and deployment of the Wink Engine
software, the Wink Broadcast Server software and the Wink Response Network, as
well as substantial sales and marketing expenses. We believe that continued
expansion of our operations and our sales and marketing efforts is critical to
the achievement of our goals. Therefore, we believe that costs and expenses will
continue to increase.
Cost of Services. Cost of services were $513,000, $538,000 and $558,000 for
the years ended December 31, 1998, 1997 and 1996, respectively. The decrease of
5% from the year ended December 31, 1997 to the year ended December 31, 1998 was
due primarily to the completion of various engineering projects during 1998. The
decrease of 4% from the year ended December 31, 1996 to the year ended December
31, 1997 was due primarily to engineering projects initiated by us in 1996 and
1995 that neared completion.
Changes in gross margins from services revenues realized during the years
ended December 31, 1998, 1997 and 1996 were primarily attributed to engineering
efforts required to meet the terms of individual non-recurring engineering
agreements. Our initial non-recurring engineering agreements were with related
parties and these agreements yielded lower gross margins than recognized on
subsequent non-recurring engineering agreements with third parties. We do not
expect that non-recurring engineering fees will represent a significant
component of future revenues.
Cost over-runs on non-recurring engineering service agreements with related
parties and third parties during the years ended December 31, 1998, 1997 and
1996, resulted in costs incurred in excess of revenues recognized. At each
reporting period, we record an accrued liability for the total remaining loss on
non-recurring engineering services agreements that are expected to result in an
overall loss.
Research and Development. Research and development expenses were $6.3
million, $4.3 million and $2.6 million for the years ended December 31, 1998,
1997 and 1996, respectively. The increase of 47% from the year ended December
31, 1997 to the year ended December 31, 1998 was due primarily to additional
engineering and operations personnel costs incurred to support increased product
deployment activities. The increase of 66% from the year ended December 31, 1996
to the year ended December 31, 1997 was due primarily to increased personnel
costs associated with our expanded operations.
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Sales and Marketing. Sales and marketing expenses were $4.7 million, $3.2
million and $2.3 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The increase of 48% from the year ended December 31, 1997 to the
year ended December 31, 1998 was primarily a result of resources expended to
support the initial deployment of Wink Enhanced Broadcasting in 1998. The
increase of 41% from the year ended December 31, 1996 to the year ended December
31, 1997 was primarily a result of increased personnel and travel-related costs.
General and Administrative. General and administrative expense was $2.4
million, $1.8 million and $1.1 million for the years ended December 31, 1998,
1997, and 1996, respectively. The year-to-year increases of 34% and 66%,
respectively, resulted primarily from recognizing $375,000 of costs in 1998
associated with our planned initial public offering that was postponed in the
second half of 1998 and the hiring of administrative and executive personnel in
1998 and 1997 to begin to position us to achieve our long-term goals.
Stock-based Costs and Expenses. During the years ended December 31, 1998,
1997 and 1996, we recognized stock-based costs and expenses totaling $1,256,000,
$455,000 and $4,000, respectively. These amounts consist of the amortization of
unearned compensation related to certain stock option grants, sales of
restricted stock to employees and warrants granted for services rendered to
Wink.
During the years ended December 31, 1998, 1997 and 1996, we recognized
unearned compensation totaling $600,000, $700,000 and $0, respectively, with
respect to certain stock option grants and sales of restricted stock to
employees. Amortization of unearned compensation totaled $615,000, $215,000 and
$4,000 during the years ended December 31, 1998, 1997 and 1996, respectively.
The remaining unearned compensation at December 31, 1998, totaling $479,000, and
unearned compensation recognized subsequent to December 31, 1998 will be
amortized in future periods over the respective stock and option vesting
periods.
In June 1997, we granted warrants to purchase an aggregate of 375,000
shares of common stock to a broadcasting company, which is affiliated with one
of our stockholders. The broadcasting company has agreed to use reasonable
efforts to develop and air Wink-enhanced programming over approximately an
18-month period. A warrant to purchase 75,000 of these shares was exercisable on
the grant date and had an estimated fair value of $20,000, which was immediately
charged to stock-based costs and expenses. Vesting of a warrant to purchase the
remaining 300,000 shares was originally contingent upon specified future
performance criteria over an 18-month period. At December 31, 1997, the warrants
had an estimated fair value at the prospective vesting date of $726,000, of
which $220,000 was recognized as a stock-based cost and expense during 1997.
Effective February 1, 1998, the agreement with the broadcasting company was
amended to remove all remaining performance vesting criteria, and the warrants
became fully exercisable. The $506,000 difference between the February 1, 1998
estimated fair value of $726,000 and the previously recognized expense is
included in stock-based costs and expenses over the period in which we received
benefits from the broadcaster's services, which was completed during the year
ended December 31, 1998.
In August 1998, as consideration for consulting services, we granted a
fully exercisable warrant to purchase common stock to a company which is one of
our stockholders. The warrant enables the holder to purchase 25,000 shares of
common stock at $8.00 per share and expires in August 2003. The estimated fair
value of the warrant totaled $135,000 and is included in stock-based costs and
expenses for the year ended December 31, 1998.
In December 1998, we issued to Vulcan Ventures Incorporated, a stockholder,
warrants to purchase up to an aggregate of 250,000 shares of common stock,
subject to certain exercisability and performance conditions. Any exercise of
the warrants is conditioned upon cable television system
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operators affiliated with Vulcan deploying set-top boxes containing Wink Engines
to at least 200,000 households between January 1, 1999 and December 31, 2001.
Vulcan may exercise the warrants on or after February 1, 2001 for a number of
shares equal to one-fifth the number of households in which a Wink-enabled
set-top box is deployed by a Vulcan affiliate during calendar 1999, which box
remains deployed for at least one year after deployment. The exercise price for
such shares is $12.00 per share. Vulcan may exercise the warrants on or after
February 1, 2002 for an additional number of shares equal to one-fifth the
number of households in which a Wink-enabled set-top box is deployed during
calendar 2000, which box remains deployed for at least one year thereafter, less
the number of shares which became exercisable in 2001, up to the aggregate
maximum of 250,000 shares. The exercise price of such additional shares is
$16.00 per share. At December 31, 1998, the lowest aggregate fair value of the
warrant totaled $1,218,000. At June 30, 1999, the lowest aggregate fair value of
the warrant totaled $2,050,000. This amount will be remeasured at each reporting
date until the deployment of Wink-enabled technology to the specified number of
cable subscribers is achieved. When and if it becomes probable that the
performance criteria will be achieved, we will record the then fair value
associated with the units meeting the performance criteria as a charge to
stock-based costs and expenses.
Interest and Other Income, Net of Interest Expense. Net interest and other
income was $659,000, $490,000 and $252,000 for the years ended December 31,
1998, 1997 and 1996, respectively. These increases were due to interest earned
on increases in the average cash and investment balances in later years as a
result of the receipt of the proceeds from sales of preferred stock, partially
offset by an increase in interest expense associated with borrowings under the
Company's lease financing facility.
Income Taxes. We have not generated taxable income since inception and, as
a result, the provision for income taxes consists solely of the California
minimum franchise tax of approximately $1,000 per year, which is included in
general and administrative expenses. At December 31, 1998, we had federal and
state net operating loss carryforwards of approximately $27.0 million available
to reduce future taxable income. Due to a cumulative change of ownership of
greater than 50 percent in December 1995, March 1996 and March 1998, the amount
of loss carryforwards that can be utilized to reduce future taxable income for
federal and state income tax purposes will be limited to approximately $8.0
million per year. Based on a number of factors, including the lack of a history
of profits, management believes that there is sufficient uncertainty regarding
the realization of deferred tax assets such that a full valuation allowance has
been provided.
Net Loss. We have incurred net losses since inception, including net losses
of $14.0 million, $9.2 million and $5.9 million for the years ended December 31,
1998, 1997, and 1996, respectively. The year-to-year increases in net losses
were due primarily to significant increases in expenses as a result of
additional business activities and stock-based costs and expenses. For the year
ended December 31, 1997, these increases in expenses were partially offset by a
small increase in revenue.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our activities largely through the
private sale of equity securities and through proceeds from capital lease
financing. At June 30, 1999, our principal source of liquidity was from $73.5
million of cash, cash equivalents and short-term investments.
Net cash used in operating activities totaled $6.8 million, $10.9 million,
$7.0 million and $5.3 million for the six months ended June 30, 1999 and the
years ended December 31, 1998, 1997 and 1996, respectively, primarily as a
result of our net losses.
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Net cash used in investing activities totaled $24.7 million for the six
months ended June 30, 1999 and was attributable mainly to the net purchases of
short-term investments totaling $24.2 million and the acquisition of $470,000 of
property and equipment. For the year ended December 31, 1998, net cash used in
investing activities was $358,000 and was attributable to the acquisition of
$1.4 million of property and equipment, which was partially offset by $1.0
million of net proceeds from short-term investment maturities. Net cash used in
investing activities was $5.8 million for the year ended December 31, 1997,
attributable primarily to net purchases of short-term investments. Net cash used
in investing activities was $1.3 million for the year ended December 31, 1996,
attributable to the acquisition of property and equipment.
Net cash provided by financing activities for the six months ended June 30,
1999 was $59.4 million, consisting primarily of proceeds totaling $44.3 million
from the sale of Series D preferred stock and proceeds totaling $15.1 million
from the issuance of a convertible promissory note to Microsoft, a related
party. In July 1999, Microsoft exercised its right to exchange the convertible
promissory note for 1,260,000 shares of our Series D convertible preferred
stock. For the years ended December 31, 1998 and 1997, net cash provided by
financing activities was $19.6 million and $17.2 million, respectively,
consisting primarily of net proceeds from sales of Series C preferred stock and
common stock in each year. Net cash provided by financing activities was $7.9
million for the year ended December 31, 1996, due to $6.5 million received as
net proceeds from sales of Series B preferred stock and $1.4 million in proceeds
from lease financing transactions.
We have entered into agreements with Microsoft, cable and direct broadcast
satellite system operators and other market participants to share with these
entities a portion of revenues, if any, we generate from viewer responses to
Wink Enhanced Broadcasting. For Microsoft and certain cable and direct broadcast
satellite system operators, we have provided a minimum revenue guarantee. We
have also agreed to provide marketing and technical development funds to a
number of cable and direct broadcast satellite system operators, contingent upon
the commercial launch of Wink Enhanced Broadcasting, including in some cases a
per set-top box fee of up to $3.50. If Wink Enhanced Broadcasting fails to
generate sufficient revenue to meet the guaranteed amount per Wink subscriber,
we are obligated to pay the difference between the guaranteed amount and the
amount actually earned. See Notes 6 and 9 of Notes to Consolidated Financial
Statements.
We believe that our existing cash, cash equivalents and short-term
investments, together with net proceeds of approximately $54.9 million from the
sale of 4,000,000 shares in this offering will be sufficient to meet our
currently anticipated business requirements, including capital expenditures and
strategic operating programs, for at least the next 12 months. We expect to
spend approximately $20 to $25 million for total operating expenses in the year
ended December 31, 1999, and to use a portion of the proceeds from the offering
to fund these expenses during the remainder of 1999 and thereafter. Thereafter,
if any, we may need to sell additional equity or debt securities or obtain
additional credit facilities. The sale of additional equity or convertible debt
securities may result in additional dilution to our stockholders. We may not be
able to raise any such capital on terms acceptable to us, if at all.
YEAR 2000 COMPLIANCE
Many existing electronic devices, systems and applications use only two
digits to identify a year in the date field, without considering the impact of
the upcoming change in the century. As a result, such devices, systems and
applications could fail or create erroneous results unless corrected so that
they can process data related to the year 2000 and beyond. We rely on certain
devices, systems and applications in operating and monitoring all major aspects
of our business, including financial systems (such as general ledger, accounts
payable and payroll), customer services, infrastructure, networks
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and telecommunications equipment. We also rely, directly and indirectly, on
external systems of business enterprises, both domestic and international, for
accurate exchange of data.
We have tested our internally developed information technology and
non-information technology systems. Based on such testing, we believe that such
systems are Year 2000 compliant.
In addition to our internally developed software, we utilize software and
hardware developed by third parties both for our customers and internal
information systems. We have initiated Year 2000 tests with such third parties
to determine Year 2000 compliance. Based upon initial tests and evaluation of
our primary software and hardware providers, we believe that all of these
providers are in the process of reviewing and implementing their own Year 2000
issue compliance programs. We will continue to work with these providers to
address the Year 2000 issue and seek assurances from them that their products
are Year 2000 compliant.
We have not incurred any significant expenses to date, and we are not aware
of any material costs associated with our anticipated Year 2000 efforts.
However, if we, our providers of hardware and software or our third party
network providers fail to remedy any Year 2000 issues, we could experience a
material loss of revenues that could materially adversely affect our business,
results of operations and financial condition. Furthermore, even if our products
comply with Year 2000 requirements, we believe that the purchasing patterns of
customers and potential customers may be affected by Year 2000 issues, as
companies expend significant resources to correct or patch their current systems
to comply with Year 2000 requirements. These expenditures may result in reduced
funds available to purchase or deploy products and systems such as those we
offer, which could have a materially adversely affect on our business, operating
results and financial condition.
We have not yet developed a comprehensive contingency plan to address the
issues which could result from such failure. We are prepared to develop such a
contingency plan if our ongoing assessment indicates areas of significant
exposure. See "Risk Factors -- Our computer systems and software and those of
our software and hardware providers and third party network providers may not be
Year 2000 compliant, which may disrupt our operations."
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. In June 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of Effective Date of FASB
Statement No. 133" ("SFAS 137"). SFAS 133, as amended by SFAS 137, is effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000, with
earlier application encouraged. The Company does not currently nor does it
intend in the future to use derivative instruments and therefore does not expect
that the adoption of SFAS 133 and SFAS 137 will have any impact on its financial
position or results of operations.
In December 1998, the AICPA issued Statement of Position 98-9,
"Modification of SoP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions" ("SoP 98-9"), which is effective for transactions entered into in
fiscal years beginning after March 15, 1999. SoP 98-9 amends SoP 97-2 and
extends the effective date of SoP 98-4, "Deferral of the Effective Date of a
Provision of SoP 97-2, Software Revenue Recognition" ("SoP 98-4"), and provides
additional interpretive guidance. The adoption of SoP 97-2 has not had and the
adoption of SoP 98-4 and SoP 98-9 are not expected to have a material impact on
our future results of operations, financial position or cash flows.
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BUSINESS
The following discussion of our business contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth under
"Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Wink Communications provides a complete end-to-end system for low-cost
electronic commerce on television. Our system, Wink Enhanced Broadcasting,
allows advertisers, merchants and broadcast and cable networks to create
interactive enhancements to traditional television advertisements and programs.
With a click of their remote control during an enhanced program or
advertisement, viewers can purchase merchandise or request product samples,
coupons or catalogues. Similarly, viewers can use Wink to access program-related
information such as news, sports and weather, participate in votes and polls,
and play along with various games.
Our business plan is to derive the primary portion of our future revenues
from transaction fees charged to advertisers and merchants for each purchase
order or other requests for information. As a result, our principal customers
are expected to be advertisers and merchants. In order for merchants and
advertisers to use Wink, many participants in the television industry must
license our technology and work with us to make Wink Enhanced Broadcasting
possible. We believe that wide acceptance of Wink by major television industry
participants is essential for us to attract merchants and advertisers. We have
established relationships with, and licensed our technology to, 60 key industry
participants from many segments of the television industry. For example:
- the four largest broadcast networks, NBC, ABC, CBS and FOX, and 16 cable
networks have agreed to air Wink-enhanced programming and advertising;
- five of the six largest cable operators in the United States, including
AT&T/TCI, Time Warner Cable, Comcast Cable Communications, Cox
Communications and Charter Communications, have agreed to distribute
Wink-enhanced programming and advertising in some of their local markets;
- the largest direct broadcast satellite operator in the United States,
DIRECTV, has agreed to distribute Wink-enhanced programming and
advertising nationwide and, although the current agreement with DIRECTV
contains no minimum deployment commitments, DIRECTV has announced that it
expects to deploy approximately four million Wink-enabled set-up boxes by
January 1, 2002;
- Microsoft Corporation has agreed to develop, market and distribute
Wink-enhanced programming and advertising on Microsoft's television
platforms;
- several of the leading set-top box and television manufacturers,
including General Instrument, Scientific Atlanta, Pioneer, Toshiba,
Matsuchita, Thomas Consumer Electronics and Hughes Network Systems, have
agreed to incorporate Wink's technology into their products; and
- several national advertisers, including AT&T, J. Walter Thompson USA,
Inc. on behalf of Ford Motor Company, The Goodyear Tire & Rubber Company,
Charles Schwab, Levi Strauss, The Clorox Company, Universal Pictures,
General Electric, Wells Fargo and Pfizer have agreed to create and air
Wink-enhanced advertisements.
A number of key strategic and financial investors have invested in Wink,
including set-top box and television manufacturers, such as General Instrument,
Scientific Atlanta and Toshiba, as well as
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Microsoft, GE Capital, Vulcan Ventures (controlled by Paul Allen) and Hughes
Electronics Corporation, the parent of DIRECTV.
We began the roll-out of our service in the United States in June 1998, and
we currently serve viewers in select cable markets in California, Connecticut,
Illinois, Missouri and Tennessee. In addition, Wink Enhanced Broadcasting has
been offered by Wink licensees in Japan since October 1996.
MARKET OPPORTUNITY
Television is one of the most pervasive communications media in society
today. According to Nielsen Media Research, there were approximately 99 million
television households in the United States in August 1998. Veronis Suhler &
Associates, a television industry market research consultant, estimates that the
average person in the United States watched approximately 1,560 hours of
television (approximately 4.3 hours per day) in 1998. With recent advances in
technology, new televisions and advanced analog and digital set-top boxes can
provide a platform for interactive television. According to Paul Kagan
Associates, a leading cable industry analysis firm*, in 1998 there were
approximately 30 million cable set-top boxes in use, of which approximately
eight million were advanced analog or digital cable set-top boxes. By 2002, Paul
Kagan Associates expects that the number of advanced analog and digital cable
set-top boxes in use will increase to approximately 33 million.
Television advertising is considered to be one of the most effective
methods of building brand recognition and general consumer awareness of products
and services. According to Veronis Suhler & Associates, the total amount spent
on television advertising in the United States in 1998 was approximately $49
billion. Despite the fact that traditional television broadcasting, cable and
direct broadcast satellite television systems do not provide an integrated means
for viewers to respond to programs and advertisements, the Direct Marketing
Association estimates approximately $91 billion of goods and services were
purchased through direct response television programming and advertising in
1998. The Direct Marketing Association predicts this amount will grow to
approximately $127 billion in 2002. In addition, we believe that electronic
commerce conducted through television viewing devices will benefit from the
rapid growth in internet online shopping, as consumers become more accustomed to
purchasing goods and services electronically. We believe that an opportunity
exists for a simple, immediate, inexpensive and automated method of responding
to direct response advertising on television.
In addition, many advertisers are using television advertisements to
generate requests for product information, which in turn serve as sales leads
for their products and services. Today, most direct response television
purchases and requests for information require a telephone call, which typically
cause advertisers to incur a significant cost per transaction. We believe that
television viewers, advertisers and merchants will respond favorably to a
simple, immediate, inexpensive and automated method for them to participate in
television commerce.
THE WINK EXPERIENCE
The Wink service is free to viewers and easy-to-use which we believe will
encourage broad and frequent usage. Viewers can receive Wink Enhanced
Broadcasting through Wink-enabled televisions and new and existing advanced
analog and digital set-top boxes. Many existing set-top boxes already installed
in consumers' homes can be activated through a remote cable download to receive
Wink
- ---------------
* Paul Kagan of Paul Kagan Associates is a holder of 2,500 shares of our stock.
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Enhanced Broadcasting. To access a Wink enhancement, a television viewer simply
clicks the remote control when the Wink icon appears on the screen. For example,
with a few clicks of the remote control, Wink allows viewers to:
- access additional information about a specific news story from CNN
Headline News;
- respond to an offer for telecommunications services from AT&T;
- access the local weather forecast instantly from The Weather Channel or
find weather forecasts for other cities;
- obtain coupons and product samples from Clorox or a new car brochure from
Ford;
- access real-time game scores on demand or search for statistics relating
to a specific sporting event while watching ESPN;
- subscribe to HBO or Showtime upon seeing an advertisement; or
- enter a virtual shopping mall which offers products for sale through
dedicated interactive channels.
WINK AND THE TELEVISION INDUSTRY
Wink Enhanced Broadcasting is designed to benefit the following
participants in the television industry:
- Viewers. Wink Enhanced Broadcasting offers viewers an easy-to-use,
enhanced television viewing experience. We anticipate that Wink Enhanced
Broadcasting will be offered to viewers for free. Wink Enhanced
Broadcasting allows viewers to obtain a variety of additional content
related to the programming they watch and to request information about or
purchase advertised products. The viewer controls access to these
broadcast enhancements or electronic commerce opportunities through the
viewer's existing remote control.
- Advertisers and Merchants. Wink Enhanced Broadcasting is designed to
allow advertisers and merchants the ability to provide additional
information to viewers, generate sales leads, sell products directly to
viewers and collect detailed market information. In addition, advertisers
and merchants can promote their brands by sponsoring Wink programming
enhancements. We believe that the use of Wink Enhanced Broadcasting will
provide advertisers and merchants a lower-cost alternative for capturing
sales leads and orders than traditional telemarketing methods.
- Broadcast and Cable Networks. We believe that Wink Enhanced Broadcasting
offers networks a new approach to increasing the number of viewers,
viewer loyalty and viewer involvement. As a result, the value of network
advertising space may be increased, allowing networks to charge
advertisers and merchants premiums for airing Wink-enhanced commercials.
The Wink enhancements may also provide opportunities for selling
additional advertising space. In addition, networks can use Wink Enhanced
Broadcasting to offer merchandise to viewers and to promote other
programming on their channels. Moreover, information obtained through the
Wink Response Network can be used by networks to offer advertisers
targeted audience information.
- Cable and Direct Broadcast Satellite System Operators. Wink Enhanced
Broadcasting is designed to offer cable and direct broadcast satellite
system operators an expanded menu of services to provide to their
subscribers, thus helping to attract new subscribers, maintain
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current subscribers and encourage all subscribers to upgrade to premium
services and purchase pay-per-view programming. In addition, in order to
encourage cable and direct broadcast satellite system operators to offer
Wink Enhanced Broadcasting, we have offered to share a portion of the
revenues generated from subscribers' responses to Wink-enhanced
programming, advertising and dedicated interactive channels.
- Set-top Box and Television Set Manufacturers. Wink Enhanced Broadcasting
is designed to offer set-top box and television set manufacturers an
opportunity to enhance their products with increased functionality and to
extend their product lines at a relatively low incremental cost. We
believe Wink Enhanced Broadcasting can assist manufacturers in
encouraging consumers and cable system operators to upgrade to higher
performance devices. In addition, in order to encourage television
manufacturers to incorporate Wink Enhanced Broadcasting into their
products, we have offered to share a portion of the revenues generated
from responses to Wink-enhanced programming and advertising from users of
their devices.
BUSINESS STRATEGY
Our strategy is to capitalize on the pervasiveness and popularity of
television to create a mass market medium for sales lead generation and
electronic commerce. Our strategy to achieve this objective includes the
following key elements:
- Increase the Presence of Wink Enhanced Broadcasting in Television
Households. We intend to promote deployment of Wink-enabled set-top boxes
and televisions and the launch of Wink Enhanced Broadcasting through
these devices. We have entered into and will continue to target licensing
relationships with leading manufacturers of set-top boxes and television
sets. We are working with certain large cable and digital broadcasting
satellite system operators to encourage both the downloading of the Wink
Engine software to Wink-capable set-top boxes already installed in
consumer homes and the deployment of new Wink-capable set-top boxes. We
are also working with Microsoft to enable Microsoft television platforms
to generate and capture Wink viewer responses. Viewers in approximately
40,000 homes receive Wink Enhanced Broadcasting as of the date of this
prospectus. While we anticipate significant growth in the remainder of
1999, we expect Wink-enhanced programming and advertising to be available
to less than 200,000 homes by the end of the year.
- Promote Use by Viewers. We believe that increased development and
broadcasting of Wink-enhanced advertising and programming and other
on-demand information and entertainment services are critical to
attracting viewers to Wink Enhanced Broadcasting. Consequently, we
actively encourage the broadcast and cable networks with whom we have
strategic relationships to air Wink enhancements that offer viewers an
easy-to-use, entertaining and informative interactive television
experience. We also intend to actively encourage usage of Wink Enhanced
Broadcasting through advertising, direct mail and promotions in
collaboration with cable and direct broadcast satellite operators,
equipment manufacturers and broadcast and cable networks.
- Expand Use of Wink-Enhanced Direct Response Offers. We believe that the
simplicity and convenience of the Wink transaction response mechanism
will encourage viewers to respond to Wink-enhanced advertising and
promotions. We intend to work with our broadcast and cable network
partners to encourage advertisers to add Wink enhancements to their
television advertisements. We believe that the low cost of response
collection and the ease with which viewers can respond to Wink-enhanced
advertising will encourage advertisers to complement their television
advertisements with direct response offers. In addition, we believe that
existing direct response television advertisers will utilize Wink to
lower their cost of capturing an order.
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We intend to introduce interactive shopping services featuring a targeted
selection of products suitable for electronic commerce via television. To
this end, we plan to enter into relationships with merchants to create
dedicated interactive channels that offer viewers the ability to request
product information, coupons, samples and other offers and to purchase
products and services.
- Benefit Multiple Participants in the Television Industry. We believe that
generating economic value for broadcast and cable networks, cable and
direct broadcast satellite system operators, set-top box and television
manufacturers, advertisers and merchants is critical to the success of
Wink Enhanced Broadcasting. Our business model has been designed to
deliver new opportunities for generating revenue and cost savings
directly to these industry participants. In addition, since Wink
enhancements are integrated with existing programming and advertising and
are under the control of the broadcast or cable networks, we believe Wink
Enhanced Broadcasting will not threaten the existing revenue streams and
customer relationships of these industry participants.
- Leverage Industry Relationships. We have formed strategic relationships
with key participants in the television industry. We believe that our
relationships with broadcast and cable networks and cable and direct
broadcast satellite system operators will assist us in attracting
interest from advertisers. Conversely, we believe our relationships with
national advertisers reinforce both the broadcast and cable networks' and
the cable and direct broadcast satellite operators' interest in launching
Wink Enhanced Broadcasting. We also believe our relationships with the
three leading cable set-top box manufacturers in North America will
encourage cable operators to adopt Wink Enhanced Broadcasting. We intend
to seek additional relationships and believe that increasing the breadth
and depth of our existing relationships will facilitate these efforts.
- Promote the Wink Icon and the Wink Brand. We believe that developing and
maintaining a strong brand identity is important to our ability to
attract viewers and obtain and retain key strategic relationships with
industry participants. Our goal is to make the Wink icon and the Wink
brand synonymous with interactive enhanced programming and advertising
that is appealing to viewers and easy to use. In addition to encouraging
content providers, broadcast and cable networks and advertisers to
produce compelling Wink-enhanced programming and advertising, we intend
to build brand recognition and to increase the visibility of the Wink
icon through a variety of marketing and promotional activities, including
targeted pre-deployment televised advertising campaigns to generate a
high level of initial interest, cooperative promotional programming with
cable operators, and advertising campaigns following deployment in
selected regions across a variety of media, including through
Wink-enhanced programming itself.
STRATEGIC RELATIONSHIPS
We believe that development of strategic relationships with television
industry participants is critical to the acceptance of Wink Enhanced
Broadcasting, the promotion of the Wink brand and ultimately the success of our
business model. We are currently focused on developing strategic relationships
in each sector of the television industry. We have initially targeted larger,
established participants in each of the following sectors:
- Advertisers and Merchants. We encourage advertisers to utilize Wink
Enhanced Broadcasting through the advertising sales efforts of our
broadcast and cable network partners. To facilitate this process, we
established a "Charter Advertiser" program in 1998 under which leading
advertisers could obtain a fixed rate quote for all Wink products and
services during a charter period ending in the second half of 1999 in
exchange for a commitment to air a specific
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number of Wink-enhanced advertisements. Wink charter advertisers include
AT&T, J. Walter Thompson USA, Inc. on behalf of Ford Motor Company, The
Goodyear Tire & Rubber Company, Charles Schwab, Levi Strauss, The Clorox
Company, Universal Pictures, General Electric, Pfizer and Wells Fargo. We
expect to add more advertisers through our own sales efforts and those of
our broadcast and cable network partners. We expect that a substantial
portion of our future advertising arrangements will not include
commitments to air a specific number of Wink-enhanced advertisements, may
be short term and cancelable and may involve payment on a
fee-per-transaction basis. We also anticipate offering products from one
or several merchants for sale through Wink dedicated interactive
channels.
- Broadcast and Cable Networks. We have license agreements with all four of
the major broadcast networks and 16 cable networks, which collectively
offer a variety of programming types, including prime time entertainment,
news, sports, weather, movies and music programming. These license
agreements generally range in length from one to eight years and provide
that the networks will air a specific number of hours of Wink-enhanced
programming per week. Wink is the only interactive television company
that has announced agreements with all four major broadcast networks. The
following is a list of networks that are currently airing or have aired
Wink-enhanced programming:
<TABLE>
<CAPTION>
NETWORK TYPES OF PROGRAMMING TYPICAL ENHANCEMENTS
<S> <C> <C>
ABC Entertainment/Sports/Talk Show Facts, Sports, Merchandise
CNN News/Talk Shows Show Facts
CNN Headline News News News Headlines and Stories
Court TV Trials Trial Facts
ESPN* Sports Sports Scoreboards
ESPN2* Sports Sports Scoreboards
NBC Entertainment/Sports/Talk Show Facts, Sports, Merchandise
Nickelodeon/Nick-at-Nite Entertainment Show Facts, Trivia
Showtime Entertainment Polls, Show Facts,
Subscriptions
The Nashville Network Entertainment Music, News, Trivia
TBS Entertainment Games, Show Facts, Trivia
TNT Entertainment Games, Show Facts, Trivia
The Weather Channel News Weather Forecasts
CNBC Financial News Financial Market Statistics
E! Entertainment News, Entertainment News
Variety
Lifetime Entertainment, Show Facts
Documentary
VH-1 Entertainment/Music CD Purchases, Games
</TABLE>
- ---------------
* Our agreements with these networks have expired. The networks currently
continue to air Wink-enhanced programming. We are currently negotiating
renewals of these agreements.
- Cable and Direct Broadcast Satellite System Operators. We focus on
establishing relationships with national cable and direct broadcast
satellite system operators and with local cable operators in order to
transmit the Wink Enhanced Broadcasting signal to viewers. The cable and
direct broadcast satellite system operators with which we have entered
into strategic relationships include DIRECTV, AT&T/TCI, Time Warner
Cable, Comcast Cable Communications, Cox Communications, Charter
Communications Inc., Bresnan Communications Company, Century
Communications Corp. and InterMedia. Our agreements with cable system
operators generally provide a framework and pricing for deployment of
Wink Enhanced Broadcasting by the operators' local systems, although
actual deployments may require us to
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negotiate and enter into additional agreements with each local operator.
In June 1999, we amended our agreement with DIRECTV, whereby DIRECTV
increased their commitment to deploy Wink technology in their direct
broadcast satellite set-top boxes. Although the amendment contains no
minimum deployment levels, DIRECTV has announced that it expects to
deploy approximately four million Wink-enabled set-top boxes by January
1, 2002.
- Cable and Direct Broadcast Satellite Set-Top Box Manufacturers. We have
licensed the Wink software to General Instrument, Pioneer and
Scientific-Atlanta, three of the leading U.S. cable set-top box
manufacturers. While we intend to license our software to other equipment
manufacturers, we believe our relationships with these three companies
are critical to our success in the cable business. General Instrument and
Scientific-Atlanta have licensed Wink technology for incorporation into
certain of their advanced analog and digital set-top boxes, and have each
begun shipment of certain Wink-capable advanced analog and digital
set-top boxes. In addition, Pioneer has begun shipping Wink-enabled
advanced analog cable set-top boxes. The agreement with DIRECTV calls for
DIRECTV to launch Wink enhanced broadcasting to Wink-enabled
DIRECTV-compatible set-top boxes. Recently, we entered into an agreement
with Thomson Consumer Electronics and Hughes Network Systems, the two
largest suppliers of DIRECTV-compatible set-top boxes, and we are
currently negotiating agreements with other manufacturers to incorporate
Wink technology into their DIRECTV-compatible set-top boxes.
- Television Manufacturers. We are developing strategic relationships with
leading worldwide television manufacturers, including Toshiba and
Matsushita. Toshiba recently introduced the first U.S. television models
incorporating Wink technology. In addition, Matsushita and Toshiba have
incorporated Wink technology software in televisions currently marketed
in Japan.
Strategic Relationship with Microsoft. Our relationship with Microsoft
focuses on three areas: development, distribution and marketing.
- Microsoft's operating system and other software for set-top boxes and
televisions that comply with the Advanced Television Enhancement Forum's
proposed Internet-based standard for enhanced television will be modified
to capture viewer responses for processing by the Wink Response Network.
We have agreed to modify all components of Wink Enhanced Broadcasting to
support this standard and these Microsoft television platforms.
- Microsoft has agreed to enable its operating system for set-top boxes and
televisions to use the Wink Response Network to collect, aggregate and
process viewer responses to applications complying with Internet-based
standards delivered as part of video programming and advertising for
set-top boxes and televisions. Wink will be the exclusive provider of
such services for deployments of such devices where Microsoft exclusively
controls the operating system, application environment and content and
data services. Microsoft has also agreed to use efforts to make other
set-top boxes and televisions which use a Microsoft operating system
capable for the Wink Response Network service. Microsoft is not obligated
to use the Wink Response Network for responses other than purchases and
requests for information, or when viewers respond by connecting directly
to an advertiser's website, via e-mail or other similar mechanisms. Wink
has agreed to make Microsoft the exclusive licensor of the Wink Engine,
except for rights previously granted to other customers and with respect
to platforms for which the Wink Engine is already available or under
development and with respect to platforms which do not support
Microsoft's technology. As part of our agreement with Microsoft, we have
agreed to share a portion of the revenues we generate from viewer
responses and to
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provide minimum revenue guarantees. See Notes 6 and 9 of Notes to
Consolidated Financial Statements.
- Microsoft and Wink have agreed to work together to promote the Wink
Response Network to current and prospective customers for set-top boxes
and televisions which utilize Microsoft software. Microsoft and Wink have
also agreed to work together to promote Microsoft's technology for
set-top boxes and televisions, and to promote products, services and
content that comply with Internet-based standards.
Strategic Relationships for Japan. As of March 31, 1999, approximately
150,000 Wink-enabled television sets have been shipped for distribution in Japan
under the brand names of Toshiba, Sony, JVC and Panasonic. We utilize Toshiba's
broadcast equipment sales team to sell Wink server and authoring tool products
to Japanese networks and direct broadcast satellite system operators. We have
server development and royalty agreements directly with Toshiba for these
products.
Wink Enhanced Broadcasting service was launched in the fourth quarter of
1996 in collaboration with the Intertext ITVision Promotion Consortium, a
consortium that has been formed to establish interactive television in Japan.
The Consortium includes companies such as Toshiba, Matsushita, Sony, Pioneer,
NTT and Dentsu, Japan's largest advertising agency. Several Japanese
broadcasters are currently using Wink technology to enhance their programming up
to seven days per week, including TV-Tokyo, TV-Osaka, TV-Aichi and Wowow.
Mitsui, Toshiba, Matsushita, NTT, Dentsu, Sony and other companies have
established MediaServe, a data center that collects responses from Wink-enabled
televisions through the Japanese public phone system. Viewers have used Wink
Enhanced Broadcasting to purchase women's apparel and to order groceries and
other products. We also have produced and licensed versions of our software
localized for Japan. The Wink programming enhancements currently airing in Japan
are similar to those being aired in the United States. Because Wink is not a
participant in the MediaServe data center, we do not receive any transaction fee
revenue from responses to Wink Enhanced Broadcasting in Japan.
COMPONENTS OF WINK ENHANCED BROADCASTING
Wink Enhanced Broadcasting provides an end-to-end solution for sending
interactive applications along with broadcast video to viewers' televisions.
This system is composed of core, proprietary technologies developed by us as
well as off-the-shelf electronic commerce and database solutions. Wink Enhanced
Broadcasting consists of:
- the Wink Studio and Wink Server Studio authoring tools that allow
networks, advertisers and cable operators to design interactive Wink
applications;
- the Wink Broadcast Server that manages the delivery of those
applications;
- the Wink Client software that enables the generation and capture of
viewer responses to Wink applications; and
- the Wink Response Server and Wink Response Network that are designed to
efficiently process viewer responses to applications and forward them to
advertisers or merchants.
The diagram on the inside front cover of this prospectus illustrates the
functional components of Wink Enhanced Broadcasting.
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WINK STUDIO AND WINK SERVER STUDIO
Wink Studio is a high-level authoring tool that allows non-technical
designers to create interactive programming and advertising applications. Wink
Studio is Windows-based and graphically oriented, and enables the creation of
simple interactive applications. A designer simply drags objects from an object
palette onto forms to create enhancements. More complex applications can be
created by fully utilizing the Wink Basic scripting language to control the
behavior of objects and forms. The Wink Server Studio is a high-level authoring
tool for server modules that provide live data updates to Wink applications. In
particular, Wink Server Studio is designed to make it easy to incorporate or
transpose data from web sites and databases for broadcast updates.
WINK BROADCAST SERVER
The Wink Broadcast Server manages the scheduling and insertion of
applications designed with Wink Studio into television programming. The Wink
Broadcast Server is designed to integrate with station management equipment such
as commercial insertion systems, when available, to enable broadcast and cable
networks to automate the delivery of interactive enhancements to programs and
advertisements. Local network affiliates and cable operators can also add
interactivity on a local level using the Wink Broadcast Server. In the future,
we expect to offer the capability to schedule and insert ATVEF applications into
television programming through the Wink Broadcast Server.
WINK CLIENT SOFTWARE
We expect to offer two versions of the Wink Client software. In
Internet-enabled set-top boxes and televisions, the Wink Client software will
enable the generation of Wink viewer responses to broadcast Internet-based
applications. In other set top boxes and televisions, the Wink Client software,
in this case known as the Wink Engine, displays the Wink applications and
enables the generation of viewer responses. Wink Client software can be
installed in Wink-capable televisions and most new advanced analog and digital
set-top boxes at the factory or downloaded through cable systems, satellite
systems or telephone modems into certain of such set-top boxes already installed
in a viewer's household.
WINK RESPONSE SERVER
The Wink Response Server collects viewer response data, or response
packets, which are generated by Wink applications. These response packets are
retrieved directly from televisions and satellite set-top boxes through phone
dial-up and from cable set-top boxes through cable head-end systems. The Wink
Response Server aggregates response packets and delivers them to the Wink
Response Network.
WINK RESPONSE NETWORK
The Wink Response Network is designed to enable the collection and
aggregation of viewer responses, requests for information and purchase orders
for transmission to and use by advertisers, merchants, broadcast and cable
networks and cable and direct broadcast satellite system operators. The Wink
Response Network includes two databases: one database correlates device serial
numbers to customer address and billing information, while the second correlates
a unique code for each interactive application to routing instruction and
product information. When a consumer responds to a
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Wink application and orders a product, a response packet is generated by the
Wink Engine in the set-top box or television. A response packet includes the
device serial number, the unique application code and application specific data.
These response packets are collected, aggregated, converted into full electronic
orders (name, address, and credit information, if appropriate), and delivered to
the advertiser or network.
In the case of set-top boxes, the customer database is maintained by the
satellite or cable operator's billing system, and Wink links to this database.
The Wink Response Network is operated by General Electric Information Services
at a data center located in Rockville, Maryland and with a backup in Brookpark,
Ohio. The Wink Response Network was activated in August 1998 following our first
launch of Wink Enhanced Broadcasting in Kingsport, Tennessee.
In addition to aggregating and delivering responses, we can provide
industry participants with additional reporting. For example, participating
networks are receiving aggregated information regarding all Wink applications
that run on their networks. Cable and direct broadcast satellite system
operators can obtain information regarding all applications that run on their
systems. Advertisers can obtain information regarding how their ads perform
across all networks. The Wink Response Network combines custom data processing
solutions developed by Wink with off-the-shelf electronic commerce systems to
provide a complete end-to-end solution for customers.
EMERGING STANDARDS
We believe that the most important aspects of our business relate to
capturing, aggregating and routing TV-viewer responses to interactive
programming and advertising. In contrast, we believe it is less important which
protocol or "language" is used to design interactive applications. Recently,
several formal and informal industry groups have proposed competing standards
for the language in which interactive programming and advertising should be
written. While we may support other proposed standards in the future, we became
an early adopter of the Advanced Television Enhancement Forum's proposal for an
Internet-based standard for enhanced television in the summer of 1998. In
conjunction with our agreement with Microsoft, we have accelerated the
development of a version of the Wink Broadcast Server that is compatible with
this standard, and a means of capturing and generating Wink response packets
from broadcast applications that are compatible with this standard. The founders
of the Advanced Television Enhancement Forum include Microsoft Corporation,
Intel Corporation, Liberate Technologies, Sony, DIRECTV, Cable Labs, NBC, The
Walt Disney Company and Discovery Communications. We are also monitoring the
standardization efforts of the Advanced Television Systems Committee.
TECHNICAL SUPPORT AND CUSTOMER SERVICE
We believe that comprehensive, high-quality support is an essential element
of our business approach. We provide users of our software with installation
services, training, documentation, technical and network support, and system
maintenance for all Wink server and authoring software. Upon request and for an
additional fee, we will provide customized technical consulting and support for
applications and server module development. We provide telephone technical
support for our products 24 hours a day, seven days a week, providing services
that include system monitoring, problem resolution and preventive
troubleshooting. We are also providing customer service to Wink viewers 24 hours
a day, seven days a week, through an agreement with Softbank that provides call-
center support. Whenever possible, we seek to connect viewers directly with
advertisers and merchants to lower customer service costs.
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COMPETITION
We face competition from a number of companies, many of which have
significantly greater financial, technical, manufacturing and marketing
resources than Wink and may be in a better position to compete in the industry.
Current and potential competitors in one or more aspects of our business include
television and other system software companies, interactive television system
providers and multimedia authoring tool providers. We also face competition from
other providers and companies operating in the direct marketing business,
especially operators of toll-free response call centers.
A number of companies are developing system software for the general
interactive television market, including At Home Corporation, Intel Corporation,
Liberate Technologies, Sun Microsystems, OpenTV and Canal Plus. OpenTV and Canal
Plus already offer certain products with features similar to Wink Enhanced
Broadcasting. Intel and Liberate Technologies have developed technology that
enables interactivity over analog or digital broadcasts. Many of these
competitors have the support of, or relationships with, industry participants
with which we also have relationships, which could adversely affect the extent
of support these market participants give to Wink Enhanced Broadcasting. In
addition, Microsoft, which has recently agreed to purchase a substantial equity
stake in Wink and to collaborate with us to develop, market and distribute Wink
Enhanced Broadcasting on Microsoft television platforms, has been active in a
variety of aspects of the interactive television market.
There also are a number of interactive system providers that have developed
proprietary software and hardware for adding interactivity to existing
television technologies, including Gemstar International Group Limited,
Worldgate Communications, Inc., Source Media and ACTV Inc. In addition, one or
more of these entities might choose to pursue hardware-independent,
cross-platform opportunities directly competitive with Wink Enhanced
Broadcasting. If we are not able to compete successfully against current or
future competitors, our business, operating results and financial condition will
be materially adversely affected.
INTELLECTUAL PROPERTY
Our ability to compete is dependent in part upon our internally developed,
proprietary intellectual property. We rely on patent, trademark, trade secret
and copyright law, as well as confidentiality procedures and licensing
arrangements to establish and protect our rights in our technology. Others may
develop technologies that are similar or superior to our technology. We
typically enter into confidentiality or license agreements with our employees,
consultants, customers, strategic partners and vendors, and typically control
access to and distribution of our software, documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use our products or technology without
authorization, or to develop similar technology independently through reverse
engineering or other means. Policing unauthorized use of our products is
difficult. The steps we take may not prevent misappropriation of our technology
or such agreements may not be enforceable. In addition, effective patent,
copyright and trade secret protection may be unavailable or limited in certain
foreign countries. Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets, or to determine the
validity and scope of the proprietary rights of others. Such litigation could
result in substantial costs and diversion of resources and could materially
adversely affect our business.
On August 6, 1998, John L. Berman, an individual, filed suit against us in
the U.S. District Court in the Northern District of California, alleging that we
infringed his patents for an interactive television graphics interface and for a
method and apparatus for applying overlay images. We believe that the resolution
of this matter will not have a material adverse effect on us.
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In the future, we may receive other notices of claims of infringement of
other parties' proprietary rights or claims for indemnification resulting from
infringement claims. Irrespective of the validity or the successful assertion of
such claims, we would incur significant costs and diversion of resources with
respect to the defense of any claims brought, which could materially adversely
affect our business. In addition, the assertion of such infringement claims
could result in injunctions preventing us from distributing certain products,
which could materially adversely affect our operating results and financial
condition. In addition, the assertion of such infringement claims could result
in injunctions preventing us from distributing certain products, which could
materially adversely affect our business. If any claims or actions are asserted
against us, we may seek to obtain a license under a third party's intellectual
property rights. However, a license under such circumstances may not be
available on reasonable terms, if at all.
The Wink Response Network is designed to collect and utilize data derived
from viewer responses to Wink-enhanced programming. This data can be used for
several purposes, including product inquiry and order fulfillment, advertising
impact research and polling. Although we believe we have a right to use and
compile such data, copyright, trade secret or other protection may not be
available for such data and information or others may claim rights to it. We are
also obligated to keep certain information regarding networks' and cable
systems' programming services and system technology confidential.
We have licensed in the past and expect that we may license in the future
elements of our technology and trademarks to third parties in the United States,
Japan and other countries. We attempt to ensure that the quality of our brand is
maintained by such business partners. However, such partners may take actions
that could adversely affect the value of our proprietary rights or the
reputation of our technologies.
Wink is a registered trademark of Wink Communications, Inc. Wink
Communications, the Wink Communications, Inc. logo, the stylized "i" logo, Wink
Engine, Wink Broadcast Server, Wink Response Server, Wink Server Studio, Wink
Response Network and Wink Enhanced Broadcasting are trademarks of Wink
Communications, Inc.
EMPLOYEES
As of June 30, 1999, we employed 99 full-time equivalents, excluding
temporary personnel and consultants. Of the total number, 49 full-time
equivalents were involved in product development, 13 in sales, marketing and
customer service, ten in accounting, finance and administration and 27 in
operations. We are not subject to any collective bargaining agreements and
believe our relationship with our employees is good. See "Risk Factors -- We are
dependent on the service of our chief executive officer, as well as our
technical personnel."
FACILITIES
Our corporate headquarters and executive offices are in Alameda,
California, where we lease approximately 38,000 square feet of space. The lease
on this facility expires in January 2000. We believe that we will be able to
renew this lease or secure sufficient space on reasonable terms upon expiration
of this lease.
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<PAGE> 43
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding our directors,
executive officers and other officers and key employees as of June 30, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
EXECUTIVE OFFICERS
Mary Agnes Wilderotter..................... 44 Chief Executive Officer, President and Director
Brian P. Dougherty......................... 42 Chairman of the Board of Directors and Chief
Technical Officer
Allan C. Thygesen.......................... 36 Executive Vice President, Sales and Business
Development
Howard L. Schrott.......................... 44 Chief Financial Officer and Senior Vice President
Timothy V. Travaille....................... 41 Senior Vice President, Operations and Deployment
Katherine Sullivan......................... 43 Senior Vice President, Marketing and People
Development
Jeffrey H. Coats........................... 41 Director
Bruce W. Dunlevie.......................... 42 Director
Michael Fuchs.............................. 53 Director
F. Philip Handy............................ 55 Director
William Schleyer........................... 47 Director
Hidetaka Yamamoto.......................... 55 Director
OTHER OFFICERS AND KEY EMPLOYEES
Michael Capuano............................ 34 Vice President, Product Marketing
Dante Carpinito............................ 39 Vice President, Business Development
Gregory Clark.............................. 41 Vice President, Sales
Michael Gannon............................. 44 Vice President, Advertising Sales
Charles McCullough......................... 48 Vice President, Engineering
Patrick Ransil............................. 43 Vice President, Engineering
Reed Spiegel............................... 40 Vice President, Consumer Electronics Sales
Melinda White.............................. 39 Vice President, Cable Sales
</TABLE>
Mary Agnes Wilderotter has served as President and Chief Executive Officer
and a director of Wink since January 1997. From August 1995 to January 1997, Ms.
Wilderotter was the Executive Vice President of National Operations and Chief
Executive Officer of the Aviation Communications Division of AT&T Wireless
Services, Inc., a provider of wireless communications services in the United
States and a wholly owned subsidiary of AT&T Corporation. Prior to her tenure at
AT&T Wireless, Ms. Wilderotter was Senior Vice President of McCaw Cellular
Communications, Inc. from October 1991 to August 1995 and Regional President of
the California/Nevada/Hawaii Region. McCaw became AT&T Wireless upon McCaw's
acquisition by AT&T. Prior to joining McCaw, Ms. Wilderotter spent over 12 years
in the cable industry. Ms. Wilderotter serves as a director on the boards of
Airborne Freight Corporation, Gaylord Entertainment Co., American Tower Corp.,
The California Chamber of Commerce, California Cable Television Association,
California Community College Foundation, and Electric Lightwave. Ms. Wilderotter
is also a member of the board of trustees of the College of the Holy Cross. Ms.
Wilderotter received a B.A. degree in Economics and Business Administration from
the College of the Holy Cross.
Brian P. Dougherty co-founded Wink in October 1994 and served as Chief
Executive Officer of Wink from inception until December 1996. Mr. Dougherty has
also served as the Chairman of the
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<PAGE> 44
Board of Wink since inception. Mr. Dougherty also serves as Chief Technical
Officer of Wink Communications. Prior to co-founding Wink Communications, Mr.
Dougherty founded Geoworks Corporation, a software developer, in 1983 and served
as its Chief Executive Officer from September 1983 until February 1993 and as
its Chairman from September 1983 until May 1997. Mr. Dougherty serves as a
director of Neomagic and Geoworks. Mr. Dougherty received a B.S. degree in
Electrical Engineering/Computer Science from the University of California,
Berkeley.
Allan C. Thygesen has served as our Executive Vice President, Sales and
Business Development since July 1999 and served as Senior Vice President,
Programming and Advertising from March 1998 to July 1999, and as Vice President,
Content, Tools and Development from July 1996 to March 1998. From November 1994
to July 1996, Mr. Thygesen served as Vice President and General Manager,
Consumer Products, of Gold Disk, Inc., a producer and publisher of personal
productivity software. From May 1993 to November 1994, Mr. Thygesen was employed
by Media Vision Technologies, Inc., a multimedia hardware manufacturer and
publisher of CD-ROM entertainment software, most recently as Vice President and
General Manager, Multimedia Publishing. Media Vision filed for bankruptcy in
March 1994. Earlier, Mr. Thygesen served in a variety of management positions in
finance, sales, marketing and operations at Pellucid Inc., Everex Systems Inc.
and Radiometer A/S. Mr. Thygesen received an MSc degree in Economics from the
University of Copenhagen and an M.B.A. degree from the Stanford Graduate School
of Business.
Howard L. Schrott has served as Senior Vice President and Chief Financial
Officer since May 1999. From 1991 to 1999, he was Executive Vice President and
Chief Financial Officer of Emmis Communications Corporation, a diversified media
company. Prior to joining Emmis, Mr. Schrott was a Vice President in the
Communications Lending Group at First Union National Bank, Charlotte, North
Carolina. From 1984 to 1989, Mr. Schrott served as Chief Operating and Executive
Officer for a group of radio stations. Mr. Schrott also spent two years
practicing law in Washington, D.C. and Indianapolis, Indiana, where he
concentrated on matters before the Federal Communications Commission and general
business matters relating to broadcasting and media. Mr. Schrott received a B.S.
degree in Communications and Business from Butler University and a J.D. degree
from Indiana University School of Law -- Indianapolis.
Timothy V. Travaille has served as our Senior Vice President, Operations
and Deployments since March 1998 and served as Vice President, Operations and
Deployments from March 1997 to March 1998. From March 1994 to March 1997, Mr.
Travaille was employed by AT&T Wireless as Vice President, Chief Information
Officer. From December 1986 to February 1994, Mr. Travaille was employed by
Lamonts Apparel Inc., most recently as Vice President of Information Systems and
Merchandise Information Office. Mr. Travaille received B.S. degrees in
Accounting and Computer Science and an M.B.A. degree from the University of
Washington.
Katherine Sullivan has served as our Senior Vice President, Marketing and
People Development since June 1999 and served as Vice President, Consumer
Marketing and Marketing Communications from September 1997 to June 1999. From
June 1992 until September 1997, Ms. Sullivan was employed by McCaw Cellular
Communications/AT&T Wireless Communications, serving in several roles directing
Western Region retail sales and distribution. Ms. Sullivan received a B.A.
degree in Economics from The University of South Carolina.
Jeffrey H. Coats has served as a director of Wink since June 1997. Since
April 1996, Mr. Coats has served as Managing Director of GE Capital Equity
Capital Group, Inc., a wholly owned subsidiary of General Electric Capital
Corporation. From September 1991 to April 1993, Mr. Coats was also a Managing
Director of GE Capital Corporate Finance Group, Inc., a wholly owned subsidiary
of General Electric Capital Corporation. From February 1994 to April 1996, Mr.
Coats served as President of Maverick Capital Equity Partners, LLC, and from May
1993 to January 1994, Mr. Coats
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<PAGE> 45
was a Managing Director with Veritas Capital, Inc., both of which are investment
firms. Mr. Coats is the Chairman of the Board of The Hastings Group, Inc., which
filed for bankruptcy in October 1995 and confirmed a plan of liquidation in
December 1997. Mr. Coats is a director of Krause's Furniture, Inc.,
autobytel.com, Inc., Valuevision International, Inc. and The Museum Company,
Inc. Mr. Coats holds a B.B.A. in Finance from the University of Georgia and an
M.A. in International Management in Finance from the American Graduate School of
International Management.
Bruce W. Dunlevie has served as a director of Wink since March 1996. In May
1995, Mr. Dunlevie founded Benchmark Capital LLC, a venture capital firm, of
which he is currently a Managing Member. From October 1989 to the present, he
has served as a General Partner of Merrill, Pickard, Anderson & Eyre, a venture
capital firm. Mr. Dunlevie is a director of Genesys Telecommunications
Laboratories, Rambus Inc. and several private companies. Mr. Dunlevie received a
B.A. degree from Rice University and an M.B.A. degree from the Stanford Graduate
School of Business.
Michael Fuchs has served as a director of Wink since June 1998. Since
November 1995, Mr. Fuchs has been an investor and consultant in the media
business. Mr. Fuchs was Chairman and Chief Executive Officer of Home Box Office,
a division of TimeWarner Entertainment Company, L.P., from October 1984 until
November 1995, and Chairman and Chief Executive Officer of Warner Music Group, a
division of Time Warner Inc., from May 1995 to November 1995. Mr. Fuchs is a
director of autobytel.com, Inc. Mr. Fuchs holds a B.A. degree from Union College
and a J.D. degree from the New York University School of Law.
F. Philip Handy has served as a director of Wink since June 1997. Mr. Handy
is a private investor who is currently in partnership with Equity Group
Investments. Mr. Handy was Managing Director of EGI Corporate Investments, a
diversified management and investment business from June 1997 until December
1998. Previously, he was Partner of Winter Park Capital Company, a private
investment firm, from June 1980 until May 1997. Mr. Handy is a director of
Anixter International, Inc., Chart House Enterprises, Inc., Transmedia Network,
Inc. and Davel Communications. Mr. Handy received an A.B. degree in Economics
from Princeton University and an M.B.A. degree from Harvard Business School.
William T. Schleyer has served as a director of Wink since January 1998.
Mr. Schleyer is currently serving as Chairman of the Open Cable Initiative. From
October 1997 to June 1998, Mr. Schleyer served as an advisor to US WEST Media
Group. From November 1996 to October 1997, Mr. Schleyer served as President and
Chief Operating Officer of MediaOne, the broadband services arm of US WEST Media
Group. From November 1994 to November 1996, Mr. Schleyer was President and Chief
Operating Officer of Continental Cablevision, Inc. before the company's
acquisition by US WEST Media Group in November 1996. Continental became MediaOne
in May 1997. Mr. Schleyer serves on the board of directors and executive
committee of Cable Television Laboratories, Inc., a research and development
consortium of cable system operators. He serves on the board of directors of
Rogers Communications, Inc., a Canadian cable operator, and Antec Corporation, a
supplier of goods and services to cable and television industries. Mr. Schleyer
received a B.S. degree in Mechanical Engineering from Drexel University and an
M.B.A. degree from Harvard Business School.
Hidetaka (Hank) Yamamoto has served as a director of Wink since February
1995. Mr. Yamamoto has been employed by Toshiba Corporation since 1966, most
recently as a General Manager of Toshiba's Information and Industrial Systems
Company. Mr. Yamamoto received a Bachelor of Economics degree from the
University of Tokyo and an M.B.A. degree from the Graduate School of Business at
the University of Chicago.
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<PAGE> 46
BOARD OF DIRECTORS
We currently have authorized eight directors. At present, each director
holds office until the next annual meeting of the stockholders or until his or
her successor is duly elected and qualified. Our Amended and Restated
Certificate of Incorporation provides for the establishment of a classified
Board of Directors upon the date of this offering. In accordance with the terms
of the Amended and Restated Certificate of Incorporation, the Board of Directors
will be divided into three classes, the terms of which will expire at different
times. Class I consists of Mr. Dougherty and Mr. Dunlevie, who will serve until
the annual meeting of stockholders to be held in 2000. Class II consists of Ms.
Wilderotter, Mr. Schleyer and Mr. Fuchs, who will serve until the annual meeting
of stockholders to be held in 2001. Class III consists of Mr. Coats, Mr. Handy
and Mr. Yamamoto, who will serve until the annual meeting of stockholders to be
held in 2002. At each annual meeting of stockholders beginning with the 2000
annual meeting, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election and until their successors have been duly
elected and qualified. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes such
that, as nearly as possible, each class will consist of an equal number of
directors.
Board Committees. The Board of Directors has a Compensation Committee and
an Audit Committee.
The Audit Committee of the Board of Directors reviews and monitors the
corporate financial reporting and the internal and external audits of Wink and
Wink's subsidiary, including, among other things, the audit and control
functions, the results and scope of the annual audit and other services provided
by our independent accountants and our compliance with legal matters that have a
significant impact on our financial reports. The Audit Committee also consults
with our management and our independent accountants prior to the presentation of
financial statements to stockholders and, as appropriate, initiates inquiries
into aspects of our financial affairs. In addition, the Audit Committee has the
responsibility to consider and recommend the appointment of, and to review fee
arrangements with, our independent accountants. The current members of the Audit
Committee are Mr. Coats, Mr. Fuchs and Mr. Yamamoto.
The Compensation Committee of the Board of Directors reviews and makes
recommendations to the Board regarding all forms of compensation provided to the
executive officers and directors of Wink and Wink's subsidiary, including stock
compensation and loans. In addition, the Compensation Committee reviews and
makes recommendations on bonus and stock compensation arrangements for all of
Wink's employees. As part of the foregoing, the Compensation Committee also
administers our 1994 Stock Plan, 1999 Stock Plan and 1999 Employee Stock
Purchase Plan. The current members of the Compensation Committee are Mr.
Schleyer, Mr. Dunlevie and Mr. Handy.
DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS
Except for reimbursements received by non-employee directors for expenses
incurred in attending board meetings, directors of Wink do not receive cash
compensation for their services as directors.
Under our 1999 Director Option Plan, each new non-employee director who
joins Wink after this offering is entitled to receive an option to purchase
40,000 shares of our common stock. In addition, each current and future
non-employee director is entitled to receive an additional option to purchase
40,000 shares of common stock four years after the grant of such person's last
option, provided that he or she has served on the Board continuously during such
period. All options granted under the 1999 Director Option Plan will become
exercisable over a four-year period at the rate of 25% per year. The exercise
price per share for all options granted under the 1999 Director Option Plan will
be
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<PAGE> 47
equal to the fair market value of the common stock on the date of grant. See
"Management -- Employee Benefit Plans."
In 1998, we granted options under our 1994 Stock Plan to certain
non-employee directors. See "Certain Transactions -- Certain Sales and Option
Grants to Executive Officers and Directors."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the Compensation Committee, the Board of Directors
determined compensation for executive officers. No interlocking relationship
exists between our Board of Directors and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information concerning total
compensation received by our Chief Executive Officer and each person who served
as an executive officer of Wink during the last fiscal year and whose aggregate
salary and bonus for such year exceeded $100,000 (collectively, the "Named
Executive Officers") for services rendered to Wink in all capacities during the
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ---------------------------
COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) AWARDS(#) OPTIONS(#)
<S> <C> <C> <C> <C>
Mary Agnes Wilderotter......................... $208,333 $ 25,000 25,000 100,000
President and Chief Executive Officer 21,000
Brian P. Dougherty............................. 90,000 50,000 -- --
Chairman of the Board and
Chief Technical Officer
Allan C. Thygesen.............................. 123,750 35,000 -- 50,000
Executive Vice President,
Sales and Business Development
Timothy V. Travaille........................... 124,583 100,000 -- 50,000
Senior Vice President,
Operations and Deployment
Katherine Sullivan............................. 103,738 40,000 -- --
Senior Vice President,
Marketing and People Development
Paritosh K. Choksi............................. 175,000 -- -- --
Former Chief Financial Officer
</TABLE>
The bonuses, restricted stock awards and option grants described above
include amounts paid or granted in 1998 with respect to fiscal 1997. For
additional information about Ms. Wilderotter's restricted stock award, see
"Certain Transactions -- Sales and Option Grants to Executive Officers and
Directors." Bonus amounts for Mr. Thygesen, Mr. Travaille and Ms. Sullivan
include the money value of stock bonuses paid in lieu of cash bonuses. The value
of Mr. Thygesen's stock bonus was $35,000. The value of Mr. Travaille's stock
bonus was $30,000. The value of Ms. Sullivan's stock bonus was $25,000. These
values were based upon a fair market value determined by the Board of
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<PAGE> 48
Directors to be $4.00 per share on the date of issuance. All stock bonuses were
fully vested at issuance. Ms. Sullivan's bonus also included $15,000 of moving
expenses.
OPTION GRANTS IN 1998
The following table sets forth, as to the Named Executive Officers who have
reportable information, information concerning stock options granted during the
year ended December 31, 1998. We granted options to purchase 1,092,231 shares of
common stock to employees and consultants in 1998.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------ STOCK PRICE
SECURITIES PERCENT OF APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION -------------------
NAME GRANTED(#) YEAR(%) SHARE($) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Mary Agnes Wilderotter.............. 100,000 9.2% $4.00 1/15/08 $251,558 $637,497
21,000 1.9 8.00 9/24/08 105,654 267,749
Allan C. Thygesen................... 50,000 4.6 6.00 3/27/08 188,668 478,123
Timothy V. Travaille................ 50,000 4.6 6.00 3/27/08 188,668 478,123
</TABLE>
In renewing the information above, please note:
- The options granted under the 1994 Stock Plan are incentive stock options
or nonqualified stock options and have exercise prices equal to the fair
market value of our common stock on the date of grant, as determined by
the Board of Directors on the date of grant.
- Except for the options granted to Ms. Wilderotter, all such options have
ten-year terms and vest over a period of four years at a rate of 1/4 of
the shares after the first year and 1/48 of the shares per month
thereafter.
- Ms. Wilderotter's option to purchase 100,000 shares vests at a rate of
1/48 per month, with accelerated vesting in the event of certain
corporate transactions. Ms. Wilderotter's option to purchase 21,000
shares was fully vested as of the date of grant.
See "Certain Transactions -- Employment Offer Letters and Severance
Arrangements."
In determining the fair market value of the common stock, the Board of
Directors considered various factors, including Wink's financial condition and
business prospects, its operating results, the absence of a market for the
common stock and the risks normally associated with technology companies.
Under rules promulgated by the Securities and Exchange Commission, the
amounts in the two columns on the far right of the above table represent the
hypothetical gain or "option spread" that would exist for the options in this
table based on assumed stock price appreciation from the date of grant until the
end of such options' ten-year term at assumed annual rates of 5% and 10%
increases over the exercise price, which equalled the fair market value on date
of grant. The 5% and 10% assumed annual rates of appreciation are specified in
Commission rules and do not represent our estimate or projection of future stock
price growth. We do not necessarily agree that this method can properly
determine the value of an option. Actual gains, if any, on stock option
exercises depend on numerous factors, including our future performance, overall
market conditions and the option holder's
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<PAGE> 49
continued employment with us throughout the entire vesting period and option
term, which factors are not reflected in this table.
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
The following table sets forth, as to the Named Executive Officers who have
reportable information, information concerning stock option activity during the
last fiscal year and the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 1998. Also reported are values
for "in-the-money" options, which values represent the positive spread, if any,
between the respective exercise prices of each outstanding stock option and the
fair market value of the common stock as of December 31, 1998 ($8.00 per share).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES DECEMBER 31, 1998 OPTIONS($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Mary Agnes Wilderotter......... -- -- 43,917 77,083 $ 91,668 $308,332
Allan C. Thygesen.............. -- -- 76,250 113,750 570,000 570,000
Timothy V. Travaille........... -- -- 43,750 106,250 315,000 505,000
Katherine Sullivan............. -- -- 23,438 176,563 140,625 309,375
</TABLE>
EMPLOYEE BENEFIT PLANS
1999 Stock Plan. Our 1999 Stock Plan was approved by the Board of Directors
in June 1999 and will be submitted to the stockholders for their approval prior
to the date of this offering, to become effective on the date of this offering.
The 1999 Plan provides for the grant to employees of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and for the grant to employees, directors and consultants of
nonstatutory stock options and stock purchase rights. Unless terminated sooner,
the 1999 Plan will terminate automatically in 2009. A total of 2,500,000 shares
of common stock are currently reserved for issuance pursuant to the 1999 Plan.
The amount reserved under the 1999 Plan will automatically increase at the end
of each fiscal year by the lesser of 1,000,000 shares, 4% of outstanding shares
on such date or a lesser amount determined by the Board.
The 1999 Plan may be administered by the Board of Directors or a committee
of the Board, which committee must, in the case of options intended to qualify
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, consist of two or more "outside directors" within the meaning of Section
162(m). The administrator has the power to determine the terms of the options or
stock purchase rights granted, including the exercise price, the number of
shares subject to each option or stock purchase rights, the exercisability
thereof, and the form of consideration payable upon such exercise. In addition,
the administrator has the authority to amend, suspend or terminate the 1999
Plan, provided that no such action may affect any share of common stock
previously issued and sold or any option previously granted under the 1999 Plan.
Options and stock purchase rights granted under the 1999 Plan are not
generally transferable by the optionee, and each option and stock purchase right
is exercisable during the lifetime of the optionee only by such optionee.
Options granted under the 1999 Plan must generally be exercised within three
months after the end of optionee's status as an employee or consultant of Wink,
or within twelve months after such termination by reason of death or disability,
but in no event later than the expiration of the option's term. Options
generally vest over a four-year period at a rate of 1/4 of the shares subject to
the option after the first year and 1/48 of the shares per month thereafter. In
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<PAGE> 50
the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement entered into at the time a
stock purchase right is exercised grants us a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment or
consulting relationship with us for any reason (including death or disability).
The purchase price for shares repurchased pursuant to the restricted stock
purchase agreement is the original price paid by the purchaser and may be paid
by cancellation of any indebtedness of the purchaser to us. The repurchase
option lapses at a rate determined by the administrator.
The exercise price of all incentive stock options granted under the 1999
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of nonstatutory stock options and stock
purchase rights granted under the 1999 Plan is determined by the administrator,
but, with respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the exercise price must at least be equal to the fair market value of the
common stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
granted to such person must equal at least 110% of the fair market value on the
grant date, and the term of such incentive stock option must not exceed five
years. The term of all other options granted under the 1999 Plan may not exceed
ten years.
The 1999 Plan provides that in the event of a merger of Wink with or into
another corporation or a sale of substantially all of our assets, each option or
right will be assumed or an equivalent option or right substituted by the
successor corporation. If the outstanding options or rights are not assumed or
substituted, all unexercised options or stock purchase rights will terminate
upon the consummation of such transaction.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan
was adopted by the Board of Directors in June 1999 and will be submitted to the
stockholders for their approval prior to the date of this offering, to become
effective on the date of this offering. A total of 250,000 shares of common
stock has been reserved for issuance under the Purchase Plan. The amount
reserved under the Purchase Plan will automatically increase at the end of each
fiscal year by the lesser of 75,000 shares, 0.3% of the outstanding shares on
such date or a lesser amount determined by the Board.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, contains successive six-month offering periods. The offering periods
generally start on the first trading day on or after February 1 and August 1 of
each year, except for the first such offering period, which commences on the
date on which the Securities and Exchange Commission declares the registration
statement for this offering effective and ends on the last trading day on or
before January 31, 2000.
Employees are eligible to participate in the Purchase Plan if they are
employed by Wink or any participating subsidiary for at least 20 hours per week
and more than five months in any calendar year, although any employee who would
own stock possessing 5% or more of the total combined voting power or value of
all classes of our stock may not participate in the Purchase Plan. The Purchase
Plan permits participants to purchase common stock through payroll deductions of
up to 15% of the participant's "compensation," up to a maximum aggregate
deduction of $21,250 for all offering periods ending within any calendar year.
Compensation is defined as the participant's gross earnings and commissions, and
will include cash payments for overtime, shift premiums, incentives, bonuses and
other compensation.
Amounts deducted and accumulated under the Purchase Plan are used to
purchase shares of common stock at the end of each offering period. The price of
stock purchased under the Purchase
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<PAGE> 51
Plan is 85% of the lower of the fair market value of the common stock at the
beginning of the offering period (or, in the case of the offering period
commencing on the date of this offering, the price to public of the shares
offered in this offering) or end of the offering period. Participants may end
their participation at any time during an offering period and will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with Wink.
Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the Purchase Plan. The Purchase Plan provides that, in
the event of a merger of Wink with or into another corporation or a sale of
substantially all of our assets, each outstanding right to purchase shares under
the Purchase Plan during the offering period then in progress may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses such assumption or substitution, the offering period then in progress
will be shortened and a new purchase date will be set at or prior to the closing
of such transaction after which time the Purchase Plan will terminate.
Otherwise, the Purchase Plan will terminate in 2009. The Board of Directors has
the authority to amend or terminate the Purchase Plan, except that no such
action may adversely affect any outstanding rights to purchase stock under the
Purchase Plan.
1999 Director Option Plan. All non-employee directors are entitled to
participate in the 1999 Director Option Plan. The Director Plan was adopted by
the Board of Directors in June 1999 and will be submitted to the stockholders
for their approval prior to the date of this offering, to become effective on
the date of this offering. The Director Plan has a term of ten years, unless
terminated sooner by the Board of Directors. A total of 250,000 shares of common
stock have been reserved for issuance under the Director Plan.
The Director Plan provides for the automatic grant of a nonstatutory option
to purchase 40,000 shares of common stock to each new non-employee director who
becomes a director after the date of this offering on the date such person
becomes a director. Each current and future non-employee director will
automatically be granted an additional nonstatutory option to purchase 40,000
shares on the fourth anniversary of the date of grant of his or her last option
if he or she has served on the Board continuously during such period. Each
option granted under the Director Plan will have a term of ten years, and will
vest as to 25% of the shares subject to the option on each anniversary of the
date of grant. The exercise price of each option granted under the Director Plan
will be 100% of the fair market value per share of the common stock on the date
of grant. Options granted under the Director Plan must be exercised within three
months of the end of the optionee's tenure as a director of Wink, or within
twelve months after such termination by reason of death or disability, but in no
event later than the expiration of the option's ten-year term. No option granted
under the Director Plan is transferable by the optionee other than by will or
the laws of descent and distribution, and each option is exercisable, during
such lifetime of the optionee, only by such optionee.
The Director Plan provides that in the event of a merger of Wink with or
into another corporation, a sale of substantially all of our assets or a like
transaction involving Wink, each option will be assumed or an equivalent option
substituted by the successor corporation. Following such an assumption or
substitution, if the optionee's status as a director of the successor
corporation terminates other than upon the optionee's voluntary resignation, the
option will become fully exercisable, including as to shares for which it would
not otherwise be exercisable. If the outstanding options are not assumed or
substituted, the Administrator will provide for each optionee to have the right
to exercise the option as to all of the currently vested stock, plus 50% of
shares as to which such options would not otherwise be exercisable for a period
of 15 days from the date of such notice, and all unexercised options will
terminate upon the expiration of such period.
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<PAGE> 52
1994 Stock Plan. Our 1994 Stock Plan provides for the grant to employees of
incentive stock options, and for the grant to employees, consultants and
directors of nonstatutory stock options. As of June 30, 1999, options to
purchase an aggregate of 4,069,314 shares of common stock were outstanding under
the 1994 Plan, with a weighted average exercise price of $5.22. The Board of
Directors has determined that no further options will be granted under the 1994
Plan after the completion of this offering. Terms of options issued under the
1994 Plan are substantially similar to those described for the 1999 Plan. The
1994 Plan provides that in the event of a merger of Wink with or into another
corporation, or a sale of substantially all of our assets, each outstanding
option or stock purchase right will be assumed or substituted for by the
successor corporation. If the successor corporation refuses to assume or
substitute for the option or stock purchase right, the option or stock purchase
right will terminate as of the closing of such transaction.
401(k) Plan. Our 401(k) Profit Sharing Plan was adopted in 1996. The 401(k)
Plan is designed to enable eligible employees to save for retirement and is for
the exclusive benefit of eligible employees and their beneficiaries. All
employees who have completed six months of service with Wink and have attained
the age of 21 are eligible to participate in the 401(k) Plan.
The 401(k) Plan permits us to make contributions to the Plan which match
employees' eligible contributions, subject to a maximum. To date, we have not
made any such matching contributions. The trustees under the 401(k) Plan invest
the assets of the 401(k) Plan, at the direction of each participating employee,
in any of several investment options. The 401(k) Plan is intended to qualify
under Section 401 of the Code, so that contributions by employees to the 401(k)
Plan, and income earned on Plan contributions, are not taxable to employees
until withdrawn, and so that any matching contributions by us will be deductible
by us when and if made.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Amended and Restated Certificate of Incorporation limits the liability
of our directors for monetary damages arising from a breach of their fiduciary
duty as directors, except to the extent otherwise required by the General
Corporation Law of Delaware. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission. Our
Bylaws provide that we shall indemnify our directors and officers, and may
indemnify our other employees and agents, to the fullest extent permitted by
Delaware law, including in circumstances in which indemnification is otherwise
discretionary under Delaware law. We intend to enter into indemnification
agreements with each of our officers and directors containing provisions that
requires Wink to, among other things, indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified and to cover our
directors and officers under any Wink liability insurance policies applicable to
our directors and officers. We also intend to obtain director and officer
insurance.
At present, there is no pending litigation or proceeding involving any
director, officer, employee benefit plan fiduciary, employee or agent of Wink
where indemnification will be required or permitted.
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<PAGE> 53
CERTAIN TRANSACTIONS
The following sets forth certain transactions between Wink and our
directors, executive officers and 5% stockholders and their affiliates. We
believe that each of the transactions described below was on terms no less
favorable to Wink than could have been obtained from unaffiliated third parties.
All future transactions between Wink and any director or executive officer will
be subject to approval by a majority of the disinterested members of the Board.
SERIES B, SERIES C AND SERIES D PREFERRED STOCK FINANCINGS
Between December 21, 1995 and March 29, 1996, we sold an aggregate of
2,233,750 shares of Series B preferred stock at a price of $4.00 per share.
Between April 17, 1997 and December 2, 1998, we sold an aggregate of 4,322,250
shares of Series C preferred stock at a price per share of $8.00, and, in
connection with such sales, issued warrants to purchase an aggregate of
1,800,000 shares of common stock at exercise prices ranging from $0.80 to $16.00
per share. In June and July 1999, we sold an aggregate of 4,958,333 shares of
Series D preferred stock at a price of $12.00 per share. In connection with a
commercial agreement with Microsoft entered into concurrently with these sales,
we issued a warrant to purchase 500,000 shares of common stock at an exercise
price of $12.00 per share. The purchasers of Series B preferred stock, Series C
preferred stock, Series D preferred stock and warrants include, among others,
the following entities affiliated with directors and holders of more than five
percent of our voting securities:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF WARRANTS TO
SERIES B SERIES C SERIES D PURCHASE
PREFERRED PREFERRED PREFERRED COMMON STOCK
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
ENTITIES AFFILIATED WITH DIRECTORS
Venture capital funds affiliated with
Benchmark Capital Partners, L.P. (Bruce
Dunlevie).................................. 375,000 93,750 -- 500,000
Venture capital funds affiliated with
EGI-Wink Investors, L.L.C. (F. Philip
Handy)..................................... -- 625,000 -- 125,000
General Electric Capital Corporation (Jeffrey
Coats)..................................... -- 906,250 -- 550,000
NBC Multimedia, Inc. (Jeffrey Coats)......... -- -- -- 375,000
Toshiba Corporation (Hidetaka Yamamoto)...... 2,500 250,000 -- --
OTHER 5% STOCKHOLDERS
General Instrument Corporation............... 600,000 187,500 166,667 --
Vulcan Ventures Incorporated ................ -- 1,162,500 -- 250,000
Microsoft Corporation........................ -- -- 2,500,000 500,000
Hughes Electronics Corporation............... -- -- 1,249,999 --
</TABLE>
In reviewing the information above, please note:
- the warrants to purchase 500,000 shares of common stock held by venture
capital funds affiliated with Benchmark Capital Partners, L.P. expire on
the closing of this offering and have an exercise price of $6.00 per
share;
- the warrants to purchase 125,000 shares of common stock held by venture
capital funds affiliated with EGI-Wink Investors, L.L.C. expire on the
date of this offering and have an exercise price of $0.80 per share;
- the shares of Series B preferred stock listed opposite Toshiba
Corporation were purchased by Mr. Yamamoto personally; and
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<PAGE> 54
- simultaneously with the completion of this offering, all shares of
preferred stock will be converted into shares of common stock.
COMMERCIAL RELATIONSHIPS AND AGREEMENTS WITH PRINCIPAL STOCKHOLDERS
In September 1997, we entered into agreements with Toshiba Corporation
under which:
- we agreed to develop for, and license to, Toshiba certain of our
proprietary technology;
- we granted Toshiba a worldwide, non-exclusive, non-transferable right to
incorporate the Wink Engine software into certain Toshiba products; and
- we granted Toshiba the right to use and distribute Wink's Online Server
software.
In addition, in October 1997, we entered into a license agreement with
Toshiba America Consumer Products, Inc., a subsidiary of Toshiba, under which we
granted a non-exclusive, non-transferable license to incorporate the Wink Engine
software into certain of its products. In addition, on January 25, 1999, we
entered into an agreement, under which we agreed to develop demonstration
software for use in certain Toshiba products. From January 1, 1995 to June 30,
1999, Toshiba and Toshiba America paid Wink $605,000 in royalties, non-recurring
engineering fees and other payments. Toshiba is a holder of more than 5% of our
outstanding common stock. Hidetaka Yamamoto, a director of Wink, is General
Manager of Toshiba's ADI Business Group.
In June 1997, we entered into a contract with NBC Multimedia, Inc. under
which we licensed certain software and technology to NBC Multimedia in return
for certain programming commitments by NBC Multimedia. Such commitments have
since expired, although NBC continues to air Wink-enhanced programming. In
addition, Wink has agreed to pay to NBC a portion of the revenues Wink receives
relating to responses to Wink-enhanced advertising and programming broadcast
through NBC, if any. NBC Multimedia is affiliated with General Electric Capital
Corporation which is a holder of more than 5% of our outstanding common stock.
Jeffrey Coats, a director of Wink, is the Managing Director of GE Capital Equity
Capital Group, Inc., a wholly owned subsidiary of General Electric Capital
Corporation, which is affiliated with NBC Multimedia. In June 1997, we issued to
NBC Multimedia a warrant to purchase 375,000 shares of common stock. This
warrant expires in 2004 and has an exercise price of $8.00 per share.
In June 1995, we entered into an agreement with General Instrument under
which we agreed to develop and license to General Instrument certain of our
proprietary technology. From January 1, 1995 to June 30, 1999, General
Instrument has paid Wink $600,000 in royalties, non-recurring engineering fees
and other payments, and we have paid General Instrument $375,000 in connection
with a research and development agreement. In connection with this agreement,
General Instrument purchased from Wink 550,000 shares of common stock at $0.01
per share (giving effect to a 10-for-1 split of our common stock in June 1995).
General Instrument is a holder of more than 5% of our outstanding common stock.
In June 1998, we entered into an agreement with General Electric Capital
Corporation, under which certain affiliates of General Electric Capital
Corporation receive fixed rate pricing for all Wink products and services during
a charter period ending in 1999, in exchange for a commitment by these
affiliates to air specified amounts of Wink-enhanced advertising. Since July
1998, General Electric Capital Corporation and its affiliates have paid us
$25,000 of license fees. We also have an agreement with General Electric
Information Services, an affiliate of General Electric Capital Corporation, for
the operation of the Wink Response Network. Since May 1998, we have paid General
Electric Information Services $328,000 under this agreement. In addition, in
August 1998, we issued to
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<PAGE> 55
General Electric Capital Corporation a warrant to purchase 25,000 shares of
common stock in exchange for consulting service under a letter agreement dated
September 1998.
In December 1998, we issued to Vulcan Ventures Incorporated warrants to
purchase up to an aggregate of 250,000 shares of common stock, subject to
certain performance and exercisability conditions. Any exercise of the warrants
is conditioned upon cable television system operators affiliated with Vulcan
deploying set-top boxes containing Wink Engines to at least 200,000 households
between January 1, 1999 and December 31, 2001. Vulcan may exercise the warrants
on or after February 1, 2001 for a number of shares equal to one-fifth the
number of households in which a Wink-enabled set-top box is deployed by a Vulcan
affiliate during calendar 1999, which box remains deployed for at least one year
after deployment. The exercise price for such shares is $12.00 per share. Vulcan
may exercise the warrants on or after February 1, 2002 for an additional number
of shares equal to one-fifth the number of households in which a Wink-enabled
set-top box is deployed during calendar 2000, which box remains deployed for at
least one year thereafter, less the number of shares which became exercisable in
2001, up to the aggregate maximum of 250,000 shares. The exercise price of such
additional shares is $16.00 per share. Vulcan Ventures Incorporated is a holder
of more than 5% of our outstanding common stock.
In October 1997, we entered into an agreement with Charter Communications
Inc. under which Charter licensed certain proprietary technology to enable the
delivery of Wink Enhanced Broadcasting to Charter subscribers in select markets.
This agreement was subsequently amended in March 1999 to include revenue
guarantees to Charter in exchange for a minimum volume commitment for Wink
Engines deployed. See Note 6 to Consolidated Financial Statements. Charter is
affiliated with Vulcan Ventures Incorporated, which is a holder of more than 5%
of our outstanding common stock.
In May 1999, we entered into an agreement with Microsoft pursuant to which
Microsoft agreed to collaborate with us to develop, market and distribute Wink
Enhanced Broadcasting. Pursuant to this agreement, we have agreed to pay
Microsoft a portion of the revenues we receive relating to responses to
Wink-enhanced advertising and programming broadcast through Microsoft's
television platforms and to provide Microsoft with certain minimum revenue
guarantees. In addition, in connection with these agreements, we issued to
Microsoft a warrant to purchase 500,000 shares of our common stock at $12.00 per
share. This warrant expires in 2004 and has an exercise price of $12.00.
Microsoft is a holder of more than 5% of our outstanding common stock. See
"Business -- Strategic Relationships -- Strategic Relationship with Microsoft"
and "Risk Factors -- We will incur substantial liability if Wink Enhanced
Broadcasting fails to generate sufficient revenue to meet our revenue guarantees
and other obligations."
In December 1998, we entered into an agreement with DIRECTV, Inc., whereby
DIRECTV has licensed Wink technology for use in their direct broadcast satellite
set-top boxes. In exchange, we have agreed to provide DIRECTV with technical
development fees. To date, no technical development fees have been paid to
DIRECTV. DIRECTV is a subsidiary of Hughes Electronics Corporation, which is a
holder of more than 5% of our outstanding common stock.
CERTAIN SALES AND OPTION GRANTS TO EXECUTIVE OFFICERS AND DIRECTORS
On December 2, 1996, we sold 1,310,000 shares of common stock at a price of
$0.40 per share to Mary Agnes Wilderotter, our President and Chief Executive
Officer and a director of Wink. We have the right to repurchase such shares in
the event Ms. Wilderotter's services to us terminate, which right lapses
progressively over four years after the date of purchase. Ms. Wilderotter paid
for such shares with a full-recourse, ten-year $524,000 promissory note, secured
by the purchased shares pursuant to a security agreement entered into on the
same date. The note bears interest at a rate of
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<PAGE> 56
6.4% per annum. The aggregate outstanding principal and interest at June 30,
1999 was approximately $601,000.
On January 15, 1998, the Board of Directors granted Ms. Wilderotter an
option to purchase 100,000 shares of common stock at an exercise price of $4.00
per share, as well as the right to purchase 25,000 shares of restricted common
stock, at $4.00 per share. We have the right to repurchase such shares in the
event Ms. Wilderotter's services to us terminate, which right lapses
progressively over four years after the date of purchase. Ms. Wilderotter paid
for the 25,000 shares of restricted stock with a full-recourse, ten-year
$100,000 promissory note, secured by the purchased shares pursuant to a security
agreement entered into on the same date. The note bears interest at a rate of
6.4% per annum. The aggregate outstanding principal and interest at June 30,
1999 was approximately $109,000.
On January 15, 1998, the Board of Directors granted to each of Jeff Coats,
F. Philip Handy, Bruce Dunlevie and William Schleyer, directors of Wink, options
to purchase 40,000 shares of common stock at an exercise price of $4.00 per
share. On June 8, 1998, the Board of Directors granted Michael Fuchs, a director
of Wink, an option to purchase 40,000 shares of common stock at an exercise
price of $6.00 per share. All the options become exercisable over a four-year
period at the rate of 25% per year.
On August 25, 1998, the Board of Directors granted to Mr. Schleyer and Mr.
Fuchs stock purchase rights under the 1994 Plan to purchase 62,500 and 298,500
shares of common stock, respectively, at $8.00 per share. Such stock purchase
rights were exercised in cash.
On May 17, 1999, we sold 250,000 shares of common stock at a price of $8.00
per share to Howard L. Schrott, our Senior Vice President and Chief Financial
Officer. We have the right to repurchase the shares at cost in the event Mr.
Schrott's services to Wink terminate, which right lapses progressively over four
years after the date of purchase. Mr. Schrott paid for the shares with a
full-recourse, ten-year $2,000,000 promissory note, secured by the purchased
shares pursuant to a security agreement entered into on the same date. The note
bears interest at a rate of 6.4% per annum. The aggregate outstanding principal
and interest on June 30, 1999 was approximately $2,016,000. See "-- Employment
Offer Letters and Severance Arrangements."
On May 17, 1999, the Board of Directors granted to each of Ms. Wilderotter,
Ms. Sullivan, Mr. Thygesen and Mr. Travaille, each executive officers of Wink,
options to purchase 500,000, 100,000, 75,000 and 75,000 shares, respectively, of
common stock at an exercise price of $8.00 per share. All the options become
exercisable over a four-year period at the rate of 25% after the first year and
1/48 per month thereafter.
On June 1, 1999, Mr. Thygesen and Mr. Travaille each received a stock bonus
of 25,000 shares. The Board of Directors determined that the fair market value
of each bonus was $300,000.
RECENT SALES OF SECURITIES
In June 1999, one of our stockholders, who is not one of our officers or
affiliates, sold an aggregate of 10,050 shares of common stock to employees of
Donaldson, Lufkin & Jenrette Securities Corporation for an aggregate purchase
price of $80,400, or $8.00 per share.
In addition, in July 1999, the same stockholder sold an aggregate of 19,500
shares of common stock for an aggregate purchase price of $195,000, or $10.00
per share, to certain employees of Donaldson, Lufkin & Jenrette Securities
Corporation and an aggregate of 60,500 shares of common stock for an aggregate
purchase price of $605,000, or $10.00 per share, to DLJ Private Equity Partners
Fund, L.P., DLJ Private Equity Employees Fund, L.P. and DLJ Fund Investment
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<PAGE> 57
Partners II, L.P., each of which is affiliated with Donaldson, Lufkin & Jenrette
Securities Corporation.
EMPLOYMENT OFFER LETTERS AND SEVERANCE ARRANGEMENTS
In October 1996, we entered into an employment offer letter with Ms.
Wilderotter under which, if she is terminated without cause, Ms. Wilderotter
will be entitled to severance compensation at a $300,000 annual salary level for
one year or until Ms. Wilderotter finds new employment. In addition, in the
event Wink is acquired by or merged into another company prior to Ms.
Wilderotter's shares fully vesting and Ms. Wilderotter is not employed by the
acquiring company in a role acceptable to her, Wink's repurchase right will
lapse as to 50% of Ms. Wilderotter's unvested shares.
In May 1999, we entered into an employment offer letter with Mr. Schrott
under which, if he is terminated without cause prior to May 2000, Mr. Schrott
will be entitled to six months of severance compensation equivalent to Mr.
Schrott's base salary, which salary is $175,000 per year. In addition, in the
event Wink is acquired by or merged into another company prior to Mr. Schrott's
shares fully vesting, our repurchase right will lapse as to 50% of Mr. Schrott's
unvested shares.
In October 1997, we entered into an employment offer letter with our
previous chief financial officer, under which, if he were terminated without
cause, he would have been entitled to six months of severance compensation
equivalent to his base salary, which salary was $175,000 per year. At
approximately the same time, the officer purchased 215,000 shares of common
stock at $2.00 per share. Wink retained the right to repurchase such shares at
cost upon the officer's termination of employment, which right lapsed
progressively over four years from the start of his employment, provided that,
if Wink were acquired by or merged into another company prior to his shares
fully vesting, the repurchase right would have lapsed as to 50% of the unvested
shares. Such arrangement was amended upon the officer's resignation in January
1999 to provide for accelerated vesting of shares during a three-month
consulting period ended April 3, 1999, at the end of which Wink repurchased
122,292 shares at cost. The officer also received $87,500 as part of his
resignation compensation.
INDEMNIFICATION AGREEMENTS
We have entered into Indemnification Agreements with each of our executive
officers and directors. Such agreements require Wink to indemnify such
individuals to the fullest extent permitted by Delaware law. See
"Management -- Limitation of Liability and Indemnification Matters."
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<PAGE> 58
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of our common stock as of June 30, 1999, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by:
- each person or entity who is known by us to own beneficially five percent
or more of our outstanding common stock;
- each of the Named Executive Officers;
- each of our current directors;
- all directors and executive officers as a group; and
- each selling stockholder.
Percentage ownership prior to this offering is based on 24,600,646 shares
outstanding. This number is based on shares of common stock and preferred stock,
on an as-converted to common stock basis, outstanding as of June 30, 1999, plus
shares of convertible preferred stock issued in July 1999 and shares of common
stock that are expected to be issued upon exercise of warrants that expire upon
the completion of this offering. Percentage ownership after this offering is
based on 28,600,646 shares outstanding, assuming no exercise of the
underwriters' over-allotment option. The number and percentage of shares
beneficially owned are determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Shares of common stock
subject to options or warrants that are currently exercisable, or exercisable
within 60 days of June 30, 1999, are deemed to be beneficially owned by the
person holding the options or warrants for the purpose of computing that
person's percentage ownership, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person. Unless
otherwise indicated in the footnotes, each person or entity has sole voting and
investment power (or shares these powers with his or her spouse) with respect to
the shares shown as beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE SHARES
SHARES BENEFICIALLY SOLD IN BENEFICIALLY OWNED
OWNED PRIOR TO OFFERING OFFERING AFTER THE OFFERING
----------------------- ------------ -----------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
<S> <C> <C> <C> <C> <C>
Brian P. Dougherty(a)................ 4,249,500 17.3% 100,000 4,149,500 14.5%
Microsoft Corporation(b)............. 3,000,000 12.0 -- 3,000,000 10.3
One Microsoft Way
Redmond, WA 98052
Entities associated with General
Electric Capital Corporation(c).... 1,866,250 7.3 -- 1,866,250 6.3
Jeffrey H. Coats
120 Long Ridge Road
Stamford, CT 06927
General Instrument Corporation....... 1,504,167 6.1 -- 1,504,167 5.3
101 Tournament Drive
Horsham, PA 19044
Toshiba Corporation(d)............... 1,502,500 6.1 -- 1,502,500 5.3
Hidetaka Yamamoto
1-1 Shibaura 1-Chome
Minato-ku
Tokyo, 105-01 Japan
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE SHARES
SHARES BENEFICIALLY SOLD IN BENEFICIALLY OWNED
OWNED PRIOR TO OFFERING OFFERING AFTER THE OFFERING
----------------------- ------------ -----------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
<S> <C> <C> <C> <C> <C>
Vulcan Ventures Incorporated......... 1,412,500 5.7% -- 1,412,500 4.9%
110 110th Ave. #550
Bellevue, WA 98004
Mary Agnes Wilderotter(e)............ 1,374,583 5.6% 100,000 1,274,583 4.4%
Hughes Electronics Corporation....... 1,249,999 5.1% -- 1,249,999 4.4%
2230 East Imperial Highway
El Segundo, CA 90245
Entities associated with Benchmark
Capital Partners, L.P.(f).......... 1,245,417 5.1% -- 1,245,417 4.4%
Bruce W. Dunlevie
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Entities associated with EGI-Wink
Investors L.L.C.(g)................ 791,250 3.2% -- 791,250 2.8%
F. Philip Handy
Two N. Riverside Plaza
Chicago, IL 60606
Allan C. Thygesen(h)................. 125,208 * -- 125,208 *
Timothy V. Travaille(i).............. 85,625 * -- 85,625 *
Katherine Sullivan(j)................ 42,188 * -- 42,188 *
Paritosh K. Choksi................... 92,708 * -- 92,708 *
Michael Fuchs(k)..................... 347,500 1.4% -- 347,500 1.2%
William Schleyer(k).................. 79,500 * -- 79,500 *
All directors and executive officers
as a group (12 persons)(l)......... 11,583,479 44.8% 200,000 11,383,479 38.1%
----------
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
common stock at June 30, 1999.
(a) Represents shares held of record in the name of Mr. Dougherty's family
trust.
(b) Includes 500,000 shares subject to a currently exercisable warrant.
(c) Includes (1) 550,000 shares subject to currently exercisable warrants held
by General Electric Capital Corporation, (2) 375,000 shares subject to a
currently exercisable warrant held by NBC Multimedia, Inc. and (3) 10,000
shares subject to stock options exercisable within 60 days of June 30, 1999
held by Jeffrey Coats. Mr. Coats, a director of Wink, is the Managing
Director of GE Capital Equity Capital Group, Inc., a wholly owned
subsidiary of General Electric Capital Corporation, which is affiliated
with NBC Multimedia, Inc., and may be deemed to have voting and investment
power with respect to such shares.
(d) Includes 1,500,000 shares held by Toshiba Corporation, and 2,500 shares
held by Hidetaka Yamamoto personally. Mr. Yamamoto, a director of Wink, is
the General Manager of New Business Development of Toshiba Corporation and
may be deemed to have voting and investment power with respect to such
shares.
(e) At June 30, 1999, 806,083 shares held by Ms. Wilderotter were vested, and
507,917 shares were unvested and subject to a right of repurchase in favor
of Wink, which right lapses over time. Includes 16,667 shares which are
subject to the terms of a Loan and Pledge Agreement between Ms. Wilderotter
and Benchmark Capital Partners, L.P. and Benchmark Founders' Fund, pursuant
to which Ms. Wilderotter has an option to require Benchmark to purchase
such
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<PAGE> 60
shares and Benchmark has an option to purchase such shares from Ms.
Wilderotter. Also includes 60,583 shares subject to currently exercisable
stock options.
(f) Represents (1) 638,622 shares held by Benchmark Capital Partners, L.P., (2)
80,128 shares held by Benchmark Founders' Fund, L.P., (3) 441,257 shares
subject to a currently exercisable warrant held by Benchmark Capital
Partners, L.P., (4) 58,743 shares subject to a currently exercisable
warrant held by Benchmark Founders' Fund, L.P. and (5) 10,000 shares
subject to stock options exercisable within 60 days of June 30, 1999 held
by Bruce M. Dunlevie. Each of the foregoing warrants is expected to be
exercised prior to the closing of this offering. Also includes 16,667
shares which Benchmark has the right to acquire upon exercise of currently
exercisable options granted by Mary Agnes Wilderotter. Mr. Dunlevie, a
director of Wink, is a managing member of Benchmark Capital Management Co.,
L.L.C., which is the general partner of both Benchmark Capital Partners,
L.P. and Benchmark Founders' Fund, L.P., and may be deemed to have voting
and investment power with respect to such shares.
(g) Represents (1) 375,000 shares held by WC Investors, L.L.C., (2) 250,000
shares held by EGI-Wink Investors, L.L.C., (3) 31,250 shares held by SZ
Investments, L.L.C. (4) 75,000 shares subject to a currently exercisable
warrant held by WC Investors, L.L.C., (5) 50,000 shares subject to a
currently exercisable warrant held by EGI-Wink Investors, L.L.C. and (6)
10,000 shares subject to stock options exercisable within 60 days of June
30, 1999 held by F. Philip Handy. Each of the foregoing warrants is
expected to be exercised prior to the closing of this offering. Mr. Handy,
a director of Wink, is the Managing Director of EGI-Wink Investors, L.L.C.
and may be deemed to have voting and investment power with respect to such
shares.
(h) Includes 116,458 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(i) Includes 78,125 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(j) Includes 35,938 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(k) Includes 10,000 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(l) Includes 357,771 shares issuable upon the exercise of stock options
exercisable within 60 days of June 30, 1999, and 1,550,000 shares subject
to warrants held by entities affiliated with directors of Wink. Of these
warrants, warrants to purchase 625,000 shares are expected to be exercised
prior to the closing of this offering.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of 100,000,000 shares of common stock, $0.001 par value per share, and
5,000,000 shares of preferred stock, $0.001 par value per share.
COMMON STOCK
Immediately prior to this offering, there were 24,600,646 shares of common
stock outstanding, based on shares outstanding as of June 30, 1999, plus shares
of convertible preferred stock issued in July 1999 and shares of common stock
that are expected to be issued upon exercise of warrants that expire upon the
completion of this offering, and treating all preferred stock as if converted to
common stock. These shares were held of record by approximately 232
stockholders. There will be 28,600,646 shares of common stock outstanding after
giving effect to the sale of 4,000,000 shares of common stock by Wink hereby.
The holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of common stock are entitled to
receive ratably such dividends as may be declared by the Board out of funds
legally available therefor, subject to any preferences that may be applicable to
any outstanding preferred stock. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of Wink, holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to any prior liquidation rights of any outstanding preferred stock. The
common stock has no preemptive, subscription or conversion rights, and there are
no redemption or sinking fund provisions applicable to the common stock.
PREFERRED STOCK
Effective upon the completion of this offering, all of our then outstanding
preferred stock will automatically convert into common stock on a one-for-one
basis. Accordingly, effective upon the completion of this offering, 5,000,000
shares of undesignated preferred stock will be authorized, and no shares will be
outstanding. The Board has the authority, without any further vote or action by
the stockholders, to issue such shares of preferred stock in one or more series
and to fix the price, powers, designations, preferences and relative,
participating, optional or other rights thereof, including dividend rights,
conversion rights, voting rights, redemption terms, liquidation preferences and
the number of shares constituting any series and the designations of such
series. The issuance of preferred stock in certain circumstances may have the
effect of delaying, deferring or preventing a change of control of Wink without
further action by the stockholders, may discourage bids for our common stock at
a premium over the market price of the common stock and may adversely affect the
market price of, and the voting and other rights of, the holders of common
stock. We have no current plans to issue any shares of preferred stock.
ANTITAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
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<PAGE> 62
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding certain shares for purposes of
determining the number of shares outstanding; or
- on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
Our Amended and Restated Certificate of Incorporation provides that, upon
the effective date of this offering, our Board of Directors will be classified
into three classes of directors. See "Management -- Board of Directors." In
addition, our Bylaws limit the ability of our stockholders to call a special
meeting of stockholders. Only our Board of Directors, Chairman, President or
stockholders holding more than 50% of our outstanding stock may call a special
meeting of stockholders.
These provisions are designed to discourage certain types of coercive
takeover practices and encourage persons seeking to acquire control of Wink to
first negotiate with us. However, these and other provisions could have the
effect of making it more difficult to acquire Wink by means of a tender offer,
proxy contest or otherwise or to remove the incumbent officers and directors of
Wink.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Upon the completion of this offering, the holders of 15,956,833 shares of
common stock, including shares issuable upon exercise of warrants, will be
entitled to certain rights with respect to the registration of such shares under
the Securities Act. Under the terms of the agreement between Wink and the
holders of such registrable securities, if we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of other securities holders exercising registration rights, such holders
are entitled to notice of such registration and to include shares of such common
stock therein. Holders of registration rights may also require us to file a
registration statement under the Securities Act at our expense with respect to
their shares of common stock, and we are required to use our best efforts to
effect such registration. Further, holders may
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<PAGE> 63
require us to file registration statements on Form S-3 at our expense when such
form becomes available for use by Wink. All such registration rights are subject
to certain conditions and limitations, including the right of the underwriters
of an offering to limit the number of registrable securities included in such
registration.
WARRANTS
Immediately following the closing of this offering, there will be
outstanding warrants to purchase an aggregate of 1,692,500 shares of our common
stock at a weighted average exercise price of $9.73 per share. Of such warrants,
warrants to purchase 17,500 shares expire in September 2002, warrants to
purchase 25,000 shares expire in August 2003, warrants to purchase 500,000
shares expire in May 2004, warrants to purchase 250,000 shares expire in January
2005, and warrants to purchase 900,000 shares expire in June 2009. All warrants
may be exercised on a "net" basis whereby, in lieu of paying the exercise price
in cash, the holder may instruct us to retain a number of shares that has a fair
market value at the time of exercise equal to the aggregate exercise price.
In December 1998, we issued to Vulcan Ventures Incorporated warrants to
purchase up to an aggregate of 250,000 shares of common stock, subject to
certain performance and exercisability conditions. Any exercise of the warrants
is conditioned upon cable television system operators affiliated with Vulcan
deploying set-top boxes containing Wink technology to at least 200,000
households between January 1, 1999 and December 31, 2001. Vulcan may exercise
the warrants on or after February 1, 2001 for a number of shares equal to
one-fifth the number of households in which a Wink-enabled set-top box is
deployed by a Vulcan affiliate during calendar 1999, which box remain deployed
for at least one year after deployment. The exercise price for such shares is
$12.00 per share. Vulcan may exercise the warrants on or after February 1, 2002
for an additional number of shares equal to one-fifth the number of households
in which a Wink-enabled set-top box is deployed during calendar 2000, which box
remain deployed for at least one year thereafter, less the number of shares
which became exercisable in 2001, up to the aggregate maximum of 250,000 shares.
The exercise price of such additional shares is $16.00 per share.
In addition to the foregoing warrants, we also have outstanding warrants to
purchase an aggregate of 988,200 shares of common stock, at a weighted average
exercise price of $7.24 per share. Such warrants expire on the completion of
this offering, and are expected to be exercised prior thereto. Such warrants may
be exercised on a "net" basis.
We have granted to a holder of one of the warrants which expire upon
completion of this offering the right to participate in any future private
financings we may undertake to the extent necessary to maintain the holder's
percentage interest in our stock. Assuming the holder exercises its warrant in
full, it will hold approximately 0.8% of our outstanding stock immediately prior
to the offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services. Its address is 235 Montgomery Street, 23rd Floor, San
Francisco, California 94109, and its telephone number at this location is (415)
743-1444.
LISTING
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the trading symbol "WINK."
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices from time to time.
Upon completion of this offering (based on shares outstanding at June 30,
1999, plus shares of convertible preferred stock issued in July 1999 and shares
of common stock that are expected to be issued upon exercise of warrants that
expire upon the completion of this offering), we will have outstanding an
aggregate of 28,600,646 shares of common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of other outstanding options
or warrants. Of these shares, the 4,200,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless such shares are purchased by an existing "affiliate" of
Wink as that term is defined in Rule 144 under the Securities Act. The remaining
24,400,646 shares of common stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which rules are summarized below. As a
result of the contractual restrictions described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY
<C> <S>
87,800 , 1999 - , 1999 (on the date of this
prospectus or within 180 days after the date of this
prospectus)
18,034,511 , 1999 (180 days after the date of this prospectus)
6,278,335 at various times thereafter upon the expiration of one-year
holding periods
</TABLE>
All officers and directors and certain stockholders and option and warrant
holders of Wink have agreed not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer, lend or
dispose of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock or enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the common stock for a period
of 180 days after the date of this prospectus, without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation, subject to certain
limited exceptions. Donaldson, Lufkin & Jenrette Securities Corporation
currently has no plans to release any portion of the securities subject to
lock-up agreements, although it may do so, in its discretion, at any time. When
determining whether or not to release shares from the lock-up agreements,
Donaldson, Lufkin & Jenrette Securities Corporation will consider, among other
factors, the stockholder's reasons for requesting the release, the number of
shares for which the release is being requested and market conditions at the
time.
In addition, certain stockholders and option and warrant holders of Wink
have agreed not to transfer their shares of common stock for a period of 180
days after the date of this prospectus without our consent. We have agreed not
to permit any transfer of the securities held by these stockholders and option
and warrant holders without the consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned restricted securities for at least one year
(including the holding period of any prior owner except an affiliate) will be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of one percent of the number of shares of common stock then
outstanding (which will equal
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<PAGE> 65
approximately 286,000 shares immediately after this offering); or the average
weekly trading volume of the common stock on the Nasdaq National Market during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about Wink. Under Rule 144(k), a person who is not deemed to have
been an Affiliate of Wink at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice requirements of Rule 144. Accordingly,
unless otherwise restricted, "144(k) shares" may be sold immediately upon
completion of this offering.
Any employee or consultant to Wink who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus.
We have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer, lend or dispose
of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or enter into
any swap or similar agreement that transfers, in whole or in part, the economic
risk of ownership of the common stock, for a period of 180 days after the date
of this prospectus, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation, subject to certain limited exceptions.
Following the offering, we intend to file a registration statement on Form
S-8 covering approximately 7,069,314 shares of common stock subject to
outstanding options or reserved for issuance under our employee stock plans
(based on options outstanding as of June 30, 1999). See "Management -- Employee
Benefit Plans." Shares registered under such registration statement will,
subject to Rule 144 volume limitations applicable to affiliates, be available
for sale in the open market, except to the extent that such shares are subject
to vesting restrictions with Wink or the contractual restrictions described
above.
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<PAGE> 66
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated , 1999, the underwriters named below, who are
represented by Donaldson, Lufkin & Jenrette Securities Corporation, Deutsche
Bank Securities Inc. and Bear, Stearns & Co. Inc. have severally agreed to
purchase from us the respective number of shares of common stock set forth
opposite their names below.
<TABLE>
<CAPTION>
NUMBER
OF
SHARES
UNDERWRITERS ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Deutsche Bank Securities Inc................................
Bear, Stearns & Co. Inc.....................................
----------
Total............................................. 4,200,000
==========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
included in this offering are subject to approval of legal matters by their
counsel and to customary conditions, including the effectiveness of the
registration statement, the continuing correctness of our representations and
those of the selling stockholders, the receipt of a "comfort letter" from our
accountants, the listing of the common stock for quotation on the Nasdaq
National Market and no occurrence of an event that would have a material adverse
effect on us. The underwriters are obligated to purchase and accept delivery of
all the shares of common stock, other than those covered by the over-allotment
option described below, if they purchase any of the shares of common stock.
The underwriters propose to initially offer some of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares of common stock to
dealers (including the underwriters) at the initial public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share on
sales to other dealers. After the initial offering of the common stock to the
public, the representatives of the underwriters may change the public offering
price and such concessions. The underwriters do not intend to confirm sales to
any accounts over which they exercise discretionary authority.
DLJdirect, an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in this offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJdirect for sale to its
brokerage account holders.
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<PAGE> 67
The following table shows the underwriting fees to be paid to the
underwriters by the selling stockholders and by us in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
NO FULL
EXERCISE EXERCISE
-------- --------
<S> <C> <C>
Wink:
Per share................................................. $ $
Total..................................................... $ $
Selling stockholders:
Per share................................................. $ $
Total..................................................... $ $
</TABLE>
Wink has granted to the underwriters an option, exercisable for 30 days
after the date of the underwriting agreement, to purchase up to 630,000
additional shares of common stock at the initial public offering price less than
the underwriting fees. The underwriters may exercise such option solely to cover
overallotments, if any, made in connection with this offering. To the extent
that the underwriters exercise such option, each underwriter will become
obligated, subject to conditions, to purchase a number of additional shares
approximately proportionate to such underwriter's initial purchase commitment.
We estimate expenses relating to this offering will be $850,000.
The underwriters, Wink and the selling stockholders have agreed to
indemnify each other against liabilities, including liabilities under the
Securities Act of 1933.
Each of Wink and our executive officers, directors and some of our
stockholders (including the selling stockholders) has agreed that, for a period
of 180 days from the date of this prospectus and subject to certain exceptions,
they will not, without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, do either of the following:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
Either of the foregoing transfer restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. In addition, during such period
and subject to certain exceptions, we have agreed not to file any registration
statement with respect to, and each of our executive officers, directors and
some of our stockholders has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
securities convertible into or exercisable for common stock without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
At our request, the underwriters have reserved up to five percent of the
shares offered by this prospectus for sale at the initial public offering price
to our employees, officers and directors and other individuals associated with
us and members of their families. The number of shares of common stock available
for sale to the general public will be reduced to the extent these individuals
purchase or confirm for purchase, orally or in writing, such reserved shares.
Any reserved shares not purchased or confirmed for purchase will be offered by
the underwriters to the general public on the same basis as the other shares
offered by this prospectus.
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<PAGE> 68
We intend to apply to list our common stock for quotation on the Nasdaq
National Market under the symbol "WINK."
Other than in the United States, no action has been taken by the
underwriters or us that would permit a public offering of the shares of common
stock included in this offering in any jurisdiction where action for that
purpose is required. The shares of common stock included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of any shares of common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of such jurisdiction. Persons who receive this prospectus
are advised to inform themselves about and to observe any restrictions relating
to this offering of the common stock and the distribution of this prospectus.
This prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction in which
that would not be permitted or legal.
DLJ Private Equity Partners Fund, L.P., DLJ Private Equity Employees Fund,
L.P. and DLJ Fund Investment Partners II, L.P., each of which are affiliates of
Donaldson, Lufkin & Jenrette Securities Corporation, are stockholders of Wink.
Donaldson, Lufkin & Jenrette Securities Corporation and its affiliates and
employees own an aggregate of less than one percent of the issued and
outstanding shares of our common stock.
STABILIZATION
In connection with this offering, any of the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. The underwriters may bid for and purchase
shares of common stock in the open market to cover such syndicate short position
or to stabilize the price of the common stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members and selected
dealers if Donaldson, Lufkin & Jenrette Securities Corporation repurchases
previously distributed common stock in syndicate covering transactions, in
stabilization transactions or otherwise if Donaldson, Lufkin & Jenrette
Securities Corporation receives a report that indicates that the clients of such
syndicate members have "flipped" the common stock. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
PRICING OF THIS OFFERING
Prior to this offering, there has been no established market for the common
stock. The initial public offering price for the shares of common stock offered
by this prospectus will be determined by negotiation among the representatives
of the underwriters and Wink. The factors to be considered in determining the
initial public offering price include:
- the history of, and the prospects for, the industry in which we compete;
- our past and present operations;
- our historical results of operations;
- our prospects for future earnings;
- the recent market prices of securities of generally comparable companies;
and
- the general conditions of the securities market at the time of this
offering.
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<PAGE> 69
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Wink by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Latham & Watkins, Costa Mesa, California, is acting as counsel for
the underwriters in connection with certain legal matters relating to the shares
of common stock offered hereby. Certain members of Wilson Sonsini Goodrich &
Rosati and investment partnerships with which they are affiliated beneficially
own an aggregate of 8,750 shares of common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act with respect to the securities
offered hereby. This prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to Wink Communications and the common stock,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part thereof. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium
Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
You may call the Commission at 1-800-SEC-0330 for further information on the
operations of the public reference facilities. Information concerning the
Company is also available for inspection at the offices of the Nasdaq National
Market, Reports Section, 1735 K Street, N.W., Washington, D.C. 20006. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's Web site is
http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934, and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the
Commission's public reference rooms and the Commission's Web site, which is
described above.
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<PAGE> 70
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statement of Operations........................ F-4
Consolidated Statement of Stockholders' Equity.............. F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Wink Communications, Inc. and its Subsidiary
The Delaware reincorporation described in Note 9 to the consolidated
financial statements has not been consummated at July 27, 1999. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of Wink Communications, Inc. and its subsidiary at December 31,
1997 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
February 23, 1999
F-2
<PAGE> 72
WINK COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, JUNE 30, JUNE 30,
------------------- -------- -------------
1997 1998 1999 1999
(UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 8,530 $ 16,892 $ 44,794
Short-term investments............................ 5,452 4,441 28,662
Accounts receivable -- related parties............ 128 52 12
Accounts receivable -- third parties, net......... -- 187 199
Prepaid expenses -- related party................. -- -- 375
Prepaid expenses and other current assets......... 194 301 575
-------- -------- --------
Total current assets...................... 14,304 21,873 74,617
Property and equipment, net......................... 1,103 1,762 1,793
Other assets........................................ 222 285 307
-------- -------- --------
$ 15,629 $ 23,920 $ 76,717
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 286 $ 995 $ 772
Accrued expenses.................................. 663 1,243 1,033
Deferred revenue -- related parties............... 650 671 650
Deferred revenue -- third parties................. 991 1,119 1,177
Convertible promissory note -- related party...... -- -- 15,120
Current portion of capital lease obligations...... 347 402 433
-------- -------- --------
Total current liabilities................. 2,937 4,430 19,185
-------- -------- --------
Capital lease obligations, less current portion..... 767 365 140
-------- -------- --------
Commitments and contingencies (Note 6)
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value,
issuable in series; aggregate liquidation
amount $45,512 and $89,892 (unaudited) at
December 31, 1998 and June 30, 1999,
respectively; 13,001 shares authorized; 5,675,
7,806 and 11,504 (unaudited) shares issued and
outstanding; no shares issued and outstanding
pro forma (unaudited).......................... 6 8 12 $ --
Common Stock, $0.001 par value; 35,000 shares
authorized; 9,816, 10,517 and 10,848
(unaudited) shares issued and outstanding;
22,352 shares issued and outstanding pro forma
(unaudited).................................... 10 11 11 23
Additional paid-in capital........................ 30,610 51,890 105,936 105,936
Stockholder notes receivable...................... (984) (1,046) (2,801) (2,801)
Unearned compensation............................. (494) (479) (5,306) (5,306)
Accumulated deficit............................... (17,223) (31,259) (40,460) (40,460)
-------- -------- -------- --------
Total stockholders' equity................ 11,925 19,125 57,392 $ 57,392
-------- -------- -------- ========
$ 15,629 $ 23,920 $ 76,717
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 73
WINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
(UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses -- related parties................... $ -- $ 384 $ 174 $ 78 $ 97
Licenses -- third parties..................... -- -- 224 113 201
Services -- related parties................... 155 148 -- -- 198
Services -- third parties..................... 193 87 119 99 124
------- ------- -------- ------- --------
Total revenues........................ 348 619 517 290 620
------- ------- -------- ------- --------
Costs and expenses:
Cost of services -- related parties........... 323 162 -- -- 142
Cost of services -- third parties............. 235 376 513 133 63
Research and development...................... 2,595 4,313 6,345 2,644 4,060
Sales and marketing........................... 2,263 3,198 4,732 2,154 2,335
General and administrative.................... 1,064 1,771 2,366 830 1,808
Stock-based costs and expenses................ 4 455 1,256 622 2,952
------- ------- -------- ------- --------
Total costs and expenses.............. 6,484 10,275 15,212 6,383 11,360
------- ------- -------- ------- --------
Loss from operations............................ (6,136) (9,656) (14,695) (6,093) (10,740)
Interest and other income....................... 279 684 813 394 1,590
Interest expense................................ (27) (194) (154) (78) (51)
------- ------- -------- ------- --------
Net loss........................................ $(5,884) $(9,166) $(14,036) $(5,777) $ (9,201)
======= ======= ======== ======= ========
Net loss per share:
Basic and diluted............................. $ (0.91) $ (1.25) $ (1.57) $ (0.66) $ (0.92)
======= ======= ======== ======= ========
Weighted average shares outstanding........... 6,432 7,337 8,954 8,695 9,965
Pro forma net loss per share (unaudited):
Basic and diluted............................. $ (0.92) $ (0.52)
======== ========
Weighted average shares outstanding........... 15,198 17,832
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 74
WINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER
--------------- --------------- PAID-IN NOTES UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............... 1,850 $ 2 8,016 $ 8 $ 4,706 $ -- $ (13)
Issuance of Series B Preferred Stock,
net...................................... 1,634 2 -- -- 6,512 (30) --
Exercise of Common Stock options........... -- -- 14 -- 1 -- --
Issuance of Common Stock for stockholder
note..................................... -- -- 1,310 1 523 (524) --
Amortization of unearned compensation...... -- -- -- -- -- -- 4
Net loss................................... -- -- -- -- -- -- --
------ --- ------ --- -------- ------- -------
BALANCE AT DECEMBER 31, 1996............... 3,484 4 9,340 9 11,742 (554) (9)
Issuance of Series C Preferred Stock,
net...................................... 2,191 2 -- -- 17,436 -- --
Exercise of Common Stock options........... -- -- 537 1 64 -- --
Issuance of Common Stock for stockholder
note..................................... -- -- 215 -- 430 (430) --
Repurchase of Common Stock................. -- -- (277) -- (3) -- --
Issuance of warrants for services.......... -- -- -- -- 240 -- --
Issuance of Common Stock for services...... -- -- 1 -- 1 -- --
Unearned compensation...................... -- -- -- -- 700 -- (700)
Amortization of unearned compensation...... -- -- -- -- -- -- 215
Net loss................................... -- -- -- -- -- -- --
------ --- ------ --- -------- ------- -------
BALANCE AT DECEMBER 31, 1997............... 5,675 6 9,816 10 30,610 (984) (494)
Issuance of Series C Preferred Stock,
net...................................... 2,131 2 -- -- 16,732 -- --
Exercise of Common Stock options........... -- -- 287 -- 207 -- --
Issuance of Common Stock
for cash................................. -- -- 389 1 3,000 -- --
Issuance of Common Stock
for stockholder note..................... -- -- 25 -- 100 (100) --
Unearned compensation...................... -- -- -- -- 600 -- (600)
Amortization of unearned compensation...... -- -- -- -- -- -- 615
Collection of stockholder note
receivable............................... -- -- -- -- -- 38 --
Issuance of warrants for services.......... -- -- -- -- 641 -- --
Net loss................................... -- -- -- -- -- -- --
------ --- ------ --- -------- ------- -------
BALANCE AT DECEMBER 31, 1998............... 7,806 8 10,517 11 51,890 (1,046) (479)
Exercise of Common Stock options
(unaudited).............................. -- -- 203 -- 194 -- --
Issuance of warrants for services
(unaudited).............................. -- -- -- -- 2,047 -- --
Repurchase of Common Stock and cancellation
of related shareholder note
(unaudited).............................. -- -- (122) -- (245) 245 --
Issuance of Common Stock for stockholder
note (unaudited)......................... -- -- 250 -- 2,000 (2,000) --
Contribution of Company Common Stock by a
principal shareholder (unaudited)........ -- -- (50) -- -- -- --
Issuance of Common Stock for employee
bonuses (unaudited)...................... -- -- 50 -- 600 -- --
Unearned compensation (unaudited).......... -- -- -- -- 5,132 -- (5,132)
Amortization of unearned compensation
(unaudited).............................. -- -- -- -- -- -- 305
Issuance of Series D Preferred Stock, net
(unaudited).............................. 3,698 4 -- -- 44,318 -- --
Net loss (unaudited)....................... -- -- -- -- -- -- --
------ --- ------ --- -------- ------- -------
BALANCE AT JUNE 30, 1999 (UNAUDITED)....... 11,504 $12 10,848 $11 $105,936 $(2,801) $(5,306)
====== === ====== === ======== ======= =======
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
(IN THOUSANDS)
<S> <C> <C>
BALANCE AT DECEMBER 31, 1995............... $ (2,173) $ 2,530
Issuance of Series B Preferred Stock,
net...................................... -- 6,484
Exercise of Common Stock options........... -- 1
Issuance of Common Stock for stockholder
note..................................... -- --
Amortization of unearned compensation...... -- 4
Net loss................................... (5,884) (5,884)
-------- --------
BALANCE AT DECEMBER 31, 1996............... (8,057) 3,135
Issuance of Series C Preferred Stock,
net...................................... -- 17,438
Exercise of Common Stock options........... -- 65
Issuance of Common Stock for stockholder
note..................................... -- --
Repurchase of Common Stock................. -- (3)
Issuance of warrants for services.......... -- 240
Issuance of Common Stock for services...... -- 1
Unearned compensation...................... -- --
Amortization of unearned compensation...... -- 215
Net loss................................... (9,166) (9,166)
-------- --------
BALANCE AT DECEMBER 31, 1997............... (17,223) 11,925
Issuance of Series C Preferred Stock,
net...................................... -- 16,734
Exercise of Common Stock options........... -- 207
Issuance of Common Stock
for cash................................. -- 3,001
Issuance of Common Stock
for stockholder note..................... -- --
Unearned compensation...................... -- --
Amortization of unearned compensation...... -- 615
Collection of stockholder note
receivable............................... -- 38
Issuance of warrants for services.......... -- 641
Net loss................................... (14,036) (14,036)
-------- --------
BALANCE AT DECEMBER 31, 1998............... (31,259) 19,125
Exercise of Common Stock options
(unaudited).............................. -- 194
Issuance of warrants for services
(unaudited).............................. -- 2,047
Repurchase of Common Stock and cancellation
of related shareholder note
(unaudited).............................. -- --
Issuance of Common Stock for stockholder
note (unaudited)......................... -- --
Contribution of Company Common Stock by a
principal shareholder (unaudited)........ -- --
Issuance of Common Stock for employee
bonuses (unaudited)...................... -- 600
Unearned compensation (unaudited).......... -- --
Amortization of unearned compensation
(unaudited).............................. -- 305
Issuance of Series D Preferred Stock, net
(unaudited).............................. -- 44,322
Net loss (unaudited)....................... (9,201) (9,201)
-------- --------
BALANCE AT JUNE 30, 1999 (UNAUDITED)....... $(40,460) $ 57,392
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 75
WINK COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................... $(5,884) $ (9,166) $(14,036) $(5,777) $ (9,201)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization.......... 360 543 710 310 439
Stock-based costs and expenses......... 4 455 1,256 622 2,952
Changes in assets and liabilities:
Accounts receivable -- related
parties........................... -- (78) 76 -- 40
Accounts receivable -- third
parties........................... -- -- (187) (123) (12)
Prepaid expenses -- related party... -- -- -- -- (375)
Prepaid expenses and other current
assets............................ (26) (122) (107) (156) (274)
Other assets........................ (90) (124) (63) (33) (22)
Accounts payable.................... -- 208 709 465 (223)
Accrued expenses.................... 174 430 580 (359) (210)
Deferred revenues -- related
parties........................... (80) 80 21 39 (21)
Deferred revenues -- third
parties........................... 213 778 128 (74) 58
------- -------- -------- ------- --------
Net cash used in operating activities......... (5,329) (6,996) (10,913) (5,086) (6,849)
------- -------- -------- ------- --------
Cash flows from investing activities:
Purchase of short-term investments.......... -- (20,739) (8,060) (4,605) (30,678)
Proceeds from sale of short-term
investments.............................. -- 15,287 9,071 3,001 6,457
Property and equipment purchases............ (1,321) (381) (1,369) (791) (470)
------- -------- -------- ------- --------
Net cash used in investing activities......... (1,321) (5,833) (358) (2,395) (24,691)
------- -------- -------- ------- --------
Cash flows from financing activities:
Proceeds from Preferred Stock issuances,
net...................................... 6,484 17,438 16,734 1,990 44,322
Proceeds from Common Stock issuances........ 1 65 3,208 88 194
Proceeds from stockholder note receivable... -- -- 38 -- --
Proceeds from issuance of convertible
promissory note -- related party......... -- -- -- -- 15,120
Proceeds from lease financing transaction... 1,421 -- -- -- --
Principal payments on capital lease
obligations.............................. (8) (298) (347) (168) (194)
Repurchase of Common Stock.................. -- (3) -- -- --
------- -------- -------- ------- --------
Net cash provided by financing activities..... 7,898 17,202 19,633 1,910 59,442
------- -------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................. 1,248 4,373 8,362 (5,571) 27,902
Cash and cash equivalents at beginning of
period...................................... 2,909 4,157 8,530 8,530 16,892
------- -------- -------- ------- --------
Cash and cash equivalents at end of period.... $ 4,157 $ 8,530 $ 16,892 $ 2,959 $ 44,794
======= ======== ======== ======= ========
Supplemental cash flow information:
Cash paid for interest...................... $ 27 $ 194 $ 154 $ 78 $ 51
======= ======== ======== ======= ========
Supplemental noncash activities:
Common Stock issued for stockholder note.... $ 524 $ 430 $ 100 $ 100 $ 2,000
======= ======== ======== ======= ========
Repurchase of Common Stock and cancellation of
related stockholder note.................... $ -- $ -- $ -- $ -- $ 245
======= ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 76
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
Wink Communications, Inc. (the "Company") was incorporated in California on
October 7, 1994 and offers an enhanced television broadcasting system that adds
interactivity and electronic commerce opportunities to traditional television
programming and advertising. See Note 9 -- Subsequent Events.
For periods prior to January 1, 1997, the Company was considered to be in
the development stage.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Wink Japan, Inc. All significant
intercompany transactions and balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term investments consist of commercial paper obligations with
original maturities at date of purchase ranging between three and 12 months. The
Company classifies these investments as available-for-sale and records the
instruments at amortized cost, which approximates fair value due to the short
maturities of such instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, deposits and accounts payable are carried at cost, which
approximates fair value because of the short-term nature of those instruments.
PROPERTY AND EQUIPMENT
Property and equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Depreciation is provided on a
straight-line basis over the estimated
F-7
<PAGE> 77
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
useful lives of the assets, which range from three to five years. Amortization
of leasehold improvements is computed using the straight-line method over the
shorter of the remaining lease term or the estimated useful life of the related
asset, typically three years. Purchased internal-use software consists primarily
of amounts paid to third parties for software applications that support the Wink
response network and the Company's computer equipment. Purchased internal-use
software is depreciated over its useful life, generally three years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"). SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the estimated
future undiscounted cash flows attributable to such assets.
REVENUE RECOGNITION
The Company's historical revenues have been derived from license fees
relating to royalties earned from the Wink Engine software, license fees
relating to Wink Studio software, non-recurring engineering services under
agreements to port the Wink Engine software to various televisions and set-top
terminals, and service fees relating to software installation and post-contract
customer support. The Company recognizes software license revenues relating to
the Wink Engine on a "sell-through" basis upon notification of shipment of
Wink-enabled products by the original equipment manufacturer. License fees from
Wink Studio software are recognized monthly over the term of the subscription
agreement, generally one year. Non-recurring engineering services are recognized
using the percentage-of-completion method, using labor hours as a measure of
progress towards completion. Fees from installation services are recognized as
services are provided, and post-contract customer support fees are recognized
ratably over the term of the support agreement. Fees received in advance of
revenue recognition are included in the balance sheet as deferred revenue.
The Company expects that in future periods, revenues will also be derived
from the Wink response network, Wink Server Studio and Wink Broadcast Server.
Revenues from the Wink response network will be generated by charging
transaction fees to advertisers for each information request or purchase order
obtained from viewers or on a fixed fee basis. All advertising agreements in
place as of June 1999 provide for a fixed fee to be paid to the Company without
any per transaction fees. These fees are recognized ratably over the life of the
agreement. Revenues derived from the Wink Server Studio and Wink Broadcast
Server software applications will be recognized monthly based upon the
applicable subscription fee. These applications are being offered to customers
under monthly license fee arrangements with terms ranging from one to five
years, with periodic fee increases based upon changes in the Consumer Price
Index and other events. The Company's business model allows other television
industry participants supporting Wink-enabled programming to benefit
economically from Wink Enhanced Broadcasting. In this regard, Wink has entered
into a number of agreements with cable system operators and certain other market
participants to share with these entities a portion of revenues, if any, the
Company generates from viewer responses to Wink Enhanced Broadcasting. These
revenue sharing commitments become effective once the relevant participant
achieves certain specified levels of deployment or launch of Wink Enhanced
Broadcasting. To date, none of these thresholds have been achieved and no
transaction fee revenue has been
F-8
<PAGE> 78
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recognized from the Wink response network. Any amounts payable to third parties
in future periods resulting from fee sharing will be included in cost of
revenues.
SALES TO SIGNIFICANT CUSTOMERS
During the years ended December 31, 1996, 1997 and 1998, sales to customers
comprising 10 percent or more of the Company's total revenues for the periods
indicated were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
CUSTOMER 1996 1997 1998
<S> <C> <C> <C>
A -- related party................................... 10% 0% 0%
B -- related party................................... 34% 21% 0%
C -- related party................................... 0% 62% 43%
D -- third party..................................... 32% 14% 0%
E -- third party..................................... 24% 0% 40%
F -- third party..................................... 0% 0% 15%
</TABLE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable, which are not
collateralized. The Company limits its exposure to credit loss by placing its
cash and cash equivalents with financial institutions that management believes
are credit worthy and by placing its short-term investments in corporate
commercial paper issues of various entities. Concentrations of credit risk with
respect to trade accounts receivable are considered to be limited due to the
assessed credit quality of the customers comprising the Company's customer base.
The Company performs ongoing credit evaluations of its customers' financial
condition to determine the need for an allowance for doubtful accounts. The
Company has not experienced significant credit losses to date. At December 31,
1997, one related party customer accounted for the entire accounts receivable
balance. At December 31, 1998, five customers individually accounted for more
than 10% of the entire accounts receivable balance. These five customers, in
aggregate, accounted for 76% of the total accounts receivable balance at
December 31, 1998. One of these five customers was a related party and accounted
for 22% of the total accounts receivable balance at December 31, 1998.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred in accordance with
Statement of Financial Accounting Standards No. 2 ("SFAS No. 2"), "Accounting
for Research and Development Costs."
SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of new products and
enhancements to existing products are charged to expense as incurred until the
technological feasibility of the product or enhancement has been established
through the development of a working model. After establishing technological
feasibility, additional development costs incurred through the date the product
is available for general release would be capitalized and amortized over the
estimated product life. No
F-9
<PAGE> 79
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
costs have been capitalized to date, as the effect on the financial statements
for all periods presented is immaterial.
ADVERTISING COSTS
Advertising costs are expensed as incurred in accordance with Statement of
Position ("SoP") No. 93-7, "Reporting on Advertising Costs." Advertising costs
for the years ended December 31, 1996, 1997 and 1998 totaled $210,000, $147,000
and $904,000, respectively. Advertising costs for the six months ended June 30,
1998 and 1999 totaled $491,000 (unaudited) and $271,000 (unaudited),
respectively.
FOREIGN CURRENCY TRANSLATION
The functional currency of the consolidated foreign subsidiary in Japan is
its local currency. Accordingly, all assets and liabilities of this entity are
translated at the current exchange rates at each balance sheet date. To date,
the subsidiary in Japan has not recognized revenues or expenses. In the event
that the subsidiary has revenue and expense components in future periods, such
amounts will be translated at weighted average exchange rates in effect during
the year. Gains and losses resulting from foreign currency translation have not
been material to the consolidated financial statements through December 31, 1998
and through June 30, 1999 (unaudited). To the extent these gains or losses are
recognized in future periods, such amounts will be recorded directly into a
separate component of stockholders' equity and comprehensive income. Foreign
currency transaction gains and losses are included in the determination of net
income or loss. During the years ended December 31, 1996, 1997 and 1998 and
during the six months ended June 30, 1998 (unaudited) and 1999 (unaudited), net
foreign currency transaction gains and losses did not have a material impact on
the consolidated financial statements.
STOCK-BASED COSTS AND EXPENSES
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation cost is recognized based on the difference, if any, on the date of
grant between the fair value of the Company's stock and the amount an employee
must pay to acquire the stock.
The Company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in accordance with SFAS
No. 123 and the consensus reached by the Emerging Issues Task Force in Issue No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in conjunction with Selling, Goods or Services."
Costs are measured at the fair market value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable. The value of equity instruments issued for consideration other than
employee services is determined on the earlier of the date on which there first
exists a firm commitment for performance by the provider of goods or services or
on the date performance is complete using the Black-Scholes pricing model.
F-10
<PAGE> 80
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.
NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of
common shares outstanding. Diluted net loss per share is computed using the
weighted average number of common and potential common shares outstanding.
Potential common shares consist of the incremental number of common shares
issuable upon conversion of Convertible Preferred Stock (using the if-converted
method) and common shares issuable upon the exercise of stock options and
warrants (using the treasury stock method). Potential common shares are excluded
from the computation if their effect is anti-dilutive. Net loss per share
computations are in accordance with SFAS No. 128, "Earnings Per Share," and the
Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 98.
Weighted average potential common shares, which are excluded from the
determination of basic and diluted net loss per share as their effect is
anti-dilutive, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------ ------------------
1998 1999
(UNAUDITED)
<S> <C> <C>
Convertible Preferred Stock........................... 6,243,808 7,867,298
Common Stock options.................................. 2,536,986 3,389,089
Convertible Preferred Stock warrants.................. 17,500 17,500
Common Stock warrants................................. 1,588,200 2,148,145
Common Stock subject to repurchase.................... 1,118,236 691,356
------------ -----------
11,504,730 14,113,388
============ ===========
</TABLE>
See Note 9 -- Subsequent Events.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma basic net loss per share is computed using the weighted average
number of common shares outstanding and the pro forma effects of the automatic
conversion of the Company's Convertible Preferred Stock into shares of the
Company's Common Stock effective upon the closing of an initial public offering
as if such conversion occurred on January 1, 1998, or at date of original
issuance, if later. Pro forma diluted net loss per share is computed using the
pro forma weighted average number of common and potential common shares
outstanding. Pro forma potential common shares consist of Common Stock subject
to repurchase and stock options and warrants (using the treasury stock method).
Pro forma potential common shares have been excluded from the computation as
their effect is antidilutive. See Note 9 -- Subsequent Events.
F-11
<PAGE> 81
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Effective upon the closing of an initial public offering, the outstanding
shares of Series A, Series B, Series C and Series D Convertible Preferred Stock
will automatically convert into 1,250,000, 2,233,750, 4,322,250 and 3,698,333
shares, respectively, of Common Stock. In addition, warrants to purchase 17,500
shares of Series B Convertible Preferred Stock will convert into warrants to
purchase 17,500 shares of Common Stock. The pro forma effects of these
transactions are unaudited and have been reflected in the accompanying pro forma
balance sheet at June 30, 1999. See Note 9 -- Subsequent Events.
UNAUDITED INTERIM RESULTS
The accompanying interim consolidated financial statements at June 30,
1999, and for the six months ended June 30, 1998 and 1999, are unaudited. The
unaudited interim consolidated financial statements have been prepared on the
same basis as the annual consolidated financial statements and, in the opinion
of management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows as of June 30, 1999 and for the six months
ended June 30, 1998 and 1999. The financial data and other information disclosed
in these notes to consolidated financial statements related to these periods are
unaudited. The results for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the year ended December
31, 1999.
SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way companies report information about operating segments in financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. In accordance with the
provisions of SFAS No. 131, the Company has determined that it operates in only
one operating segment.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from nonowner
sources. To date, the Company's comprehensive net loss has not varied materially
from the reported net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. In June 1999, the FASB issued
Statement of
F-12
<PAGE> 82
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Financial Accounting Standards No. 137, "Accounting for Derivatives Instruments
and Hedging Activities -- Deferral of Effective Date of FASB Statement No. 133"
("SFAS 137"). SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
application encouraged. The Company does not currently nor does it intend in the
future to use derivative instruments and therefore does not expect that the
adoption of SFAS 133 will have any impact on its financial position or results
of operations.
In December 1998, the AICPA issued Statement of Position No. 98-9,
"Modification of SoP No. 97-2, Software Revenue Recognition, With Respect to
Certain Transactions" ("SoP 98-9"), which is effective for transactions entered
into in fiscal years beginning after March 15, 1999. SoP 98-9 amends SoP 97-2
and extends the effective date of SoP No. 98-4 "Deferral of the Effective Date
of a Provision of SoP 97-2, Software Revenue Recognition" ("SoP 98-4"), and
provides additional interpretive guidance. The adoption of SoP 97-2 has not had
and the adoption of SoP 98-4 and SoP 98-9 are not expected to have a material
impact on the Company's results of operations, financial position or cash flows.
NOTE 3 -- RELATED PARTY TRANSACTIONS
The Company has entered into various agreements with certain holders of the
Company's Preferred and Common Stock. These agreements consist primarily of
royalties derived from the sale of Wink enabled products and non-recurring
engineering services. Revenues and related costs of revenues together with
deferred revenues and accounts receivable from these related parties are
separately disclosed in the statement of operations and balance sheet. In June
1999, the Company paid $375,000 (unaudited) to a holder of Common and Preferred
Stock in connection with a research and development agreement for the period
from July 1, 1999 through September 30, 1999. This amount is separately
disclosed in the balance sheet.
NOTE 4 -- BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- -----------
1997 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable -- third parties, net:
Accounts receivable -- third parties............. $ -- $ 187 $ 229
Less allowance for doubtful accounts............. -- -- (30)
------ ------- -------
$ -- $ 187 $ 199
====== ======= =======
Property and equipment, net:
Computer equipment............................... $1,050 $ 1,521 $ 2,069
Office furniture and equipment................... 526 575 587
Leasehold improvements........................... 357 358 358
Purchased internal-use software.................. 161 1,009 919
------ ------- -------
2,094 3,463 3,933
Less accumulated depreciation and amortization... (991) (1,701) (2,140)
------ ------- -------
$1,103 $ 1,762 $ 1,793
====== ======= =======
</TABLE>
F-13
<PAGE> 83
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Assets acquired under capital lease obligations are included in property
and equipment and totaled $1,421, $1,421 and $1,421 (unaudited), with related
accumulated depreciation of $674, $1,046 and $1,232 (unaudited) at December 31,
1997 and 1998 and June 30, 1999, respectively.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------- -----------
1997 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued expenses:
Compensation and benefits......................... $455 $1,083 $ 774
Deferred rent..................................... 117 72 40
Other............................................. 91 88 219
---- ------ ------
$663 $1,243 $1,033
==== ====== ======
</TABLE>
NOTE 5 -- INCOME TAXES
No current provision or benefit for federal or state income taxes has been
recorded for the years ended December 31, 1996, 1997 and 1998 and for the six
months ended June 30, 1998 (unaudited) and 1999 (unaudited), as the Company has
incurred net operating losses and has no carryback potential.
At December 31, 1998, the Company had federal and state net operating loss
carryforwards of approximately $27,000,000 available to reduce future taxable
income. At June 30, 1999, the Company had federal and state net operating loss
carryforwards of approximately $34,500,000 (unaudited) available to reduce
future taxable income. Such carryforwards may be limited in certain
circumstances including, but not limited to, cumulative stock ownership changes
of more than 50 percent over a three-year period and expire at varying amounts
during the period from 2002 through 2013. The Company believes that there were
cumulative changes of ownership of greater than 50 percent in December 1995,
March 1996 and March 1998. Accordingly, the amount of loss carryforwards that
can be utilized to reduce future taxable income for federal and state income tax
purposes will be limited to approximately $8,000,000 per year. Net deferred tax
assets are composed of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------- -----------
1997 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Net operating loss carryforwards................. $ 5,750 $ 10,700 $12,600
Deferred revenues................................ 600 700 600
Other............................................ 150 100 100
------- -------- -------
Gross deferred tax assets........................ 6,500 11,500 13,300
Deferred tax asset valuation allowance........... (6,500) (11,500) (13,300)
------- -------- -------
Net deferred tax assets.......................... $ -- $ -- $ --
======= ======== =======
</TABLE>
Based on a number of factors, including the lack of a history of profits,
management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has been
provided. The valuation allowance increased by $5,000,000 from
F-14
<PAGE> 84
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 to December 31, 1998. The valuation allowance increased by
$1,800,000 (unaudited) from December 31, 1998 to June 30, 1999.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its main office facilities under a noncancelable
operating lease which expires in January 2000. Under the terms of the lease, the
Company is required to pay property taxes, insurance and normal maintenance
costs. The Company also leases certain equipment under capital lease
obligations.
Future minimum lease payments under noncancelable operating and capital
leases are as follows at December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
(IN THOUSANDS)
<S> <C> <C>
1999...................................................... $743 $ 490
2000...................................................... 62 387
---- -----
$805 877
====
Less amount representing interest........................... (110)
-----
Present value of capital lease obligations.................. 767
Less current portion........................................ (402)
-----
Long-term portion........................................... $ 365
=====
</TABLE>
Rent expense on noncancelable operating leases for the years ended December
31, 1996, 1997 and 1998, totaled $573,000, $694,000 and $714,000, respectively.
Rent expense on noncancelable operating leases for the six months ended June 30,
1998 and 1999, totaled $352,000 (unaudited) and $355,000 (unaudited).
REVENUE SHARING AND OTHER COMMITMENTS
The Company has entered into a number of agreements with cable operators,
direct broadcast satellite operators ("DBS operators") and certain other market
participants to share with these entities a portion of revenues, if any, the
Company generates from viewer responses to Wink Enhanced Broadcasting. For
certain cable and DBS operators, the Company has provided a minimum revenue
guarantee if the operator makes a minimum volume commitment for Wink Engines
deployed. If these minimum volume requirements are met, and Wink Enhanced
Broadcasting fails to generate sufficient revenue to meet the guaranteed amount
per Wink subscriber, the Company is obligated to pay the difference between the
guaranteed amount and the amount earned by the operator. The Company's agreement
with a major DBS operator calls for the Company to guarantee revenue per enabled
subscriber household of $2.50 per year for three years, if that operator enables
at least 1,000,000 homes during a specific time period. In addition, the
potential future liability to cover the minimum revenue guarantees in other
agreements with certain cable operators is estimated to be approximately
$760,000 at December 31, 1998 and June 30, 1999 (unaudited). Such costs, if and
when incurred, shall be recorded as cost of revenues.
F-15
<PAGE> 85
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has also agreed to provide marketing and technical development
funds to certain cable and digital broadcast satellite operators, contingent
upon the commercial launch of Wink enhanced broadcasting. The Company has agreed
to provide development funds at the rate of $1.00 per subscriber with a
guaranteed minimum of $1,000,000 to a major digital broadcast satellite
provider. Additional marketing development and networking equipment funds
committed to in contractual agreements with cable operators total approximately
$495,000 and $1,885,000 at December 31, 1998 and June 30, 1999 (unaudited).
These costs, if and when incurred, shall be recorded as sales and marketing
expense.
See Note 9 -- Subsequent Events.
LEGAL PROCEEDING
A patent claim arising in the ordinary course of business, seeking monetary
damages and other relief is pending. The amount of liability, if any, from such
claim can not be determined with certainty; however, in the opinion of
management, the ultimate liability for such claim will not have a material
adverse effect on the Company's financial position, results of operations or
cash flows.
NOTE 7 -- STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible Preferred Stock consists of the following:
<TABLE>
<CAPTION>
SHARES ISSUED
AND OUTSTANDING DECEMBER 31, 1998 JUNE 30, 1999
--------------------------- ---------------------- ----------------------
SHARES DECEMBER 31, JUNE 30, GROSS LIQUIDATION GROSS LIQUIDATION
AUTHORIZED 1997 1998 1999 PROCEEDS AMOUNT PROCEEDS AMOUNT
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series A.................... 1,250 1,250 1,250 1,250 $ 2,000 $ 2,000 $ 2,000 $ 2,000
Series B.................... 2,251 2,234 2,234 2,234 8,936 8,936 8,936 8,936
Series C.................... 4,500 2,191 4,322 4,322 34,576 34,576 34,576 34,576
Series D.................... 5,000 -- -- 3,698 -- -- 44,380 44,380
------ ----- ----- ------ ------- ------- ------- -------
13,001 5,675 7,806 11,504 $45,512 $45,512 $89,892 $89,892
====== ===== ===== ====== ======= ======= ======= =======
</TABLE>
CONVERSION
Each share of Preferred Stock is convertible at the option of the holder at
any time into Common Stock at the initial conversion rate of one share of Common
Stock for each share of Preferred Stock. The initial conversion rate of each
series of Preferred Stock is subject to adjustment as provided in the
Certificate of Incorporation, as amended. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
conversion rate for each series upon the closing of a firm commitment
underwritten initial public offering of the Company's Common Stock at a price
per share not less than $8.00 per share and an aggregate offering price to the
public of not less than $10,000,000, exclusive of underwriting commissions and
offering expenses.
F-16
<PAGE> 86
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
VOTING
Each holder of Series A, Series B, Series C and Series D Preferred Stock is
entitled to a number of votes equal to the number of shares of Common Stock into
which such holders' shares of Preferred Stock could be converted.
DIVIDEND
Holders of Series A, Series B, Series C and Series D Preferred Stock are
entitled to a noncumulative dividend, when and if declared by the Board of
Directors, at the fixed rate of $0.128, $0.32, $0.64 and $0.96 (unaudited),
respectively, per share per annum, prior and in preference to any distribution
on the Common Stock.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company
(as defined), the holders of the Series A, Series B, Series C and Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution to the holders of the Common Stock, the amount of $1.60, $4.00,
$8.00 and $12.00 (unaudited), respectively, per share plus an amount equal to
all declared but unpaid dividends on such shares.
COMMON STOCK
REPURCHASE RIGHTS
At December 31, 1998, the Company had the right to repurchase the unvested
portion of 3,072,916 shares of Common Stock sold to certain key employees at a
weighted average price of $0.40 per share. Under employment arrangements with
certain key employees, in the event the Company is acquired by or merged into
another company prior to full vesting of the shares subject to repurchase
rights, the employees are entitled to have the Company's repurchase right lapse
as to 50 percent of the unvested shares. The Common Stock repurchase rights
reside solely with the Company and there are no situations under which the
Stockholders can put their shares or cause any other form of redemption. At
December 31, 1998, 830,954 shares were subject to repurchase rights of the
Company. At June 30, 1999, the Company had the right to repurchase the unvested
portion of 3,200,624 shares (unaudited) of Common Stock. At June 30, 1999,
752,175 shares (unaudited) were subject to repurchase rights of the Company.
RESERVED SHARES
The Company has reserved an adequate number of shares of Common Stock to
satisfy the conversion of all Preferred Stock and the exercise of all
outstanding options and warrants.
WARRANTS
In July 1996, the Company granted a fully exercisable warrant to purchase
Common Stock to two companies affiliated with a director of the Company in
connection with the issuance of Series B Preferred Stock. The warrant enables
the holders to purchase 441,257 and 58,743 shares of Common
F-17
<PAGE> 87
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock, respectively, at $6.00 per share and expires in July 2001. The warrant
had an immaterial fair value on the date of grant.
In September 1996, the Company granted a fully exercisable warrant to
purchase Series B Preferred Stock to a company providing property and equipment
lease financing. The warrant enables the holder to purchase 17,500 shares of
Series B Preferred Stock at $4.00 per share and expires in September 2002. The
warrant and related services had an immaterial fair value on the date of grant.
In April 1997, the Company granted a fully exercisable warrant to purchase
Common Stock to certain holders of Series C Preferred Stock providing business
development services. The warrant enables the holders to purchase 75,000 shares
of Common Stock at $0.80 per share and expires in April 2007. The warrant and
related services had an immaterial fair value on the date of grant.
In June 1997, the Company granted a fully exercisable warrant to purchase
Common Stock in connection with the issuance of Series C Preferred Stock. The
warrant enables the holders to purchase 525,000 shares of Common Stock at $8.00
per share and expires in June 2009. The estimated fair value of the warrant
totaled $142,000 and is included in additional paid-in capital.
In June 1997, the Company granted a warrant to purchase Common Stock to a
broadcasting company that agreed to use its reasonable best efforts to develop
and air Wink-enhanced programming over an approximate 18 month period. The
broadcasting company is affiliated with a holder of the Company's Series C
Preferred Stock. The warrant enables the holder to purchase 375,000 shares of
Common Stock at $8.00 per share and expires in June 2009. On the date of grant,
the warrant was exercisable with respect to 75,000 shares (the "fixed shares")
and was exercisable with respect to the remaining 300,000 shares (the "variable
shares") contingent upon the completion of specified future performance
obligations of the broadcasting company. The grant date fair value of the
warrant relating to the fixed shares totaled $20,000, which was charged to
stock-based costs and expenses. The fair value of the warrant relating to the
variable shares on December 31, 1997, totaled $726,000. Of this amount, $220,000
was recognized as stock-based costs and expenses during the year ended December
31, 1997. On February 1, 1998, the Company amended the terms of the warrant to
eliminate any future performance obligation of the broadcasting company. The
fair value of the warrant relating to the variable shares on the date the
performance obligation was eliminated had not changed from the estimated fair
value on December 31, 1997. Accordingly, the unamortized value of the warrant
totaling $506,000 was recognized as stock-based costs and expenses during the
year ended December 31, 1998 over the period in which the Company received
benefits from the broadcaster's services.
In November 1997, the Company granted a fully exercisable warrant to
purchase Common Stock to a company providing business development services. The
warrant enables the holder to purchase 38,200 shares of Common Stock at $4.00
per share and expires in November 2009. The warrant and related services had an
immaterial fair value on the date of grant.
In January 1998, the Company granted a fully exercisable warrant to
purchase Common Stock in connection with the issuance of Series C Preferred
Stock. The warrant enables the holder to purchase 50,000 shares of Common Stock
at $0.80 per share and expires in January 2008. The estimated fair value of the
warrant totaled $226,000 and is included in additional paid-in capital.
In August 1998, the Company granted a fully exercisable warrant to purchase
Common Stock to a holder of Series C Preferred Stock providing consulting
services. The warrant enables the holder to
F-18
<PAGE> 88
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
purchase 25,000 shares of Common Stock at $8.00 per share and expires in August
2003. The estimated fair value of the warrant totaled $135,000 and is included
in stock-based costs and expenses.
In December 1998, the Company granted a warrant to purchase Common Stock to
a cable operator company that is a holder of Series C Preferred Stock as
consideration for the future deployment of Wink-enabled technology to at least
200,000 households. The warrant enables the holder to purchase 250,000 shares of
Common Stock at either $12.00 or $16.00 per share, contingent upon achieving the
deployment criteria and the timing of such achievement. In the event the $12.00
exercise price is earned, the warrant will expire in January 2004. In the event
the $16.00 exercise price is earned, the warrant will expire in January 2005. At
December 31, 1998, the lowest aggregate fair value of the warrant totaled
$1,218,000. At June 30, 1999, the lowest aggregate fair value of the warrant
totaled $2,050,000 (unaudited). This amount will be remeasured at each reporting
date until the deployment of Wink-enabled technology to the specified number of
cable subscribers is achieved. When and if it becomes probable that the
performance criteria will be achieved, the Company will record the then fair
value associated with the units meeting the performance criteria as a charge to
stock-based costs and expenses.
OTHER
Through December 31, 1998, no dividends on either the Preferred or Common
Stock have been declared by the Board of Directors.
See Note 9 -- Subsequent Events.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
The 1994 Stock Plan (the "Plan"), as amended, provides for the issuance of
up to 7,000,000 shares of Common Stock in connection with incentive and
non-statutory stock option awards granted to employees, directors and
consultants to the Company. Stock purchase rights may also be granted under the
Plan. Options must be issued at prices not less than 100 percent and 85 percent,
for incentive and non-statutory options, respectively of the estimated fair
value of the Common Stock on the date of grant and are exercisable for periods
not exceeding ten years from the date of grant. Options granted to stockholders
who own greater than 10 percent of the outstanding stock at the time of grant
are exercisable for periods not exceeding five years from the date of grant and
must be issued at prices not less than 110 percent of the estimated fair value
at the date of grant. Options granted under the Plan generally vest ratably over
four years following the date of grant, although the Board of Directors may
issue options that vest over a period up to five years. The Company has certain
repurchase rights and rights of first refusal on shares purchased under the
Plan.
During the year ended December 31, 1997 and 1998 and the six months ended
June 30, 1998 and 1999, the Company recognized unearned compensation totaling
$700,000, $600,000, $600,000 (unaudited) and $5,132,000 (unaudited),
respectively, with respect to certain stock option grants and sales of
restricted stock to employees. These expenses are being amortized over the
respective four-year vesting periods. Amortization of unearned compensation
totaled $215,000, $615,000, $359,000 (unaudited) and $305,000 (unaudited) for
the year ended December 31, 1997 and 1998 and for the
F-19
<PAGE> 89
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
six months ended June 30, 1998 and 1999, respectively, and has been recognized
as stock-based costs and expenses. See Note 9 -- Subsequent Events.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under the
minimum value method prescribed by SFAS No. 123, the Company's net loss would
have been as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ------------------
1996 1997 1998 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported......................... $(5,884) $(9,166) $(14,036) $(5,777) $(9,201)
Pro forma........................... $(5,905) $(9,235) $(14,342) $(5,906) $(9,533)
Basic and diluted net loss per share:
As reported......................... $ (0.91) $ (1.25) $ (1.57) $ (0.66) $ (0.92)
Pro forma........................... $ (0.92) $ (1.26) $ (1.60) $ (0.68) $ (0.96)
</TABLE>
Under SFAS No. 123, the minimum value of each option grant is estimated on
the grant date using the minimum value method with the following weighted
average assumptions used for grants made:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ --------------
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expected lives, in years........................ 5 5 5 5 5
Risk free interest rates........................ 6.30% 6.30% 5.00% 5.47% 5.45%
Dividend yield.................................. 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
F-20
<PAGE> 90
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock option transactions
under the Plan:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------- -------------------
1996 1997 1998 1999
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period....................... 793 $0.05 1,759 $0.23 2,122 $1.06 2,813 $2.90
Granted........................ 980 0.37 1,099 1.82 1,092 5.66 1,717 8.16
Exercised...................... (14) 0.05 (537) 0.13 (287) 0.62 (203) 0.96
Canceled....................... -- -- (199) 0.44 (114) 2.59 (258) 3.05
----- ----- ----- --------
Outstanding at end of period... 1,759 0.23 2,122 1.06 2,813 2.90 4,069 5.22
----- ----- ----- --------
Options vested at period end... 431 289 971 1,183
----- ----- ----- --------
Weighted-average fair value of
options granted during the
period....................... 0.15 0.67 1.23 4.43
</TABLE>
Because additional option grants are expected to be made each year, the
above pro forma disclosures are not representative of pro forma effects of
reported net income (loss) for future years.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
------------------------------------ -----------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE VESTED PRICE
(IN THOUSANDS, EXCEPT YEARS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
$ 0.01 - $0.25 372 6.8 year $ 0.12 236 $ 0.12
0.40 - 0.80 565 7.9 0.50 287 0.47
1.00 - 2.00 627 8.4 1.46 220 1.44
4.00 - 6.00 1,006 9.4 4.92 199 4.01
8.00 218 9.6 8.00 21 8.00
12.00 25 9.8 12.00 8 12.00
----- ---
2,813 8.55 2.90 971 1.59
===== ===
</TABLE>
F-21
<PAGE> 91
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options outstanding
at June 30, 1999 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE VESTED PRICE
<S> <C> <C> <C> <C> <C>
$ 0.01 - $0.25 244 6.2 year $0.09 194 $ 0.10
0.40 - 0.80 517 7.4 0.50 323 0.48
1.00 - 2.00 443 8.0 1.38 220 1.36
4.00 - 6.00 951 7.3 4.88 396 4.49
8.00 1,819 9.5 8.00 27 8.00
12.00 95 7.9 12.00 23 12.00
----- -----
4,069 8.3 5.22 1,183 2.32
===== =====
</TABLE>
401(k) PLAN
Effective July 1996, the Company adopted the Wink Communications, Inc.
401(k) Profit Sharing Plan (the "401(k) Plan"), which qualifies as a deferred
salary arrangement under Section 401 of the Internal Revenue Service Code. Under
the 401(k) Plan, participating employees may defer a portion of their pretax
earnings not to exceed 15% of their total compensation. The Company, at its
discretion, may make contributions for the benefit of eligible employees. The
Company made no contributions through December 31, 1998.
NOTE 9 -- SUBSEQUENT EVENTS (UNAUDITED)
DELAWARE REINCORPORATION
In February 1999, the Company's Board of Directors authorized the
reincorporation of the Company in the State of Delaware to be effective prior to
the Company's initial public offering. As a result of the reincorporation, the
Company will be authorized to issue 100,000,000 shares of $0.001 par value
Common Stock and 5,000,000 shares of $0.001 par value Preferred Stock. The Board
of Directors has the authority to issue the undesignated Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions
thereof.
WARRANTS
In February 1999, the Company granted a fully exercisable warrant to
purchase Common Stock to a company affiliated with a broadcasting company as an
incentive for signing a definitive software licensing agreement with the
broadcasting company. The warrant enables the holder to purchase 200,000 shares
of Common Stock at $12.00 per share, subject to adjustment, and expires in
February 2004. The exercise price is subject to adjustment in the event that the
Company completes a qualified equity financing with a per share issuance price
of less than $12.00 per share prior to an initial public offering by the
Company. The maximum exercise price is $12.00 per share. The fair value of the
warrant on the measurement date totaled $1,220,000 (unaudited) and was
recognized as
F-22
<PAGE> 92
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
stock-based costs and expenses as there was no remaining performance obligation
on behalf of the warrant holder and no significant license revenues are expected
to be derived from the agreements.
In March 1999, the Company granted a fully exercisable warrant to purchase
Common Stock to a separate broadcasting company as an incentive for signing a
definitive software licensing agreement. The warrant enables the holder to
purchase 125,000 shares of Common Stock at $12.00 per share, subject to
adjustment, and expires in March 2004. The exercise price is subject to
adjustment in the event that the Company completes a qualified equity financing
with a per share issuance price of less than $12.00 per share prior to an
initial public offering by the Company. The maximum exercise price is $12.00 per
share. The fair value of the warrant on the measurement date totaled $760,000
(unaudited) and was recognized as stock-based costs and expenses as there was no
remaining performance obligation on behalf of the warrant holder and no
significant license revenues are expected to be derived from the agreement.
In May 1999, the Company granted a fully exercisable warrant to purchase
Common Stock to Microsoft Corporation in connection with a 10 year definitive
software distribution agreement. The warrant enables the holder to purchase
500,000 shares of Common Stock at $12.00 per share, subject to adjustment, and
expires in May 2004. The exercise price is subject to adjustment in the event
that the Company completes a qualified equity financing with a per share
issuance price of less than $12.00 per share prior to an initial public offering
by the Company. The maximum exercise price is $12.00 per share. The fair value
of the warrant on the measurement date totaled $4,050,000 (unaudited). During
the six months ended June 30, 1999, amortization recognized as stock-based costs
and expenses totaled $68,000 and the remaining $3,982,000 will be recognized as
stock-based costs and expenses ratably over the remainder of the expected period
of benefit of five years.
CONTRACT TERMINATION AGREEMENT
In May 1999, the Company and a third party executed an agreement that
terminated a development and license agreement dated April 1998. Under this
termination agreement, the third party paid the Company $1,112,000. Of this
amount, $1,000,000 was included in other income and the remaining $112,000
related to a non-recurring engineering agreement and was included in services
revenues from third parties during the six months ended June 30, 1999. The
Company has no material remaining obligations under these agreements.
COMMON STOCK
In May 1999, the Company entered into an employment agreement with a member
of management. In connection with this employment agreement, the Company sold
250,000 shares of Common Stock at a price of $8.00 per share in exchange for a
full-recourse, ten-year $2,000,000 promissory note. The note bears interest at a
rate of 6.40% per annum. The Company has the right to repurchase the shares at
original issuance cost of $8.00 per share. These repurchase rights lapse
progressively over a four-year period. In connection with the sale of these
shares, the Company recognized unearned compensation totaling $1,000,000
(unaudited), which will be amortized over the four-year vesting period.
DISTRIBUTION AGREEMENT
In May 1999, the Company entered into a 10 year definitive software
distribution agreement with Microsoft Corporation (the "distributor") that
entitles the distributor to share a portion of revenues, if any, the Company
generates from viewer responses to Wink Enhanced Broadcasting. The
F-23
<PAGE> 93
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company has also provided a minimum revenue guarantee ranging from $2 to $4 per
year, per Microsoft-controlled Wink-enabled device. If such devices are enabled
by Microsoft and Wink Enhanced Broadcasting fails to generate sufficient revenue
to meet the guaranteed amount per Wink subscriber, the Company is obligated to
pay the difference between the guaranteed amount and the amount earned by the
distributor. Such costs, if and when incurred, shall be recorded as cost of
revenues.
CONVERTIBLE PROMISSORY NOTE
In May 1999, the Company issued a convertible promissory note to Microsoft
Corporation in exchange for cash totaling $15,120,000. The convertible
promissory note may be converted, at the discretion of the holder, into
1,260,000 shares of the Company's Series D Convertible Preferred Stock at $12.00
per share. The convertible promissory note accrues interest at 10 percent, per
annum. At June 30, 1999, the Company had obligations totaling $15,120,000 under
the convertible promissory note. In July 1999, Microsoft Corporation exercised
its right to exchange the convertible promissory note for 1,260,000 shares of
the Company's Series D Convertible Preferred Stock.
SERIES D CONVERTIBLE PREFERRED STOCK FINANCING
In June 1999, the Company sold an aggregate of 3,698,333 shares of Series D
Convertible Preferred Stock at $12.00 per share for gross proceeds totaling
$44,380,000.
1999 STOCK PLAN
In June 1999, the 1999 Stock Plan (the "1999 Plan") was adopted by the
Board of Directors and will be submitted to the stockholders for their approval
prior to the date of the Company's initial public offering, to become effective
on the date of the initial public offering. The 1999 Plan provides for the grant
to employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for grants to
employees, directors and consultants of nonstatutory stock options and stock
purchase rights. Unless terminated sooner, the 1999 Plan will terminate
automatically in 2009. A total of 2,500,000 shares of Common Stock have been
reserved for issuance pursuant to the 1999 Plan. The amount reserved under the
Plan will automatically increase at the end of each year by the lesser of (1)
1,000,000 shares, (2) 4% of outstanding shares on such date or (3) a lesser
amount determined by the Board of Directors.
1999 EMPLOYEE STOCK PURCHASE PLAN
In June 1999, the 1999 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors and will be submitted to the stockholders
for their approval prior to the date of the Company's initial public offering,
to become effective on the date of the initial public offering. The Purchase
Plan permits participants to purchase Common Stock through payroll deductions of
up to 15% of the participant's compensation, up to a maximum aggregate deduction
of $21,250 for all offering periods ending in any calendar year. A total of
250,000 shares of Common Stock have been reserved for issuance pursuant to the
Purchase Plan. The amount reserved under the Plan will automatically increase at
the end of each year by the lessor of (1) 75,000 shares, (2) 0.3% of outstanding
shares on such date or (3) a lesser amount determined by the Board of Directors.
F-24
<PAGE> 94
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1999 DIRECTOR OPTION PLAN
In June 1999, the 1999 Director Option Plan (the "Director Plan") was
adopted by the Board of Directors and will be submitted to the stockholders for
their approval prior to the date of the Company's initial public offering, to
become effective on the date of the initial public offering. The Director Plan
provides for the automatic grant of a nonstatutory option to purchase 40,000
shares of Common Stock to each new non-employee director who becomes a director
after the date of the Company's initial public offering on the date that such
person becomes a director. Each current and future non-employee director will
automatically be granted an additional nonstatutory option to purchase 40,000
shares on the fourth anniversary of the date of grant of his or her last option
if he or she served on the Board of Directors continuously during such period. A
total of 250,000 shares of Common Stock have been reserved for issuance pursuant
to the Director Plan.
EMPLOYEE BONUS
In June 1999, the Company issued an aggregate of 50,000 shares of Common
Stock to employees as incentive bonuses. The fair value of these shares of
Common Stock on the issuance date totaled $600,000 and was recognized as
stock-based costs and expenses as there were no remaining performance
obligations on behalf of the holders.
F-25
<PAGE> 95
[LOGO]
<PAGE> 96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[WINK LOGO]
4,200,000 SHARES OF COMMON STOCK
------------------------------
P R O S P E C T U S
------------------------------
DONALDSON, LUFKIN & JENRETTE DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
------------------
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus should create an
implication that the information contained in this prospectus or the affairs of
Wink have not changed since the date of this prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these securities may be required to deliver
a prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the costs and expenses, other
than underwriting discounts and commissions, incurred and to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered hereby. All amounts are estimates except the SEC registration fee and
the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID BY
REGISTRANT
<S> <C>
SEC registration fee........................................ $ 21,484
NASD filing fee............................................. 8,228
Nasdaq National Market listing fee.......................... 95,000
Printing.................................................... 240,000
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 100,000
Director and officer SEC liability insurance................ 65,000
Blue sky fees and expenses.................................. 15,000
Transfer agent, registrar and custodial fees................ 10,000
Miscellaneous............................................... 45,288
--------
Total............................................. $850,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a court to award, or a corporation's Board of Directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article X of Registrant's Amended Restated
Certificate of Incorporation (Exhibit 3.3 hereto) and Article VI of the
Registrant's Bylaws (Exhibit 3.5 hereto) provide for indemnification of the
Registrant's directors, officers, employees and other agents to the maximum
extent permitted by the DGCL. The Registrant maintains insurance covering its
directors and officers against certain liabilities incurred by them in their
capacities as such. The Registrant has entered into Indemnification Agreements
(a form of which is provided as Exhibit 10.1 hereto) with its officers and
directors. The Underwriting Agreement (Exhibit 1.1 hereto) also provides for
cross-indemnification among the Registrant and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1996, the Registrant has sold and issued the following
unregistered securities (all numbers reflect a ten-for-one stock split effective
July 24, 1995):
- Between January 1, 1996 and May 31, 1999, the Registrant sold and issued
1,330,447 shares of common stock to a total of 63 employees, five
non-employee directors and 10 consultants at purchase prices ranging from
$0.01 to $8.00 per share upon exercise of stock options or stock purchase
rights, or as stock bonuses, pursuant to the Registrant's 1994 Stock Plan
in reliance
II-1
<PAGE> 98
upon Rule 701 promulgated under the Securities Act or an exemption from
registration provided by Section 4(2) of the Securities Act.
- On June 21, 1995, the Registrant sold and issued 65,800 shares of common
stock to Geoworks at a purchase price of $0.05 per share in exchange for
the Registrant's use of office facilities and resources. Such sale was
made in reliance upon an exemption from registration provided by Section
4(2) of the Securities Act.
- Between December 21, 1995 and March 29, 1996, the Registrant sold and
issued an aggregate of 2,233,750 shares of Series B preferred stock at a
purchase price of $4.00 per share to a total of three institutional
investors, three corporate investors and 20 individuals affiliated with
us or our employees or investors. Such sales were made in reliance upon
an exemption from registration provided by Section 4(2) of the Securities
Act.
- On July 31, 1996, the Registrant issued a warrant to purchase 441,257
shares of common stock with an exercise price of $6.00 per share to
Benchmark Capital Partners, L.P. and a warrant to purchase 58,743 shares
of common stock with an exercise price of $6.00 per share to Benchmark
Founders' Fund, L.P. Such issuances were made in reliance upon an
exemption from registration provided by Section 4(2) of the Securities
Act.
- On September 18, 1996, the Registrant issued a warrant to purchase 17,500
shares of Series B preferred stock with an exercise price of $4.00 per
share to Venture Lending & Leasing, Inc. as partial consideration for the
financing of certain equipment and leasehold improvements. Such issuance
was made in reliance upon an exemption from registration provided by
Section 4(2) of the Securities Act.
- On December 2, 1996, the Registrant issued 1,310,000 shares of common
stock at a purchase price of $0.40 per share to an officer of the
Registrant. Such sale was made in reliance upon Rule 701 promulgated
under the Securities Act.
- Between April 17, 1997 and December 2, 1998, the Registrant sold and
issued an aggregate of 4,322,250 shares of Series C preferred stock at a
purchase price of $8.00 per share to a total of nine institutional
investors, three corporate investors and 25 individuals affiliated with
us or our employees or investors. Such sales were made in reliance upon
an exemption from registration provided by Section 4(2) of the Securities
Act.
- On April 17, 1997, the Registrant issued a warrant to purchase 75,000
shares of common stock with an exercise price of $0.80 per share to WC
Investors, LLC. Such issuance was made in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act.
- On May 27, 1997, the Registrant issued 250 shares of common stock at a
purchase price of $1.00 per share, and between July 21, 1997 and
September 2, 1997, the Registrant issued an aggregate of 750 shares of
common stock at a purchase price of $2.00 per share, to a consultant of
the Registrant in exchange for recruiting services rendered. Such sales
were made in reliance upon Rule 701 promulgated under the Securities Act.
- On June 18, 1997, the Registrant issued a warrant to purchase 525,000
shares of common stock with an exercise price of $8.00 per share to GE
Capital Corporation and a warrant to purchase 375,000 shares of common
stock with an exercise price of $8.00 per share to NBC Multimedia, Inc.
Such issuances were made in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
II-2
<PAGE> 99
- On October 15, 1997, the Registrant issued 96 shares of common stock at a
purchase price of $2.00 per share to a consultant of the Registrant in
exchange for consulting services rendered. Such sale was made in reliance
upon Rule 701 promulgated under the Securities Act.
- On November 3, 1997, the Registrant issued 215,000 shares of common stock
at a purchase price of $2.00 per share to an officer of the Registrant.
Such sale was made in reliance upon Rule 701 promulgated under the
Securities Act.
- On November 3, 1997, the Registrant issued a warrant to purchase 38,200
shares of common stock with an exercise price of $4.00 per share to a
consultant of the Registrant. The consideration for the issuance of such
warrant was $20,000 in cash. Such sale was made in reliance upon an
exemption from registration provided by Section 4(2) of the Securities
Act.
- On January 6, 1998, the Registrant issued a warrant to purchase 50,000
shares of common stock with an exercise price of $0.80 per share to
EGI-Wink Investors. Such issuance was made in reliance upon an exemption
from registration provided by Section 4(2) of the Securities Act.
- On February 1, 1998, the Registrant issued 25,000 shares of common stock
at a purchase price of $4.00 per share to an officer of the Registrant.
Such sale was made in reliance upon Rule 701 promulgated under the
Securities Act.
- On August 27, 1998, the Registrant issued a warrant to purchase 25,000
shares of common stock with an exercise price of $8.00 per share to
General Electric Capital Corporation. Such issuance was made in reliance
upon an exemption from registration provided by Section 4(2) of the
Securities Act.
- On December 2, 1998, the Registrant issued warrants to purchase up to an
aggregate of 250,000 shares of common stock with exercise prices ranging
from $12.00 to $14.00 per share to Vulcan Ventures Incorporated. Such
issuances were made in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act.
- On February 25, 1999, the Registrant issued a warrant to purchase up to
200,000 shares of common stock with an exercise price of $12.00 per share
to The Walt Disney Company. Such issuance was made in reliance upon an
exemption from registration provided by Section 4(2) of the Securities
Act.
- On March 23, 1999, the Registrant issued a warrant to purchase 125,000
shares of common stock with an exercise price of $12.00 per share to CBS
Corporation. Such issuance was made in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act.
- On May 17, 1999, the Registrant issued 250,000 shares of common stock at
a purchase price of $8.00 per share to an officer of the Registrant. Such
sale was made in reliance upon an exemption from registration provided by
Section 4(2) of the Securities Act.
- On May 26, 1999, the Registrant issued a warrant to purchase 500,000
shares of common stock with an exercise price of $12.00 per share to
Microsoft Corporation. Such issuance was made in reliance upon an
exemption from registration provided by Section 4(2) of the Securities
Act.
- On June 30, 1999 and July 21, 1999, the Registrant sold and issued an
aggregate of 4,958,333 shares of Series D preferred stock at a price of
$12.00 per share to Microsoft Corporation, Hughes Electronics
Corporation, General Instrument Corporation, Goldman Sachs Group,
II-3
<PAGE> 100
Inc., and GFI Company. Such issuances were made in reliance upon an
exemption from registration provided by Section 4(2) of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1** Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant's California predecessor.
3.2* Certificate of Incorporation of the Registrant.
3.3 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.4 Second Amended and Restated Certificate of Incorporation of
the Registrant to be filed following the closing of the
offering.
3.5 Bylaws of the Registrant.
4.1 Specimen Common Stock Certificate.
4.2 Fourth Investor Rights Agreement dated as of June 30, 1999
between the Registrant and the individuals and entities
listed in the exhibit thereto.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati regarding the
legality of the common stock being registered.
10.1* Form of Indemnification Agreement between the Registrant and
each of its officers and directors.
10.2* 1994 Stock Plan and form of agreement thereunder.
10.3 1999 Stock Plan and form of agreement thereunder.
10.4 1999 Director Stock Option Plan and form of agreement
thereunder.
10.5 1999 Employee Stock Purchase Plan and form of agreement
thereunder.
+ 10.6* Charter Programmer Affiliation Agreement dated February 23,
1999 between the Registrant and ABC, Inc.
+ 10.7* Charter Programmer Affiliation Agreement dated March 23,
1999 between the Registrant and CBS Corporation.
10.8* Equity Side Letter dated March 23, 1999 between the
Registrant and CBS Corporation and warrant issued to CBS
Corporation dated March 23, 1999.
+ 10.9* Letter Agreement dated June 3, 1997 between the Registrant
and NBC Multimedia, Inc. dba NBC Interactive Media.
+ 10.10* Cable Affiliation Agreement dated October 8, 1997 between
the Registrant and Charter Communications, Inc., as amended
on March 16, 1998 and March 12, 1999.
+ 10.11* Cable Affiliation Agreement dated December 10, 1998 between
the Registrant and Comcast Programming.
10.12* Cable Affiliation Agreement dated January 15, 1999 between
the Registrant and Coxcom, Inc. d/b/a Cox Communications
Palos Verdes.
+ 10.13* Master Affiliation Agreement dated December 22, 1998 between
the Registrant and DIRECTV, Inc., as amended on December 22,
1998.
+ 10.14* Master Cable Affiliation Agreement dated September 23, 1998
between the Registrant and Time Warner Cable.
+ 10.15* Development and License Agreement dated June 8, 1995 between
the Registrant and General Instrument Corporation of
Delaware, as amended on January 24, 1997 and August 18,
1997.
+ 10.16* Development and License Agreement dated January 15, 1996
between the Registrant and Scientific-Atlanta, Inc., as
amended on January 27, 1998.
</TABLE>
II-4
<PAGE> 101
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
+ 10.17* Application Server License Agreement dated September 30,
1997 between the Registrant and Toshiba Corporation, as
amended on September 30, 1997 and December 31, 1998.
+ 10.18* Engine License Agreement dated September 30, 1997 between
the Registrant and Toshiba Corporation, as amended on
September 30, 1997 and December 31, 1998.
+ 10.19* Engine License Agreement dated October 6, 1997 between the
Registrant and Toshiba America Consumer Products, Inc.
10.20* ATVEF Adapter License Agreement dated November 9, 1998
between the Registrant and INTEL Corporation.
10.21* Development and License Agreement dated May 17, 1999 between
the Registrant and Thomson Consumer Electronics, Inc.
10.22* Personnel Services Agreement dated November 10, 1997 between
GE Information Services, Inc. and the Registrant.
10.23* Letter Agreement dated September 10, 1998 between Registrant
and General Electric Capital Corporation.
10.24* Agreement dated January 1, 1999 between Registrant and
Satellite Services, Inc.
10.25* Master Service Agreement dated June 8, 1998 between the
Registrant and Softbank Services Group.
+ 10.26* System Addendum dated November 25, 1998 between the
Registrant and Time Warner Cable of New York City.
10.27* Agreement of Development of Demonstration Software dated
January 25, 1999 between the Registrant and Toshiba
Corporation.
10.28* Equity Side Letter dated February 23, 1999 between the
Registrant and The Walt Disney Company.
+ 10.29 Agreement dated May 25, 1999 between the Registrant and
Microsoft Corporation.
10.30* Sublease by and between Computer Associates International,
Inc. and the Registrant dated November 28, 1995, as amended
on March 21, 1996.
10.31* Loan Agreement dated as of September 18, 1996 between the
Registrant and Venture Lending & Leasing, Inc.
10.32* Warrant issued to GE Capital Corporation dated June 18,
1997.
10.33* Amended and Restated Warrant issued to NBC Multimedia, Inc.
dated June 18, 1997.
10.34* Warrant issued to Venture Lending and Leasing, Inc. dated
September 18, 1996.
10.35* Warrant issued to GE Capital Corporation dated August 27,
1998.
10.36 Warrant Issuance Agreement dated November 30, 1998 between
the Registrant and Vulcan Ventures Incorporated and warrants
issued to Vulcan Ventures Incorporated.
10.37* Warrant issued to The Walt Disney Company dated February 25,
1999.
10.38* Restricted Stock Purchase Agreement dated December 2, 1996
between the Registrant and Mary Agnes Wilderotter.
10.39* Restricted Stock Purchase Agreement dated January 15, 1998
between the Registrant and Mary Agnes Wilderotter.
10.40 Restricted Stock Purchase Agreement dated May 17, 1999
between the Registrant and Howard Schrott.
10.41* Employment Letter from the Registrant to Mary Agnes
Wilderotter dated October 21, 1996.
10.42* Employment Letter from the Registrant to Howard L. Schrott
dated May 6, 1999.
+ 10.43 Second Amendment to Master Affiliation Agreement dated June
28, 1999 between Registrant and DIRECTV, Inc.
10.44 Warrant issued to Microsoft Corporation dated May 30, 1999.
</TABLE>
II-5
<PAGE> 102
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
+ 10.45 Information Services Agreement effective May 1, 1998 between
the Registrant and GE Information Services, Inc.
11.1 Statement regarding computation of historical and pro forma
net loss per share.
21.1* List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit pursuant to a request for confidential treatment filed with the
Commission. Omitted portions have been filed separately with the Commission.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of the prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in such
denomination and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-6
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Alameda,
State of California, on this 28th day of July 1999.
WINK COMMUNICATIONS, INC.
By: *
---------------------------------------
Name: Mary Agnes Wilderotter
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on July 28, 1999
in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
* President and Chief Executive Officer; Director
- --------------------------------------------------- (principal executive officer)
Mary Agnes Wilderotter
/s/ HOWARD L. SCHROTT Chief Financial Officer; Senior Vice President
- --------------------------------------------------- (principal financial officer and principal
Howard L. Schrott accounting officer)
* Chairman of the Board of Directors and Chief
- --------------------------------------------------- Technical Officer
Brian P. Dougherty
* Director
- ---------------------------------------------------
Bruce W. Dunlevie
* Director
- ---------------------------------------------------
Hidetaka Yamamoto
* Director
- ---------------------------------------------------
F. Philip Handy
* Director
- ---------------------------------------------------
Jeffrey Coats
* Director
- ---------------------------------------------------
William Schleyer
* Director
- ---------------------------------------------------
Michael Fuchs
*By: /s/ HOWARD L. SCHROTT
-------------------------------------------
Howard L. Schrott
Attorney-in-fact
</TABLE>
II-7
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1** Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant's California predecessor.
3.2* Certificate of Incorporation of the Registrant.
3.3 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.4 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant to be filed following the
closing of the offering.
3.5 Bylaws of the Registrant.
4.1 Specimen Common Stock Certificate.
4.2 Fourth Investor Rights Agreement dated as of June 30, 1999
between the Registrant and the individuals and entities
listed in the exhibit thereto.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati regarding the
legality of the common stock being registered.
10.1* Form of Indemnification Agreement between the Registrant and
each of its officers and directors.
10.2* 1994 Stock Plan and form of agreement thereunder.
10.3 1999 Stock Plan and form of agreement thereunder.
10.4 1999 Director Stock Option Plan.
10.5 1999 Employee Stock Purchase Plan and form of agreement
thereunder.
+ 10.6* Charter Programmer Affiliation Agreement dated February 23,
1999 between the Registrant and ABC, Inc.
+ 10.7* Charter Programmer Affiliation Agreement dated March 23,
1999 between the Registrant and CBS Corporation.
10.8* Equity Side Letter dated March 23, 1999 between the
Registrant and CBS Corporation and warrant issued to CBS
Corporation dated March 23, 1999.
+ 10.9* Letter Agreement dated June 3, 1997 between the Registrant
and NBC Multimedia, Inc. dba NBC Interactive Media.
+ 10.10* Cable Affiliation Agreement dated October 8, 1997 between
the Registrant and Charter Communications, Inc., as amended
on March 16, 1998 and March 12, 1999.
+ 10.11* Cable Affiliation Agreement dated December 10, 1998 between
the Registrant and Comcast Programming.
10.12* Cable Affiliation Agreement dated January 15, 1999 between
the Registrant and Coxcom, Inc. d/b/a Cox Communications
Palos Verdes.
+ 10.13* Master Affiliation Agreement dated December 22, 1998 between
the Registrant and DIRECTV, Inc., as amended on December 22,
1998.
+ 10.14* Master Cable Affiliation Agreement dated September 23, 1998
between the Registrant and Time Warner Cable.
+ 10.15* Development and License Agreement dated June 8, 1995 between
the Registrant and General Instrument Corporation of
Delaware, as amended on January 24, 1997 and August 18,
1997.
+ 10.16* Development and License Agreement dated January 15, 1996
between the Registrant and Scientific-Atlanta, Inc., as
amended on January 27, 1998.
+ 10.17* Application Server License Agreement dated September 30,
1997 between the Registrant and Toshiba Corporation, as
amended on September 30, 1997 and December 31, 1998.
+ 10.18* Engine License Agreement dated September 30, 1997 between
the Registrant and Toshiba Corporation, as amended on
September 30, 1997 and December 31, 1998.
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
+ 10.19* Engine License Agreement dated October 6, 1997 between the
Registrant and Toshiba America Consumer Products, Inc.
10.20* ATVEF Adapter License Agreement dated November 9, 1998
between the Registrant and INTEL Corporation.
10.21* Development and License Agreement dated May 17, 1999 between
the Registrant and Thomson Consumer Electronics, Inc.
10.22* Personnel Services Agreement dated November 10, 1997 between
GE Information Services, Inc. and the Registrant.
10.23* Letter Agreement dated September 10, 1998 between Registrant
and General Electric Capital Corporation.
10.24* Agreement dated January 1, 1999 between Registrant and
Satellite Services, Inc.
10.25* Master Service Agreement dated June 8, 1998 between the
Registrant and Softbank Services Group.
+ 10.26* System Addendum dated November 25, 1998 between the
Registrant and Time Warner Cable of New York City.
10.27* Agreement of Development of Demonstration Software dated
January 25, 1999 between the Registrant and Toshiba
Corporation.
10.28* Equity Side Letter dated February 23, 1999 between the
Registrant and The Walt Disney Company.
+ 10.29 Agreement dated May 25, 1999 between the Registrant and
Microsoft Corporation.
10.30* Sublease by and between Computer Associates International,
Inc. and the Registrant dated November 28, 1995, as amended
on March 21, 1996.
10.31* Loan Agreement dated as of September 18, 1996 between the
Registrant and Venture Lending & Leasing, Inc.
10.32* Warrant issued to GE Capital Corporation dated June 18,
1997.
10.33* Amended and Restated Warrant issued to NBC Multimedia, Inc.
dated June 18, 1997.
10.34* Warrant issued to Venture Lending and Leasing, Inc. dated
September 18, 1996.
10.35* Warrant issued to GE Capital Corporation dated August 27,
1998.
10.36 Warrant Issuance Agreement dated November 30, 1998 between
the Registrant and Vulcan Ventures Incorporated and warrants
issued to Vulcan Ventures Incorporated.
10.37* Warrant issued to The Walt Disney Company dated February 25,
1999.
10.38* Restricted Stock Purchase Agreement dated December 2, 1996
between the Registrant and Mary Agnes Wilderotter.
10.39* Restricted Stock Purchase Agreement dated January 15, 1998
between the Registrant and Mary Agnes Wilderotter.
10.40 Restricted Stock Purchase Agreement dated May 17, 1999
between the Registrant and Howard Schrott.
10.41* Employment Letter from the Registrant to Mary Agnes
Wilderotter dated October 21, 1996.
10.42* Employment Letter from the Registrant to Howard L. Schrott
dated May 6, 1999.
+ 10.43 Second Amendment to Master Affiliation Agreement dated June
28, 1999 between Registrant and DIRECTV, Inc.
10.44 Warrant issued to Microsoft Corporation dated May 30, 1999.
+ 10.45 Information Services Agreement effective May 1, 1998 between
the Registrant and GE Information Services, Inc.
11.1 Statement regarding computation of historical and pro forma
net loss per share.
21.1* List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Counsel (included in Exhibit 5.1).
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit pursuant to a request for confidential treatment filed with the
Commission. Omitted portions have been filed separately with the Commission.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WINK COMMUNICATIONS, INC.
Maggie Wilderotter and Howard Schrott certify that:
1. They are the duly elected President and Secretary, respectively,
of Wink Communications, Inc., a California corporation (the "Company").
2. The Amended and Restated Articles of Incorporation of the
Company are hereby amended and restated in full to read in their entirety as set
forth in Exhibit A attached hereto.
3. The attached Amended and Restated Articles of Incorporation have
been duly approved by the Board of Directors of the Company.
4. The attached Amended and Restated Articles of Incorporation have
been duly approved by the holders of the requisite number of shares of this
Company in accordance with Sections 902 and 903 of the California General
Corporation Law. The total number of outstanding shares of each class entitled
to vote with respect to the attached amendment and restatement was 10,473,967
shares of Common Stock, 1,250,000 shares of Series A Preferred Stock, 2,233,750
shares of Series B Preferred Stock and 4,322,250 shares of Series C Preferred
Stock. The number of shares of Common Stock and Preferred Stock voting in favor
of the attached Amended and Restated Articles of Incorporation equaled or
exceeded the vote required. The vote required was a majority of the outstanding
shares of Common Stock and a majority of the outstanding shares of Preferred
Stock, each voting as a separate class.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed these Amended and
Restated Articles of Incorporation on June 8, 1999.
/s/ Maggie Wilderotter
----------------------------------------
Maggie Wilderotter, President
/s/ Howard Schrott
----------------------------------------
Howard Schrott, Secretary
The undersigned further declare under penalty of perjury under the laws
of the State of California that the matters set forth in this certificate are
true and correct of their own knowledge.
Executed at Alameda, California on June 8, 1999.
/s/ Maggie Wilderotter
----------------------------------------
Maggie Wilderotter, President
/s/ Howard Schrott
----------------------------------------
Howard Schrott, Secretary
<PAGE> 3
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WINK COMMUNICATIONS, INC.
I
The name of the corporation is Wink Communications, Inc.
II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This corporation is authorized to issue two classes of stock, designated
Common Stock, par value $0.001 per share ("Common Stock") and Preferred Stock,
par value $0.001 per share. The number of shares of Common Stock which this
Corporation is authorized to issue is 35,000,000. The number of shares of
Preferred Stock which this Corporation is authorized to issue is 13,001,250,
1,250,000 of which shall be designated "Series A Preferred," 2,251,250 of which
shall be designated "Series B Preferred," 4,500,000 of which shall be designated
"Series C Preferred" and 5,000,000 of which shall be designated "Series D
Preferred" (Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred are referred to collectively as the "Preferred Stock").
No share or shares of Preferred Stock acquired by the corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be canceled, retired and eliminated from the shares which
the corporation shall be authorized to issue.
IV
The relative rights, preferences, privileges and restrictions granted to
or imposed on the respective classes of shares of capital stock or the holders
thereof are as follows:
1. Dividends.
(a) The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available therefor, dividends at the rate of $0.128 per share of Series A
Preferred per annum, $0.32 per share of Series B Preferred per annum,
<PAGE> 4
$0.64 per share of Series C Preferred per annum and $0.96 per share of Series D
Preferred per annum, payable in preference and priority to any payment of any
dividend on Common Stock of the corporation. Such dividends shall not be
cumulative, and no right to such dividends shall accrue to holders of Preferred
Stock unless declared by the Board of Directors. No dividends or other
distributions shall be made with respect to the Common Stock in any fiscal year,
other than dividends payable solely in Common Stock, until:
(i) in the case of Series A Preferred, a dividend in the amount of
at least $0.128 per share of Series A Preferred;
(ii) in the case of Series B Preferred, a dividend in the amount of
at least $0.32 per share of Series B Preferred;
(iii) in the case of Series C Preferred, a dividend in the amount of
at least $0.64 per share multiplied by (i) the number one (1),
in the event of dividends or other distributions made during the
first fiscal year in which the Series C Preferred is
outstanding, or (ii) the number of years elapsed since the first
date of issuance of the Series C Preferred (pro rated for any
partial years), less the aggregate amount previously paid as
dividends on the Series C Preferred, in the event of dividends
or other distributions made after the first fiscal year in which
the Series C Preferred is outstanding; and
(iv) in the case of Series D Preferred, a dividend in the amount of
at least $0.96 per share of Series D Preferred,
has in each case been declared and paid during that fiscal year.
(b) For purposes of this Section 1, unless the context
otherwise requires, a "distribution" shall mean the transfer of cash or other
property without consideration whether by way of dividend or otherwise, payable
other than in Common Stock, or the purchase or redemption of shares of the
corporation (other than repurchases of Common Stock issued to or held by
employees, officers, directors or consultants of the corporation or its
subsidiaries upon termination of their employment or services) for cash or
property.
(c) As authorized by Section 402.5(c) of the California
Corporations Code, the provisions of Sections 502 and 503 of the California
Corporations Code shall not apply with respect to repurchases by the corporation
of shares of Common Stock issued to or held by employees, officers, directors or
consultants of the corporation or its subsidiaries upon termination of their
employment or services.
2. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the corporation, either voluntary or involuntary,
distributions to the shareholders of the corporation shall be made in the
following manner:
-2-
<PAGE> 5
(a) The holders of the Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the corporation to the holders of the Common Stock by reason of
their ownership of such stock, (i) the amount of $1.60 per share for each share
of Series A Preferred then held by them (adjusted for any combinations,
consolidations, or stock distributions or stock dividends with respect to such
shares) plus an amount equal to all declared but unpaid dividends on the Series
A Preferred, (ii) the amount of $4.00 per share for each share of Series B
Preferred then held by them (adjusted for any combinations, consolidations, or
stock distributions or stock dividends with respect to such shares) plus an
amount equal to all declared but unpaid dividends on the Series B Preferred and
(iii) the amount of $8.00 per share for each share of Series C Preferred then
held by them (adjusted for any combinations, consolidations, or stock
distributions or stock dividends with respect to such shares) plus an amount
equal to all declared but unpaid dividends on the Series C Preferred and (iv)
the amount of $12.00 per share for each share of Series D Preferred then held by
them (adjusted for any combinations, consolidations, or stock distributions or
stock dividends with respect to such shares) plus an amount equal to all
declared but unpaid dividends on the Series D Preferred. If the assets and funds
thus distributed among the holders of the Preferred Stock shall be insufficient
to permit the payment to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Preferred
Stock in a manner that the amount distributed to each holder of Preferred Stock
shall equal the amount obtained by multiplying the entire assets and funds of
the corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the aggregate liquidation preference of the shares
of Preferred Stock then held by such holder, and the denominator of which shall
be the total liquidation preference of all shares of Preferred Stock then
outstanding.
(b) After payment has been made to the holders of the
Preferred Stock of the full amounts to which they shall be entitled as set forth
in Section 2(a) above, then the entire remaining assets and funds of the
corporation legally available for distribution, if any, shall be distributed
ratably among the holders of the Common Stock in a manner such that the amount
distributed to each holder of Common Stock shall equal the amount obtained by
multiplying the entire remaining assets and funds of the corporation legally
available for distribution hereunder by a fraction, the numerator of which shall
be the number of shares of Common Stock then held by such holder, and the
denominator of which shall be the total number of shares of Common Stock then
outstanding.
(c) For purposes of this Section 2, a merger or
consolidation of the corporation with or into any other corporation or
corporations, unless the shareholders of the corporation immediately following
such transaction directly or indirectly own greater than fifty percent (50%) of
the total voting power of the surviving or acquiring corporation or corporations
and the aggregate per share value (determined in good faith by the corporation's
Board of Directors) of each share of Preferred Stock following such merger or
consolidation plus any consideration paid to the holder of such share of
Preferred Stock in connection with such merger or consolidation is at least
equal to the liquidation preference which such holder would be entitled to
receive under Section 2(a) hereof in the event of liquidation, dissolution or
winding up of the corporation, or a sale of all or substantially
-3-
<PAGE> 6
all of the assets of the corporation, shall be treated as a liquidation,
dissolution or winding up of the corporation.
(d) Notwithstanding Sections 2(a) and 2(b) hereof, the
corporation may at any time, out of funds legally available therefor, repurchase
shares of Common Stock of the corporation issued to or held by employees,
officers, directors or consultants of the corporation or its subsidiaries upon
termination of their employment or services on terms approved by a majority of
disinterested members of the entire Board of Directors.
3. Voting Rights and Directors.
(a) Generally. Except as otherwise required by law or by
Sections 3 or 5 hereof, the holder of each share of Common Stock issued and
outstanding shall have one vote, and the holder of each share of Preferred Stock
shall be entitled to vote on all matters and entitled with respect to such share
to a number of votes equal to the number of shares of Common Stock into which
such share of Preferred Stock could be converted at the record date for
determination of the shareholders entitled to vote on such matters, or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited, such votes to be counted together with all
other shares of the corporation having general voting power and not separately
as a class. Holders of Common Stock and Preferred Stock shall be entitled to
notice of any shareholders' meeting in accordance with the Bylaws of the
corporation. Fractional votes by the holders of Preferred Stock shall not,
however, be permitted, and any fractional voting rights shall (after aggregating
all shares into which shares of Preferred Stock held by each holder could be
converted) be rounded to the nearest whole number.
(b) Board Size. The authorized number of directors of the
Company's Board shall be not less than six (6) nor more than ten (10). The exact
number of directors shall be specified in the Bylaws of the corporation and may
be changed, within the limits specified above, by a duly adopted resolution by
the Company's Board. The Company shall not alter the indefinite range in number
of directors specified above or fix a definite number of directors without a
provision for an indefinite range in its Articles of Incorporation, Bylaws or
otherwise, without first obtaining the written consent, or affirmative vote at a
meeting, of the holders of at least a majority of the then-outstanding shares of
the Preferred Stock, all series consenting or voting (as the case may be)
together as a separate class.
(c) Board of Directors Election and Removal.
(i) Election. The holders of the Preferred Stock,
all series voting together as a separate class (with cumulative voting rights as
among themselves in accordance with Section 708 of the California Corporations
Code), shall be entitled to elect one (1) director of the Company; the holders
of the Common Stock, voting as a separate class (with cumulative voting rights
as among themselves in accordance with Section 708 of the California
Corporations Code), shall be entitled to elect one (1) director of the Company;
and the holders of the Preferred Stock and
-4-
<PAGE> 7
the Common Stock, voting together as a single class (with cumulative voting
rights as among themselves in accordance with Section 708 of the California
Corporations Code), shall be entitled to elect the remaining authorized number
of directors of the Company.
(ii) Quorum; Required Vote.
(A) Quorum. At any meeting held for the
purpose of electing directors, the presence in person or by proxy of the holders
of a majority of the shares of the Preferred Stock or Common Stock then
outstanding, respectively, shall constitute a quorum of the Preferred Stock or
Common Stock, as the case may be, for the election of directors to be elected
solely by the holders of the Preferred Stock or Common Stock, respectively. The
holders of Preferred Stock and Common Stock representing a majority of the
voting power of all the then-outstanding shares of Preferred Stock and Common
Stock shall constitute a quorum for the election of the director to be elected
jointly by the holders of the Preferred Stock and the Common Stock.
(B) Required Vote. With respect to the
election of any director or directors by the holders of the outstanding shares
of a specified series, series, class or classes of stock given the right to
elect such director or directors pursuant to Subsection 3(c)(i) above
("Specified Stock"), that candidate or those candidates (as applicable) shall be
elected who either: (1) in the case of any such vote conducted at a meeting of
the holders of such Specified Stock, receive the highest number of affirmative
votes of the outstanding shares of such Specified Stock, up to the number of
directors to be elected by such Specified Stock; or (2) in the case of any such
vote taken by written consent without a meeting, are elected by the unanimous
written consent of the holders of shares of such Specified Stock.
(iii) Vacancy. If there shall be any vacancy in the
office of a director elected by the holders of any Specified Stock pursuant to
Subsection 3(c)(i), then a successor to hold office for the unexpired term of
such director may be elected by either: (A) the remaining director or directors
(if any) in office that were so elected by the holders of such Specified Stock,
by the affirmative vote of a majority of such directors (or by the sole
remaining director elected by the holders of such Specified Stock if there is
but one), or (B) the affirmative vote, either at a meeting or by written
consent, of a majority of holders of the shares of such Specified Stock that are
entitled to elect such director under Subsection 3(c)(i).
(iv) Removal. Subject to Section 303 of the
Corporations Code, any director who shall have been elected to the Board by the
holders of any Specified Stock pursuant to Subsection 3(c)(i) or by any director
or directors elected by holders of any Specified Stock as provided in Subsection
3(c)(iii)(A) may be removed during his or her term of office, either with or
without cause, by, and only by, the affirmative vote of shares representing a
majority of the voting power of all the outstanding shares of such Specified
Stock entitled to vote, given either a meeting of such shareholders duly called
for that purpose or pursuant to a written consent of shareholders without a
meeting. Any vacancy created by such removal may be filled only in the manner
provided in Subsection 3(c)(iii).
-5-
<PAGE> 8
(v) Procedures. Any meeting of the holders of any
Specified Stock, and any action taken by the holders of any Specified Stock by
written consent without a meeting, in order to elect or remove a director under
this Section 3(c), shall be held in accordance with the procedures and
provisions of the Company's Bylaws, the California Corporations Code and
applicable law regarding shareholder meetings and shareholder actions by written
consent, as such are then in effect (including but not limited to procedures and
provisions for determining the record date for shares entitled to vote).
(vi) Termination. Notwithstanding anything in this
Subsection 3(c) to the contrary, the provisions of this Subsection 3(c) shall
cease to be of any further force or effect upon the earliest of (A) the merger
or consolidation of the Company with or into any other corporation or
corporations if such consolidation or merger is approved by the shareholders of
the Company in compliance with applicable law and the Articles of Incorporation
and Bylaws of the Company; (B) a sale of all or substantially all of the
Company's assets; or (C) such time as no shares of Preferred Stock are
outstanding.
4. Conversion. The holders of the Preferred Stock have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Series A Preferred. Each share of Series A
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series A Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series A
Issuance Price (as hereinafter defined) by the Series A Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series A Conversion Rate"). The Issuance Price for Series A Preferred Stock
shall be $1.60 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series A Conversion Price") for Series A
Preferred Stock shall initially be $1.60 per share of Common Stock. Such initial
Series A Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series A Preferred shall be paid in cash.
(ii) Series B Preferred. Each share of Series B
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series B Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series B
Issuance Price (as hereinafter defined) by the Series B Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series B Conversion Rate"). The Issuance Price for Series B Preferred Stock
shall be $4.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series B Conversion Price") for Series B
Preferred
-6-
<PAGE> 9
Stock shall initially be $4.00 per share of Common Stock. Such initial Series B
Conversion Price shall be subject to adjustment as hereinafter provided.
Upon conversion, all declared and unpaid
dividends on the Series B Preferred shall be paid in cash.
(iii) Series C Preferred. Each share of Series C
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series C Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series C
Issuance Price (as hereinafter defined) by the Series C Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series C Conversion Rate"). The Issuance Price for Series C Preferred Stock
shall be $8.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series C Conversion Price") for Series C
Preferred Stock shall initially be $8.00 per share of Common Stock. Such initial
Series C Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series C Preferred shall be paid in cash.
(iv) Series D Preferred. Each share of Series D
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series D Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series D
Issuance Price (as hereinafter defined) by the Series D Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series D Conversion Rate"). The Issuance Price for Series D Preferred Stock
shall be $12.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series D Conversion Price") for Series D
Preferred Stock shall initially be $12.00 per share of Common Stock. Such
initial Series D Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series D Preferred shall be paid in cash.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Conversion Price either (i) immediately prior to the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the corporation to the public at a price
per share (prior to underwriter commissions and offering expenses) of not less
than $8.00 per share (as appropriately adjusted for any subsequent stock splits,
stock dividends, reclassifications or recapitalizations) and with gross proceeds
to the Company (prior to underwriter commissions and offering expenses) of not
less than $10,000,000 or (ii) upon the receipt by the corporation of the
affirmative vote at a duly noticed
-7-
<PAGE> 10
shareholders meeting or pursuant to a duly solicited written consent of the
holders of more than sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of Preferred Stock. In the event of the automatic conversion
of the Preferred Stock upon a public offering as set forth in clause (i) above,
the person(s) entitled to receive the Common Stock issuable upon such conversion
of Preferred Stock shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of securities.
(c) Mechanics of Conversion. Before any holder of Preferred
Stock shall be entitled to convert the same into full shares of Common Stock and
to receive certificates therefor, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
corporation at such office that he elects to convert the same; provided,
however, that in the event of an automatic conversion pursuant to Section 4(b),
the outstanding shares of Preferred Stock shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the corporation or its
transfer agent, and provided further that the corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of Preferred
Stock are either delivered to the corporation or its transfer agent as provided
above, or the holder notifies the corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the corporation to indemnify the corporation from any loss
incurred by it in connection with such certificates. The corporation shall, as
soon as practicable after such delivery, or receipt of such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid and
a check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted, or
in the case of automatic conversion on the date of closing of the offering or
the effective date of such written consent, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
(d) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder of Preferred Stock would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the fair market
value of the Common Stock on the date of such conversion, as determined by the
board of directors of the corporation. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock held by each holder at the time converting
into Common Stock and the total number of shares of Common Stock issuable upon
such aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Price of
each series of Preferred Stock shall be subject to adjustment from time to time
as follows:
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<PAGE> 11
(i) Issuance of Common Stock and Common Stock
Equivalents. If, after the date hereof, the corporation shall issue (or,
pursuant to Section 4(e)(ii)(C) hereof, shall be deemed to have issued) any
Common Stock other than "Excluded Stock" (as defined below) for a consideration
per share less than the Conversion Price for such series of Preferred Stock in
effect immediately prior to the issuance of such Common Stock (excluding stock
dividends, subdivisions, split-ups, combinations, dividends or recapitalizations
covered by Sections 4(e)(iv), (v), (vi) and (vii)), the Conversion Price for
such series of Preferred Stock in effect immediately after each such issuance
shall forthwith be adjusted to a price equal to the quotient obtained by
dividing:
(A) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of such series of Preferred Stock, or deemed to have been issued
pursuant to Section 4(e)(ii)(C) and 4(e)(iii)) immediately prior to such
issuance multiplied by the Conversion Price for such series of Preferred Stock
in effect immediately prior to such issuance, plus
(y) the consideration received by
the corporation upon such issuance, by
(B) the total number of shares of Common
Stock outstanding immediately prior to such issuance of Common Stock (including
any shares of Common Stock issuable upon conversion of such series of Preferred
Stock or deemed to have been issued pursuant to Section 4(e)(ii)(C) and
4(e)(iii)) plus the number of shares of Common Stock actually issued in the
transaction which resulted in the adjustment pursuant to this Section 4(e)(i).
(ii) Treatment of Certain Issuances. For the purposes
of any adjustment of the Conversion Price for such series of Preferred Stock
pursuant to Section 4(e)(i), the following provisions shall be applicable:
(A) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any discounts or commissions paid or incurred by the
corporation in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as reasonably
determined by the board of directors of the corporation, in accordance with
generally accepted accounting treatment.
(C) In the case of the issuance of (x)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (y) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (z) options to purchase or rights
to subscribe for such convertible or exchangeable securities:
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(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Section 4(e)(ii)(A) and
4(e)(ii)(B) above), if any, received by the corporation upon the issuance of
such options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities, or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional minimum consideration, if any, to be received by the corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in Section 4(e)(ii)(A) and 4(e)(ii)(B) above);
(3) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change or (y) the options or rights related
to such securities not converted or exchanged prior to such change, as the case
may be, been made upon the basis of such change; and
(4) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights relate to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iii) Excluded Stock. "Excluded Stock" shall mean:
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(A) all shares of Common Stock issued and
outstanding on the date this certificate is filed with the California Secretary
of State;
(B) all shares of Series A Preferred, Series
B Preferred, Series C Preferred and Series D Preferred, and the Common Stock
into which the shares of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred are convertible;
(C) all shares of Common or Preferred Stock
issuable pursuant to options, warrants or other rights outstanding on the date
this Certificate is filed with the California Secretary of State;
(D) all shares of Common or Preferred Stock
(and/or options, warrants or other rights therefor) issued or issuable to
employees, officers, directors, contractors, advisors, consultants, lessors,
vendors, lenders, customers or strategic partners of the Company pursuant to
agreements or plans approved by the Board of Directors of the Company.
All outstanding shares of Excluded Stock (including shares issuable upon
conversion of the Series A Preferred Stock, the Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred) shall be deemed to be outstanding for
all purposes of the computations of Section 4(e)(i).
(iv) Stock Splits and Stock Dividends. If the number
of shares of Common Stock outstanding at any time after the date hereof is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, on the date such
payment is made or such change is effective, the Conversion Price of each series
of Preferred Stock shall be appropriately decreased so that the number of shares
of Common Stock issuable on conversion of any shares of such series of Preferred
Stock shall be increased in proportion to such increase of outstanding shares.
(v) Reverse Stock Splits. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, on the effective
date of such combination, the Conversion Price of each series of Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of any shares of such series of Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(vi) Cash Dividends. In case the corporation shall
declare a cash dividend upon its Common Stock generally payable otherwise than
out of retained earnings or shall distribute to all holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the corporation or other
persons, assets (excluding cash dividends) or options or rights (excluding
options to purchase and rights to subscribe for Common Stock or other securities
of the corporation convertible into or exchangeable for Common Stock), then, in
each such case, the holders of shares of Preferred Stock
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shall, concurrent with the distribution to holders of Common Stock, receive a
like distribution based upon the number of shares of Common Stock into which
such Preferred Stock is then convertible.
(vii) Reorganization; Reclassification. In the case,
at any time after the date hereof, of any capital reorganization, or any
reclassification of the stock of the corporation (other than as a result of a
stock dividend or subdivision, split-up or combination of shares), the
consolidation or merger of the corporation with or into another person (other
than a consolidation or merger to which the provisions of Section 2 hereof apply
or in which the corporation is the continuing entity and which does not result
in any change in the Common Stock), or a sale or transfer of all or
substantially all of the corporation's assets, the shares of Preferred Stock
shall, after such reorganization, reclassification, consolidation, merger, or
sale, be convertible into the kind and number of shares of stock or other
securities or property of the corporation or otherwise to which such holder
would have been entitled if, immediately prior to such reorganization,
reclassification, consolidation, merger, or sale, such holder had converted its
shares of Preferred Stock into Common Stock. The provisions of this clause (vii)
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers or sales.
(viii) All calculations under this Section 4 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share, as
appropriate.
(f) Minimal Adjustments. No adjustment in the Conversion
Price for any series of Preferred Stock need be made if such adjustment would
result in a change in the Conversion Price of less than $0.01. Any adjustment of
less than $0.01 which is not made shall be carried forward and shall be made at
the time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue, sale or repurchase of securities or any other voluntary
action, avoid or seek to avoid, directly or indirectly, the observance or
performance of any of the terms to be observed or performed hereunder by the
corporation or wrongfully deny any of the benefits or rights intended to be
conferred hereby, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 4 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment. This provision shall not,
however, restrict the corporation's right to amend its Articles of Incorporation
with the requisite shareholder consent.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for a series of Preferred
Stock pursuant to this Section 4, the corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The corporation
shall, upon written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
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forth (i) all such adjustments and readjustments, (ii) the Conversion Rate at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event that this
corporation shall propose at any time:
(A) to declare any dividend or distribution
upon its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(B) to offer for subscription pro rata to
the holders of any class or series of its stock any additional shares of stock
of any class or series or other rights;
(C) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(D) to merge or consolidate with or into any
other corporation, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, this corporation shall send to the
holders of Preferred Stock:
(1) at least ten (10) days' prior
written notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in clauses (C) and (D) above; and
(2) in the case of the matters
referred to in clauses (C) and (D) above, at least ten (10) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon the occurrence of such
event).
Each such written notice shall be delivered personally or given by first class
mail, postage prepaid, addressed to the holders of Preferred Stock at the
address for each such holder as shown on the books of this corporation. Any
notice required by the provisions of this Section 4 to be given to the holder of
shares of Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at such
holder's address appearing on the corporation's books.
(j) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its
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shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
5. Protective Provisions. In addition to any other rights provided
by law, so long as any shares of Preferred Stock remain outstanding, the
corporation shall not, without first obtaining the approval by vote or written
consent, in the manner provided by law, of the holders of at least a majority of
the total number of outstanding shares of Preferred Stock, all series voting
together as a single class:
(a) merge or consolidate with or into any corporation if
such merger or consolidation would result in the shareholders of the Company
immediately prior to such merger or consolidation holding less than majority of
the voting power of the stock of the surviving corporation immediately after
such merger or consolidation;
(b) sell all or substantially all the Company's assets in a
single transaction or series of related transactions;
(c) liquidate or dissolve;
(d) declare or pay any dividends (other than dividends
payable solely in shares of its own Common Stock) on or declare or make any
other distribution, directly or indirectly, on account of any shares of Common
Stock now or hereafter outstanding;
(e) except as permitted by Section 3(b), alter the
authorized number of directors in the corporation's Articles of Incorporation,
Bylaws or otherwise;
(f) amend or repeal any provision of, or add any provision
to, the corporation's Articles of Incorporation if such action would materially
and adversely alter or change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the Preferred Stock;
(g) authorize or issue shares of any class of stock having
any rights, preferences or privileges prior to or on a parity with the Preferred
Stock;
(h) reclassify any shares of Common Stock (or any other
shares of the corporation other than the Preferred Stock) into shares having any
rights, preferences or privileges prior to or on a parity with the Preferred
Stock;
(i) authorize or issue any additional series or shares of
heretofore unauthorized Preferred Stock; or
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(j) repurchase any shares of Common Stock or Preferred Stock
(other than shares of Common Stock issued to or held by employees, officers,
directors or consultants of the corporation or its subsidiaries upon termination
of their employment or services on terms approved by a majority of disinterested
members of the entire Board of Directors).
6. Waivers and Consents. Any preference, right, privilege or power
of the Preferred Stock may be waived, and any action of the corporation may be
consented to, by the affirmative vote of the holders of a majority of the
then-outstanding shares of Preferred Stock, taken at a duly constituted meeting
or by written consent, and such waiver or consent shall be binding upon all
holders of Preferred Stock.
7. No Reissuance of Preferred Stock. Any share of Preferred
acquired by the corporation, whether by redemption, repurchase, conversion or
otherwise, shall be canceled, and shall not be reissuable.
V
1. Limitation of Directors' Liability. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. Indemnification of Corporate Agents. This corporation is
authorized to indemnify the directors, officers and agents of the corporation to
the fullest extent permissible under California law.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification.
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EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WINK COMMUNICATIONS, INC.
Maggie Wilderotter and Howard L. Schrott hereby certify that:
FIRST: The original name of this corporation is Wink Communications,
Inc. and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is April 30,
1998.
SECOND: They are the duly elected and acting President and Secretary,
respectively, of Wink Communications, Inc., a Delaware corporation.
THIRD: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is Wink Communications, Inc.
II.
The address of the corporation's registered office in the State of
Delaware is 15 E. North Street, Dover, Delaware 19901, County of Kent. The name
of its registered agent at such address is Incorporating Services, Ltd.
III.
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
IV.
This corporation is authorized to issue two classes of stock, designated
Common Stock, par value $0.001 per share and Preferred Stock, par value $0.001
per share. The number of shares of Common Stock which this corporation is
authorized to issue is 100,000,000. The number of shares of Preferred Stock
which this corporation is authorized to issue is 18,001,250, 1,250,000 of which
shall be designated
<PAGE> 2
"Series A Preferred," 2,251,250 of which shall be designated "Series B
Preferred," 4,500,000 of which shall be designated "Series C Preferred" and
5,000,000 of which shall be designated as "Series D Preferred" (Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred are
referred to collectively as the "Outstanding Preferred Stock"). The remaining
5,000,000 shares of Preferred Stock shall be undesignated and may be issued from
time to time in one or more series.
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the Board of Directors (authority to do so being hereby expressly
vested in the Board of Directors), and such resolution or resolutions shall also
set forth the voting powers, full or limited or none, of each such series of
Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of each such series of Preferred Stock. The Board of Directors
is further authorized to determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly unissued series of
Preferred Stock and to fix the number of shares of any series of Preferred Stock
and the designation of any such series of Preferred Stock.
No share or shares of Outstanding Preferred Stock acquired by the
corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the corporation shall be authorized to issue.
For any series of Preferred Stock having issued and outstanding shares
after completion of the corporation's initial underwritten public offering of
Common Stock, the Board of Directors is further authorized to increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of such series when the number of shares of such series was
originally fixed by the Board of Directors, but such increase or decrease shall
be subject to the limitations and restrictions stated in the resolution of the
Board of Directors originally fixing the number of shares of such series, if
any. If the number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
Until such time as there are no shares of Outstanding Preferred Stock
outstanding (at which time the provisions of this Article V relating to the
Outstanding Preferred Stock shall be null and void), the relative rights,
preferences, privileges and restrictions granted to or imposed on the respective
classes of shares of capital stock or the holders thereof are as follows:
1. Dividends.
(a) The holders of the Outstanding Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, dividends at the rate of $0.128 per share of
Series A Preferred per annum, $0.32 per share of Series B Preferred per annum,
$0.64 per share of Series C Preferred per annum, and $0.96 per share of Series D
Preferred per annum, payable in preference and priority to any payment of any
dividend on Common Stock of the corporation. Such dividends shall not be
cumulative, and no right to such dividends shall accrue to holders of Preferred
Stock unless declared by the Board of Directors. No dividends or other
distributions shall be made with
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respect to the Common Stock in any fiscal year, other than dividends payable
solely in Common Stock, until:
(i) in the case of Series A Preferred, a dividend in
the amount of at least $0.128 per share of
Series A Preferred;
(ii) in the case of Series B Preferred, a dividend in
the amount of at least $0.32 per share of Series
B Preferred;
(iii) in the case of Series C Preferred, a dividend in
the amount of at least $0.64 per share
multiplied by (i) the number one (1), in the
event of dividends or other distributions made
during the first fiscal year in which the Series
C Preferred is outstanding, or (ii) the number
of years elapsed since the first date of
issuance of the Series C Preferred (pro rated
for any partial years), less the aggregate
amount previously paid as dividends on the
Series C Preferred, in the event of dividends or
other distributions made after the first fiscal
year in which the Series C Preferred is
outstanding; and
(iv) in the case of Series D Preferred, a dividend in
the amount of at least $0.96 per share of Series
D Preferred,
has in each case been declared and paid during that fiscal year.
(b) For purposes of this Section 1, unless the context
otherwise requires, a "distribution" shall mean the transfer of cash or other
property without consideration whether by way of dividend or otherwise, payable
other than in Common Stock, or the purchase or redemption of shares of the
corporation (other than repurchases of Common Stock issued to or held by
employees, officers, directors or consultants of the corporation or its
subsidiaries upon termination of their employment or services) for cash or
property.
(c) As authorized by the General Corporation Law of the
State of Delaware, a repurchase by the corporation of shares of Common Stock
issued to or held by employees, officers, directors or consultants of the
corporation or its subsidiaries upon termination of their employment or services
shall not be deemed a "distribution" as defined in Section 1(b) above.
2. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the corporation, either voluntary or involuntary,
distributions to the stockholders of the corporation shall be made in the
following manner:
(a) The holders of the Outstanding Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the corporation to the holders of the Common Stock by
reason of their ownership of such stock, (i) the amount of $1.60 per share for
each share of Series A Preferred then held by them (adjusted for any
combinations, consolidations, or
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stock distributions or stock dividends with respect to such shares) plus an
amount equal to all declared but unpaid dividends on the Series A Preferred,
(ii) the amount of $4.00 per share for each share of Series B Preferred then
held by them (adjusted for any combinations, consolidations, or stock
distributions or stock dividends with respect to such shares) plus an amount
equal to all declared but unpaid dividends on the Series B Preferred, (iii) the
amount of $8.00 per share for each share of Series C Preferred then held by them
(adjusted for any combinations, consolidations, or stock distributions or stock
dividends with respect to such shares) plus an amount equal to all declared but
unpaid dividends on the Series C Preferred and (iv) the amount of $12.00 per
share for each share of Series D Preferred then held by them (adjusted for any
combinations, consolidations, or stock distributions or stock dividends with
respect to such shares) plus an amount equal to all declared but unpaid
dividends on the Series D Preferred. If the assets and funds thus distributed
among the holders of the Outstanding Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Outstanding
Preferred Stock in a manner that the amount distributed to each holder of
Outstanding Preferred Stock shall equal the amount obtained by multiplying the
entire assets and funds of the corporation legally available for distribution
hereunder by a fraction, the numerator of which shall be the aggregate
liquidation preference of the shares of Outstanding Preferred Stock then held by
such holder, and the denominator of which shall be the total liquidation
preference of all shares of Outstanding Preferred Stock then outstanding.
(b) After payment has been made to the holders of the
Outstanding Preferred Stock of the full amounts to which they shall be entitled
as set forth in Section 2(a) above, then the entire remaining assets and funds
of the corporation legally available for distribution, if any, shall be
distributed ratably among the holders of the Common Stock in a manner such that
the amount distributed to each holder of Common Stock shall equal the amount
obtained by multiplying the entire remaining assets and funds of the corporation
legally available for distribution hereunder by a fraction, the numerator of
which shall be the number of shares of Common Stock then held by such holder,
and the denominator of which shall be the total number of shares of Common Stock
then outstanding.
(c) For purposes of this Section 2, a merger or
consolidation of the corporation with or into any other corporation or
corporations, unless the stockholders of the corporation immediately following
such transaction directly or indirectly own greater than fifty percent (50%) of
the total voting power of the surviving or acquiring corporation or corporations
and the aggregate per share value (determined in good faith by the corporation's
Board of Directors) of each share of Outstanding Preferred Stock following such
merger or consolidation plus any consideration paid to the holder of such share
of Outstanding Preferred Stock in connection with such merger or consolidation
is at least equal to the liquidation preference which such holder would be
entitled to receive under Section 2(a) hereof in the event of liquidation,
dissolution or winding up of the corporation, or a sale of all or substantially
all of the assets of the corporation, shall be treated as a liquidation,
dissolution or winding up of the corporation.
(d) Notwithstanding Sections 2(a) and 2(b) hereof, the
corporation may at any time, out of funds legally available therefor, repurchase
shares of Common Stock of the corporation issued to or held by employees,
officers, directors or consultants of the corporation or its subsidiaries upon
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termination of their employment or services on terms approved by a majority of
disinterested members of the entire Board of Directors.
3. Voting Rights and Directors.
(a) Generally. Except as otherwise required by law or by
Sections 3 or 5 hereof, the holder of each share of Common Stock issued and
outstanding shall have one vote, and the holder of each share of Outstanding
Preferred Stock shall be entitled to vote on all matters and entitled with
respect to such share to a number of votes equal to the number of shares of
Common Stock into which such share of Outstanding Preferred Stock could be
converted at the record date for determination of the stockholders entitled to
vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of the corporation having
general voting power and not separately as a class. Holders of Common Stock and
Outstanding Preferred Stock shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the corporation. Fractional votes by
the holders of Outstanding Preferred Stock shall not, however, be permitted, and
any fractional voting rights shall (after aggregating all shares into which
shares of Outstanding Preferred Stock held by each holder could be converted) be
rounded to the nearest whole number.
(b) Board Size. Prior to the conversion of all shares of the
Outstanding Preferred Stock into Common Stock pursuant to Article IV, Section 4
hereof, the authorized number of directors of the corporation's Board of
Directors shall be not less than six (6) nor more than ten (10). The exact
number of directors shall be specified in the Bylaws of the corporation and may
be changed by amendment of the corporation's Bylaws, duly adopted by the
corporation's Board of Directors or by the stockholders, or by a duly adopted
amendment to the Certificate of Incorporation. The corporation shall not alter
the indefinite range in number of directors specified above or fix a definite
number of directors without a provision for an indefinite range in its
Certificate of Incorporation, Bylaws or otherwise, without first obtaining the
written consent, or affirmative vote at a meeting of the holders of at least a
majority of the then-outstanding shares of the Outstanding Preferred Stock, all
series consenting or voting (as the case may be) together as a separate class.
Upon conversion of all shares of Outstanding Preferred Stock
into Common Stock pursuant to Article IV, Section 4 hereof, the size and
composition of the Board of Directors will be determined as provided in Article
VII hereof.
(c) Board of Directors Election and Removal.
(i) Election. Prior to the conversion of all shares
of the Outstanding Preferred Stock into Common Stock pursuant to Article IV,
Section 4 hereof, the holders of the Outstanding Preferred Stock, all series
voting together as a separate class (with cumulative voting rights as among
themselves in accordance with Section 214 of the General Corporation Law of
Delaware), shall be entitled to elect one (1) director of the corporation; the
holders of the Common Stock, voting as a separate class (with cumulative voting
rights as among themselves in accordance with Section 214 of the General
Corporation Law of Delaware), shall be entitled to elect one (1) director of the
corporation; and
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the holders of the Preferred Stock and the Common Stock, voting together as a
single class (with cumulative voting rights as among themselves in accordance
with Section 214 of the General Corporation Law of Delaware), shall be entitled
to elect the remaining authorized number of directors of the corporation.
Upon conversion of all shares of the Outstanding Preferred Stock
into Common Stock pursuant to Article IV, Section 4 hereof, elections of
directors will take place in accordance with Article VII hereof.
(ii) Quorum; Required Vote.
(A) Quorum. Prior to the conversion of all
shares of the Outstanding Preferred Stock into Common Stock pursuant to Article
IV, Section 4 hereof at any meeting held for the purpose of electing directors,
the presence in person or by proxy of the holders of a majority of the shares of
Outstanding Preferred Stock or Common Stock then outstanding, respectively,
shall constitute a quorum of Outstanding Preferred Stock or Common Stock, as the
case may be, for the election of directors to be elected solely by the holders
of Outstanding Preferred Stock or Common Stock, respectively. The holders of
Outstanding Preferred Stock and Common Stock representing a majority of the
voting power of all the then-outstanding shares of Outstanding Preferred Stock
and Common Stock shall constitute a quorum for the election of the director to
be elected jointly by the holders of Outstanding Preferred Stock and the Common
Stock.
(B) Required Vote. Prior to the conversion
of all shares of the Outstanding Preferred Stock into Common Stock pursuant to
Article IV, Section 4 hereof with respect to the election of any director or
directors by the holders of the outstanding shares of a specified series,
series, class or classes of stock given the right to elect such director or
directors pursuant to Subsection 3(c)(i) above ("Specified Stock"), that
candidate or those candidates (as applicable) shall be elected who either: (1)
in the case of any such vote conducted at a meeting of the holders of such
Specified Stock, receive the highest number of affirmative votes of the
outstanding shares of such Specified Stock, up to the number of directors to be
elected by such Specified Stock; or (2) in the case of any such vote taken by
written consent without a meeting, are elected by the unanimous written consent
of the holders of shares of such Specified Stock.
(iii) Vacancy. Prior to the conversion of all shares
of the Outstanding Preferred Stock into Common Stock pursuant to Article IV,
Section 4 hereof, if there shall be any vacancy in the office of a director
elected by the holders of any Specified Stock pursuant to Subsection 3(c)(i),
then a successor to hold office for the unexpired term of such director may be
elected by either: (A) the remaining director or directors (if any) in office
that were so elected by the holders of such Specified Stock, by the affirmative
vote of a majority of such directors (or by the sole remaining director elected
by the holders of such Specified Stock if there is but one), or (B) the
affirmative vote of holders of the shares of such Specified Stock that are
entitled to elect such director under Subsection 3(c)(i).
(iv) Removal. Subject to Section 141 of the General
Corporation Law of the State of Delaware, any director who shall have been
elected to the Board of Directors by the holders of
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any Specified Stock pursuant to Subsection 3(c)(i) or by any director or
directors elected by holders of any Specified Stock as provided in Subsection
3(c)(iii)(A) may be removed during his or her term of office, either with or
without cause, by, and only by, the affirmative vote of shares representing a
majority of the voting power of all the outstanding shares of such Specified
Stock entitled to vote, given either a meeting of such stockholders duly called
for that purpose or pursuant to a written consent of stockholders without a
meeting. Any vacancy created by such removal may be filled only in the manner
provided in Subsection 3(c)(iii).
(v) Procedures. Any meeting of the holders of any Specified
Stock, and any action taken by the holders of any Specified Stock by written
consent without a meeting, in order to elect or remove a director under this
Section 3(c), shall be held in accordance with the procedures and provisions of
the corporation's Bylaws, the General Corporation Law of the State of Delaware
and applicable law regarding stockholder meetings and stockholder actions by
written consent, as such are then in effect (including but not limited to
procedures and provisions for determining the record date for shares entitled to
vote).
(vi) Termination. Notwithstanding anything in this Subsection
3(c) to the contrary, the provisions of this Subsection 3(c) shall cease to be
of any further force or effect upon the earliest of (A) the merger or
consolidation of the corporation with or into any other corporation or
corporations if such consolidation or merger is approved by the stockholders of
the corporation in compliance with applicable law and the Certificate of
Incorporation and Bylaws of the corporation; (B) a sale of all or substantially
all of the corporation's assets; or (C) such time as no shares of Outstanding
Preferred Stock are outstanding.
4. Conversion. The holders of the Preferred Stock have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Series A Preferred. Each share of Series A
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series A Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series A
Issuance Price (as hereinafter defined) by the Series A Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series A Conversion Rate"). The Issuance Price for Series A Preferred Stock
shall be $1.60 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series A Conversion Price") for Series A
Preferred Stock shall initially be $1.60 per share of Common Stock. Such initial
Series A Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series A Preferred shall be paid in cash.
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(ii) Series B Preferred. Each share of Series B
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series B Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series B
Issuance Price (as hereinafter defined) by the Series B Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series B Conversion Rate"). The Issuance Price for Series B Preferred Stock
shall be $4.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series B Conversion Price") for Series B
Preferred Stock shall initially be $4.00 per share of Common Stock. Such initial
Series B Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid dividends on
the Series B Preferred shall be paid in cash.
(iii) Series C Preferred. Each share of Series C
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series C Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series C
Issuance Price (as hereinafter defined) by the Series C Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series C Conversion Rate"). The Issuance Price for Series C Preferred Stock
shall be $8.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series C Conversion Price") for Series C
Preferred Stock shall initially be $8.00 per share of Common Stock. Such initial
Series C Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series C Preferred shall be paid in cash.
(iv) Series D Preferred. Each share of Series D
Preferred shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the corporation or any
transfer agent for the Series D Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series D
Issuance Price (as hereinafter defined) by the Series D Conversion Price,
determined as hereinafter provided, in effect at the time of the conversion (the
"Series D Conversion Rate"). The Issuance Price for Series D Preferred Stock
shall be $12.00 per share. The price at which shares of Common Stock shall be
deliverable upon conversion (the "Series D Conversion Price") for Series D
Preferred Stock shall initially be $12.00 per share of Common Stock. Such
initial Series D Conversion Price shall be subject to adjustment as hereinafter
provided.
Upon conversion, all declared and unpaid
dividends on the Series D Preferred shall be paid in cash.
(b) Automatic Conversion. Each share of Outstanding
Preferred Stock shall automatically be converted into shares of Common Stock at
the then effective Conversion Price either
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(i) immediately prior to the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the corporation to the public at a price per share (prior to
underwriter commissions and offering expenses) of not less than $8.00 per share
(as appropriately adjusted for any subsequent stock splits, stock dividends,
reclassifications or recapitalizations) and with gross proceeds to the
corporation (prior to underwriter commissions and offering expenses) of not less
than $10,000,000 or (ii) upon the receipt by the corporation of the affirmative
vote at a duly noticed stockholders meeting or pursuant to a duly solicited
written consent of the holders of more than sixty-six and two-thirds percent (66
2/3%) of the then outstanding shares of Outstanding Preferred Stock. In the
event of the automatic conversion of the Outstanding Preferred Stock upon a
public offering as set forth in clause (i) above, the person(s) entitled to
receive the Common Stock issuable upon such conversion of Outstanding Preferred
Stock shall not be deemed to have converted such Outstanding Preferred Stock
until immediately prior to the closing of such sale of securities.
(c) Mechanics of Conversion. Before any holder of
Outstanding Preferred Stock shall be entitled to convert the same into full
shares of Common Stock and to receive certificates therefor, he shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
corporation or of any transfer agent for the Outstanding Preferred Stock, and
shall give written notice to the corporation at such office that he elects to
convert the same; provided, however, that in the event of an automatic
conversion pursuant to Section 4(b), the outstanding shares of Outstanding
Preferred Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the corporation or its transfer agent, and provided
further that the corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless the certificates evidencing such shares of Outstanding Preferred Stock
are either delivered to the corporation or its transfer agent as provided above,
or the holder notifies the corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the corporation to indemnify the corporation from any loss
incurred by it in connection with such certificates. The corporation shall, as
soon as practicable after such delivery, or receipt of such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Outstanding Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Outstanding Preferred Stock to be converted, or in the case of automatic
conversion on the date of closing of the offering or the effective date of such
written consent, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(d) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder of Outstanding Preferred Stock would otherwise be
entitled, the corporation shall pay cash equal to such fraction multiplied by
the fair market value of the Common Stock on the date of such conversion, as
determined by the Board of Directors of the corporation. Whether or not
fractional shares are issuable upon such
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<PAGE> 10
conversion shall be determined on the basis of the total number of shares of
Outstanding Preferred Stock held by each holder at the time converting into
Common Stock and the total number of shares of Common Stock issuable upon such
aggregate conversion.
(e) Adjustment of Conversion Price. The Conversion Price of
the Outstanding Preferred Stock shall be subject to adjustment from time to time
as follows:
(i) Issuance of Common Stock and Common Stock
Equivalents. If, after the date hereof, the corporation shall issue (or,
pursuant to Section 4(e)(ii)(C) hereof, shall be deemed to have issued) any
Common Stock other than "Excluded Stock" (as defined below) for a consideration
per share less than the Conversion Price for such series of Outstanding
Preferred Stock in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations covered by Sections 4(e)(iv), (v), (vi) and (vii)), the
Conversion Price for such series of Outstanding Preferred Stock in effect
immediately after each such issuance shall forthwith be adjusted to a price
equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of such series of Outstanding Preferred Stock, or deemed to have been
issued pursuant to Section 4(e)(ii)(C) and 4(e)(iii)) immediately prior to such
issuance multiplied by the Conversion Price for such series of Preferred Stock
in effect immediately prior to such issuance, plus
(y) the consideration received by
the corporation upon such issuance, by
(B) the total number of shares of Common
Stock outstanding immediately prior to such issuance of Common Stock (including
any shares of Common Stock issuable upon conversion of such series of Preferred
Stock or deemed to have been issued pursuant to Section 4(e)(ii)(C) and
4(e)(iii)) plus the number of shares of Common Stock actually issued in the
transaction which resulted in the adjustment pursuant to this Section 4(e)(i).
(ii) Treatment of Certain Issuances. For the purposes
of any adjustment of the Conversion Price for such series of Preferred Stock
pursuant to Section 4(e)(i), the following provisions shall be applicable:
(A) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any discounts or commissions paid or incurred by the
corporation in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value
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thereof as reasonably determined by the Board of Directors of the corporation,
in accordance with generally accepted accounting treatment.
(C) In the case of the issuance of (x)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (y) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (z) options to purchase or rights
to subscribe for such convertible or exchangeable securities:
(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Section 4(e)(ii)(A) and
4(e)(ii)(B) above), if any, received by the corporation upon the issuance of
such options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities, or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional minimum consideration, if any, to be received by the corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in Section 4(e)(ii)(A) and 4(e)(ii)(B) above);
(3) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change or (y) the options or rights related
to such securities not converted or exchanged prior to such change, as the case
may be, been made upon the basis of such change; and
(4) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights relate to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the
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conversion or exchange of such convertible or exchangeable securities or upon
the exercise of the options or rights related to such convertible or
exchangeable securities, as the case may be.
(iii) Excluded Stock. "Excluded Stock" shall mean:
(A) all shares of Common Stock issued and
outstanding on the date this certificate is filed with the California Secretary
of State;
(B) all shares of Series A Preferred, Series
B Preferred, Series C Preferred and Series D Preferred and the Common Stock into
which the shares of Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred are convertible;
(C) all shares of Common or Outstanding
Preferred Stock issuable pursuant to options, warrants or other rights
outstanding as of June 9, 1999; or
(D) all shares of Common or Outstanding
Preferred Stock (and/or options, warrants or other rights therefor) issued or
issuable to employees, officers, directors, contractors, advisors, consultants,
lessors, vendors, lenders, customers or strategic partners of the corporation
pursuant to agreements or plans approved by the Board of Directors of the
corporation.
All outstanding shares of Excluded Stock (including shares issuable upon
conversion of the Series A Preferred Stock , the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 4(e)(i).
(iv) Stock Splits and Stock Dividends. If the number
of shares of Common Stock outstanding at any time after the date hereof is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, on the date such
payment is made or such change is effective, the Conversion Price of each series
of Outstanding Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of any shares of such
series of Preferred Stock shall be increased in proportion to such increase of
outstanding shares.
(v) Reverse Stock Splits. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, on the effective
date of such combination, the Conversion Price of each series of Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of any shares of such series of Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(vi) Cash Dividends. In case the corporation shall
declare a cash dividend upon its Common Stock generally payable otherwise than
out of retained earnings or shall distribute to all holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the corporation or other
persons, assets (excluding cash dividends) or options or rights (excluding
options to purchase and rights to subscribe
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for Common Stock or other securities of the corporation convertible into or
exchangeable for Common Stock), then, in each such case, the holders of shares
of Outstanding Preferred Stock shall, concurrent with the distribution to
holders of Common Stock, receive a like distribution based upon the number of
shares of Common Stock into which such Outstanding Preferred Stock is then
convertible.
(vii) Reorganization; Reclassification. In the case,
at any time after the date hereof, of any capital reorganization, or any
reclassification of the stock of the corporation (other than as a result of a
stock dividend or subdivision, split-up or combination of shares), the
consolidation or merger of the corporation with or into another person (other
than a consolidation or merger to which the provisions of Section 2 hereof apply
or in which the corporation is the continuing entity and which does not result
in any change in the Common Stock), or a sale or transfer of all or
substantially all of the corporation's assets, the shares of Outstanding
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, or sale, be convertible into the kind and number of
shares of stock or other securities or property of the corporation or otherwise
to which such holder would have been entitled if, immediately prior to such
reorganization, reclassification, consolidation, merger, or sale, such holder
had converted its shares of Outstanding Preferred Stock into Common Stock. The
provisions of this clause (vii) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers or sales.
(viii) All calculations under this Section 4 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share, as
appropriate.
(f) Minimal Adjustments. No adjustment in the Conversion
Price for any series of Outstanding Preferred Stock need be made if such
adjustment would result in a change in the Conversion Price of less than $0.01.
Any adjustment of less than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $0.01 or more in the
Conversion Price.
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue, sale or repurchase of securities or any other voluntary
action, avoid or seek to avoid, directly or indirectly, the observance or
performance of any of the terms to be observed or performed hereunder by the
corporation or wrongfully deny any of the benefits or rights intended to be
conferred hereby, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 4 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of Outstanding Preferred Stock against impairment. This provision shall
not, however, restrict the corporation's right to amend its Articles of
Incorporation with the requisite stockholder consent.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for a series of
Outstanding Preferred Stock pursuant to this Section 4, the corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of such series of
Outstanding Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any
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time of any holder of Outstanding Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) all such
adjustments and readjustments, (ii) the Conversion Rate at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares of Outstanding Preferred Stock.
(i) Notices of Record Date. In the event that this
corporation shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up;
then, in connection with each such event, this corporation shall send to the
holders of Preferred Stock:
(A) at least ten (10) days' prior written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in clauses (C) and (D) above; and
(B) in the case of the matters referred to
in clauses (C) and (D) above, at least ten (10) days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by first class
mail, postage prepaid, addressed to the holders of Preferred Stock at the
address for each such holder as shown on the books of this corporation. Any
notice required by the provisions of this Section 4 to be given to the holder of
shares of Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at such
holder's address appearing on the corporation's books.
(j) Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Outstanding Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all
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outstanding shares of Outstanding Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
5. Protective Provisions. In addition to any other rights provided
by law, so long as any shares of Outstanding Preferred Stock remain outstanding,
the corporation shall not, without first obtaining the approval by vote or
written consent, in the manner provided by law, of the holders of at least a
majority of the total number of outstanding shares of Outstanding Preferred
Stock, all series voting together as a single class:
(a) merge or consolidate with or into any corporation if
such merger or consolidation would result in the stockholders of the corporation
immediately prior to such merger or consolidation holding less than majority of
the voting power of the stock of the surviving corporation immediately after
such merger or consolidation;
(b) sell all or substantially all the corporation's assets
in a single transaction or series of related transactions;
(c) liquidate or dissolve;
(d) declare or pay any dividends (other than dividends
payable solely in shares of its own Common Stock) on or declare or make any
other distribution, directly or indirectly, on account of any shares of Common
Stock now or hereafter outstanding;
(e) except as permitted by Section 3(b), alter the
authorized number of directors in the corporation's Articles of Incorporation,
Bylaws or otherwise;
(f) amend or repeal any provision of, or add any provision
to, the corporation's Articles of Incorporation if such action would materially
and adversely alter or change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the Preferred Stock;
(g) authorize or issue shares of any class of stock having
any rights, preferences or privileges prior to or on a parity with the Preferred
Stock;
(h) reclassify any shares of Common Stock (or any other
shares of the corporation other than the Preferred Stock) into shares having any
rights, preferences or privileges prior to or on a parity with the Preferred
Stock;
(i) authorize or issue any additional series or shares of
heretofore unauthorized Preferred Stock; or
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(j) repurchase any shares of Common Stock or Preferred Stock
(other than shares of Common Stock issued to or held by employees, officers,
directors or consultants of the corporation or its subsidiaries upon termination
of their employment or services on terms approved by a majority of disinterested
members of the entire Board of Directors).
6. Waivers and Consents. Any preference, right, privilege or power
of the Outstanding Preferred Stock may be waived, and any action of the
corporation may be consented to, by the affirmative vote of the holders of a
majority of the then-outstanding shares of Outstanding Preferred Stock, taken at
a duly constituted meeting or by written consent, and such waiver or consent
shall be binding upon all holders of Outstanding Preferred Stock.
7. No Reissuance of Preferred Stock. Any share of Outstanding
Preferred Stock acquired by the corporation, whether by redemption, repurchase,
conversion or otherwise, shall be canceled, and shall not be reissuable.
V.
The corporation is to have perpetual existence.
VI.
Elections of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
VII.
Except as otherwise provided in Article IV, the number of directors
which constitutes the whole Board of Directors of the corporation shall be
designated in the Bylaws of the corporation and may be fixed from time to time
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board of Directors for adoption). At each annual meeting of
stockholders, directors of the corporation shall be elected to hold office until
the expiration of the term for which they are elected and until their successors
have been duly elected and qualified; except that if any such election shall not
be so held, such election shall take place at a stockholders' meeting called and
held in accordance with the General Corporation Law of the State of Delaware.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the provisions of this Amended and
Restated Certificate of Incorporation, vacancies and newly created directorships
of such class or classes or series may be filled only by a majority of the
directors elected by such class or classes or series thereof then in office, or
by a sole remaining director so elected. In the event that no directors elected
by such class or classes of stock or series remain, the majority of the other
directors then in office, although less than a quorum, or a sole remaining
director may fill such vacancy or vacancies. A person so elected by the Board of
Directors to fill a vacancy shall hold office until the next succeeding annual
meeting of stockholders of the corporation and until his or her successor shall
have been duly elected and qualified.
-16-
<PAGE> 17
Effective at and after such time as the corporation has outstanding
securities designated as qualified for trading as a national market system
security on the National Association of Securities Dealers Automated Quotation
System (or any successor national market system), or such later time as required
by applicable law (the "Effective Date"), the directors of the corporation shall
be divided into three classes as nearly equal in size as is practicable, hereby
designated Class I, Class II and Class III (collectively, the "Classes"). The
term of office of the initial Class I directors shall expire at the first
regularly-scheduled annual meeting of the stockholders following the Effective
Date, the term of office of the initial Class II directors shall expire at the
second annual meeting of the stockholders following the Effective Date and the
term of office of the initial Class III directors shall expire at the third
annual meeting of the stockholders following the Effective Date. At each annual
meeting of stockholders, commencing with the first regularly-scheduled annual
meeting of stockholders following the Initial Public Offering, each of the
successors elected as directors of a Class whose term shall have expired at such
annual meeting shall be elected to hold office until the third annual meeting
next succeeding his or her election and until his or her respective successor
shall have been duly elected and qualified.
If the number of directors is hereafter changed, any newly created
directorships or decrease in directorships shall be so apportioned among the
classes as to make the Classes as nearly equal in number as is practicable,
provided that no decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
VIII.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.
IX.
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or as may hereafter be amended and by any
other applicable law, a director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
The corporation may indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer or employee of the
corporation or any predecessor of the corporation or serves or served at any
other enterprise as a director, officer or employee at the request of the
corporation or any predecessor to the corporation.
Neither any amendment nor repeal of this Article IX, nor the adoption of
any provision of this corporation's Amended and Restated Certificate of
Incorporation inconsistent with this Article IX, shall eliminate or reduce the
effect of this Article IX, with respect to any matter occurring, or any action
or proceeding accruing or arising or that, but for this Article IX, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
-17-
<PAGE> 18
X.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
XI.
Effective at and after the Effective Time referred to in Article VII,
the stockholders of the corporation may not take action by written consent in
lieu of a meeting but must take any actions at a duly called annual or special
meeting.
XII.
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the corporation.
XIII.
(a) Until the Effective Time referred to in Article VII, every
stockholder complying with Section (b) of this Article XIII and entitled to vote
at any election of directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are normally
entitled, or distribute the stockholder's votes on the same principle among as
many candidates as the stockholder thinks fit.
(b) No stockholder shall be entitled to cumulate votes unless such
candidate or candidates' names have been placed in nomination prior to the
voting and a stockholder has given notice at the meeting prior to the voting of
that stockholder's intention to cumulate votes.
XIV.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
* * * * *
-18-
<PAGE> 19
A. This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this corporation.
B. This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the corporation. A majority of the outstanding shares of
Common Stock and Preferred Stock, and a majority of the outstanding shares of
Preferred Stock approved this Amended and Restated Certificate of Incorporation
by written consent in accordance with Section 228 of the General Corporation Law
of the State of Delaware and in accordance with the corporation's Certificate of
Incorporation and written notice of such was given by the corporation in
accordance with Section 228.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
-19-
<PAGE> 20
IN WITNESS WHEREOF, Wink Communications, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by the President and the
Secretary in Alameda, California this _______ day of July, 1999.
Wink Communications, Inc.
By:
-------------------------------------
Maggie Wilderotter
President
ATTEST:
By:
-------------------------------
Howard L. Schrott
Secretary
<PAGE> 1
EXHIBIT 3.4
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WINK COMMUNICATIONS, INC.
a Delaware corporation
Wink Communications, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of Delaware (the "Corporation"),
does hereby certify as follows:
FIRST: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on April 13, 1998.
SECOND: This Second Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with the provisions of Section 242 and 245
of General Corporation Law of the State of Delaware by the Board of Directors of
the Corporation.
THIRD: This Second Amended and Restated Certificate of Incorporation was
approved by written consent of the stockholder of the Corporation pursuant to
Section 228 of the General Corporation Law of the State of Delaware.
FOURTH: The Amended and Restated Certificate of Incorporation of this
Corporation is amended and restated in its entirety to read as follows:
"I.
The name of the Corporation is Wink Communications, Inc. (hereinafter
sometimes referred to as the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is 15 East North Street, Dover, Delaware 19903-0899, County of Kent.
The name of its registered agent at such address is Incorporating Services, Ltd.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
<PAGE> 2
IV.
The Corporation is authorized to issue a total of 105,000,000 shares of
stock in two classes designated respectively "Preferred Stock" and "Common
Stock." The total number of shares of Preferred Stock the Corporation shall have
authority to issue is 5,000,000, par value $0.001 per share, and the total
number of shares of Common Stock the Corporation shall have authority to issue
is 100,000,000, par value $0.001 per share.
The shares of Preferred Stock authorized by this Second Amended and
Restated Certificate of Incorporation may be issued from time to time in one or
more series. For any wholly unissued series of Preferred Stock, the Board of
Directors is hereby authorized to fix and alter the dividend rights, dividend
rates, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption prices, liquidation preferences,
the number of shares constituting any such series and the designation thereof,
or any of them.
For any series of Preferred Stock having issued and outstanding shares,
the Board of Directors is further authorized to increase or decrease (but not
below the number of shares of such series then outstanding) the number of shares
of such series when the number of shares of such series was originally fixed by
the Board of Directors, but such increase or decrease shall be subject to the
limitations and restrictions stated in the resolution of the Board of Directors
originally fixing the number of shares of such series, if any. If the number of
shares of any series is so decreased, then the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
V.
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
1. The business of the Corporation shall be managed by or under
the direction of the Board of Directors.
2. Special meetings of stockholders of the Corporation may be
called only by the President or the Chairman of the Board or by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption).
<PAGE> 3
VI.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of a director, then the liability of a director of the Corporation,
without any further corporate action on the part of the Corporation, shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this Article
VI by the stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
VII.
The number of directors shall be fixed from time to time by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption). The directors shall be divided into three classes, as
nearly equal in number as possible, with the term of office of the first class
to expire at the first annual meeting of stockholders after the Corporation is
subject to the Securities Exchange Act of 1934, as amended, the term of office
of the second class to expire at the second annual meeting of stockholders and
the term of office of the third class to expire at the third annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected to serve three-year terms and until their
successors are elected and qualified, so that the term of one class of directors
will expire each year. When the number of directors is changed, any newly
created directorships, or any decrease in directorships, shall be apportioned
among the classes so as to make all classes as nearly equal as possible,
provided that no decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Vacancies occurring on the Board of Directors for any reason may be
filled by vote of a majority of the remaining members of the Board of Directors,
although less than a quorum, at any meeting of the Board of Directors or by
unanimous written consent of the Board of Directors. A person so elected by the
Board of Directors to fill a vacancy shall hold office until the next succeeding
annual meeting of stockholders of the Corporation and until his or her successor
shall have been duly elected and qualified.
<PAGE> 4
VIII.
The Board of Directors is expressly empowered to adopt, amend or repeal
Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the
Corporation by the Board of Directors shall require the approval of a majority
of the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any resolution
providing for any such adoption, amendment or repeal is presented to the Board).
The stockholders shall also have power to adopt, amend or repeal the Bylaws of
the Corporation.
IX.
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, said compromise or arrangement
and said reorganization shall, if sanctioned by the court to which said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on this Corporation.
X.
Stockholders of the Corporation may not take action by written consent
in lieu of a meeting but must take any actions at a duly called annual or
special meeting.
XI.
Pursuant to Section 203(b) of the Delaware General Corporation Law, the
stockholders of this Corporation expressly elect not to be governed by Section
203(a) of the Delaware General Corporation Law.
<PAGE> 5
XII.
Notwithstanding any other provision of this Second Amended and Restated
Certificate of Incorporation or any provision of law that might otherwise permit
a lesser vote or no vote, but in addition to any affirmative vote of the holders
of the capital stock required by law or this Second Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at least
two-thirds (2/3) of the combined voting power of all of the then-outstanding
shares of the Corporation entitled to vote shall be required to alter, amend or
repeal Articles VII, X, XI or XII or any provision thereof.
XIII.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Second Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
<PAGE> 6
IN WITNESS WHEREOF, the undersigned Mary Agnes Wilderotter and Howard L.
Schrott have signed this Second Amended and Restated Certificate of
Incorporation as President and Secretary, respectively, of said Wink
Communications, Inc. this _____ day of _____________, 1999.
------------------------------------
Mary Agnes Wilderotter, President
------------------------------------
Howard L. Schrott, Secretary
<PAGE> 1
EXHIBIT 3.5
BYLAWS
OF
WINK COMMUNICATIONS, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I CORPORATE OFFICES.....................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS.............................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETING...................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS..........................................................................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................4
2.7 QUORUM............................................................................4
2.8 ADJOURNED MEETING; NOTICE.........................................................5
2.9 VOTING............................................................................5
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT.................................5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ..........................6
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING........................................6
2.13 PROXIES...........................................................................7
2.14 ORGANIZATION......................................................................8
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................8
2.16 INSPECTORS OF ELECTION............................................................8
2.17 INSPECTORS OF ELECTION AND PROCEDURES FOR COUNTING WRITTEN
CONSENTS..........................................................................9
ARTICLE III DIRECTORS..........................................................................10
3.1 POWERS...........................................................................10
3.2 NUMBER OF DIRECTORS..............................................................11
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.........................................11
3.4 RESIGNATION AND VACANCIES........................................................12
3.5 REMOVAL OF DIRECTORS.............................................................13
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.........................................13
3.7 FIRST MEETINGS...................................................................13
3.8 REGULAR MEETINGS.................................................................14
3.9 SPECIAL MEETINGS; NOTICE.........................................................14
3.10 QUORUM...........................................................................14
3.11 WAIVER OF NOTICE.................................................................15
3.12 ADJOURNMENT......................................................................15
3.13 NOTICE OF ADJOURNMENT............................................................15
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................15
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.15 FEES AND COMPENSATION OF DIRECTORS...............................................15
3.16 APPROVAL OF LOANS TO OFFICERS....................................................15
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION...........................16
3.18 CONDUCT OF BUSINESS..............................................................16
ARTICLE IV COMMITTEES..........................................................................16
4.1 COMMITTEES OF DIRECTORS..........................................................16
4.2 MEETINGS AND ACTION OF COMMITTEES................................................17
4.3 COMMITTEE MINUTES................................................................17
ARTICLE V OFFICERS.............................................................................17
5.1 OFFICERS.........................................................................17
5.2 APPOINTMENT OF OFFICERS..........................................................18
5.3 SUBORDINATE OFFICERS.............................................................18
5.4 REMOVAL AND RESIGNATION OF OFFICERS..............................................18
5.5 VACANCIES IN OFFICES.............................................................19
5.6 CHAIRMAN OF THE BOARD............................................................19
5.7 PRESIDENT........................................................................19
5.8 VICE PRESIDENTS..................................................................19
5.9 SECRETARY........................................................................20
5.10 CHIEF FINANCIAL OFFICER..........................................................20
5.11 ASSISTANT SECRETARY..............................................................20
5.12 ADMINISTRATIVE OFFICERS..........................................................21
5.13 AUTHORITY AND DUTIES OF OFFICERS.................................................21
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS..................................................................................21
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................21
6.2 INDEMNIFICATION OF OTHERS........................................................22
6.3 INSURANCE........................................................................23
ARTICLE VII RECORDS AND REPORTS................................................................23
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................23
7.2 INSPECTION BY DIRECTORS..........................................................23
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................24
7.4 CERTIFICATION AND INSPECTION OF BYLAWS...........................................24
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VIII GENERAL MATTERS...................................................................24
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............................24
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS........................................24
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED...............................25
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES.................................25
8.5 SPECIAL DESIGNATION ON CERTIFICATES..............................................26
8.6 LOST CERTIFICATES................................................................26
8.7 TRANSFER AGENTS AND REGISTRARS...................................................26
8.8 CONSTRUCTION; DEFINITIONS........................................................27
8.10 FISCAL YEAR......................................................................27
8.11 SEAL.............................................................................27
8.12 STOCK TRANSFER AGREEMENTS........................................................27
8.13 REGISTERED STOCKHOLDERS..........................................................27
8.14 NOTICES..........................................................................28
ARTICLE IX AMENDMENTS..........................................................................28
ARTICLE X DISSOLUTION..........................................................................28
ARTICLE XI CUSTODIAN...........................................................................29
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES......................................29
11.2 DUTIES OF CUSTODIAN..............................................................30
</TABLE>
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<PAGE> 5
BYLAWS
OF
WINK COMMUNICATIONS, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday in March in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted if brought before the meeting in
accordance with Section 2.5 of these Bylaws.
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<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
Except as otherwise provided by the General Corporation Law of Delaware,
all notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.6 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and (i) in the case of a special meeting,
the purpose or purposes for which the meeting is called (no business other than
that specified in the notice may be transacted) or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS
(a) To be properly brought before an annual meeting, nominations
for the election of directors or other business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the board of directors, (ii) otherwise properly brought before the meeting by or
at the direction of the board of directors or (iii) otherwise properly brought
before the meeting by a stockholder in accordance with Section 2.5(b). To be
properly brought before a special meeting, nominations for the election of
directors or other business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors.
(b) For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, such stockholder's
notice must be delivered to or mailed and received by the secretary of the
corporation not less than 60 days prior to the meeting; provided, however, that
in the event that less than 60 days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
seventh day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the
-2-
<PAGE> 7
stockholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Exchange Act. Notwithstanding
anything in these bylaws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 2.5. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 2.5,
and, if he or she should so determine, he or she shall so declare at the meeting
that any such business not properly brought before the meeting shall not be
transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.5. Such stockholder's notice
shall set forth (i) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 2.5; and (ii)
as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (E) any other information relating to such person
that is required to be disclosed in solicitations of proxies for elections of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement, if any, as a nominee and to
serving as a director if elected). At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrants, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these bylaws, and if he should so determine, he shall so declare
at the meeting, and the defective nomination shall be disregarded.
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2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. If any notice addressed to a
stockholder at the address of that stockholder appearing on the books of the
corporation is returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice to the stockholder at that address, then all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available to the stockholder on written demand of the stockholder
at the principal executive office of the corporation for a period of one (1)
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. Where a separate vote by a class or classes is
required, a majority, present in person or by proxy, of the shares of such class
or classes entitled to take action with respect to that vote on that matter
shall constitute a quorum. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the holders of a majority of the shares represented at the
meeting and entitled to vote thereat, present in person or represented by proxy,
shall have power to adjourn the meeting in accordance with Section 2.8 of these
bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
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2.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by (i) the chairman of the meeting
or (ii) the vote of the holders of a majority of the shares represented at that
meeting and entitled to vote thereat, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.7 of these bylaws.
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Any stockholder entitled to vote on
any matter may vote part of the shares in favor of the proposal, refrain from
voting the remaining shares or, may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
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Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing setting forth the action so taken
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days
after the date the earliest dated consent is delivered to the corporation, a
written consent or consents signed by holders of a sufficient number of votes to
take action are delivered to the corporation in the manner prescribed in the
first paragraph of this section.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
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If the board of directors does not so fix a record date the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall neither precede nor be more than
ten (10) days after the date upon which such resolution is adopted by the board
of directors. Any stockholder of record seeking to have the stockholders
authorize or take action by written consent shall, by written notice to the
secretary, request the board of directors to fix a record date. The board of
directors shall promptly, but in all events within ten (10) days after the date
on which such notice is received, adopt a resolution fixing the record date.
If the board of directors has not fixed a record date within such time,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation in the manner prescribed in the first paragraph of Section 2.11
of these bylaws. If the board of directors has not fixed a record date within
such time and prior action by the board of directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the date on
which the board of directors adopts the resolution taking such prior action.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.13 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation in accordance with the procedure established for the meeting
or taking of action in writing, as the case may be, but no such proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, telefacsimile or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware
(relating to the irrevocability of proxies).
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2.14 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, and in the absence of the chairman of the board, the vice presidents, in
order of their rank as fixed by the board of directors, shall call the meeting
of the stockholders to order, and shall act as chairman of the meeting. In the
absence of the president, the chairman of the board, and all of the vice
presidents, the stockholders shall appoint a chairman for such meeting. The
chairman of any meeting of stockholders shall determine the order of business
and the procedures at the meeting, including such matters as the regulation of
the manner of voting and the conduct of business. The date and time of the
opening and closing of the polls for each matter upon which the stockholders
will vote at the meeting shall be announced at the meeting. The secretary of the
corporation shall act as secretary of all meetings of the stockholders, but in
the absence of the secretary at any meeting of the stockholders, the chairman of
the meeting may appoint any person to act as secretary of the meeting.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.16 INSPECTORS OF ELECTION
The corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
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Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine and certify the result; and
(g) do any other acts that may be proper to conduct the election
or vote with fairness to all stockholders.
2.17 INSPECTORS OF ELECTION AND PROCEDURES FOR COUNTING WRITTEN
CONSENTS
Within three (3) business days after receipt of the earliest dated
consent delivered to the corporation in the manner provided in Section 228(c) of
the General Corporation Law of Delaware or the determination by the board of
directors of the corporation that the corporation should seek corporate action
by written consent, as the case may be, the secretary may, but is not required
to, engage nationally recognized independent inspectors of elections for the
purpose of performing a ministerial review of the validity of the consents and
revocations. The cost of retaining inspectors of election shall be borne by the
corporation.
Consents and revocations shall be delivered to the inspectors upon
receipt by the corporation, the stockholder or stockholders soliciting consents
or soliciting revocations in opposition to action by consent proposed by the
corporation (the "Soliciting Stockholders") or their proxy solicitors or other
designated agents. As soon as consents and revocations are received, the
inspectors shall review the consents and revocations and shall maintain a count
of the number of valid and unrevoked consents. The inspectors shall keep such
count confidential and shall not reveal the count to the corporation, the
Soliciting Stockholders or their representatives or any other person or entity.
As soon as practicable after the earlier of (i) sixty (60) days after the date
of the earliest dated consent delivered to the corporation in the manner
provided in Section 228(c) of the General Corporation Law of Delaware or (ii) a
written request therefor by the corporation or the Soliciting Stockholders
(whichever is soliciting consents) (which request, except in the case of
corporate action by written consent taken pursuant to the solicitations of not
more than ten (10) persons, may be made no earlier
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than after such reasonable amount of time after the commencement date of the
applicable solicitation of consents as is necessary to permit the inspectors to
commence and organize their count, but in no event less than five (5) days after
such commencement date), notice of which request shall be given to the party
opposing the solicitation of consents, if any, which request shall state that
the corporation or Soliciting Stockholders, as the case may be, have a good
faith belief that the requisite number of valid and unrevoked consents to
authorize or take the action specified in the consents has been received in
accordance with these bylaws, the inspectors shall issue a preliminary report to
the corporation and the Soliciting Stockholders stating: (i) the number of valid
consents; (ii) the number of valid revocations; (iii) the number of valid and
unrevoked consents; (iv) the number of invalid consents; (v) the number of
invalid revocations; and (vi) whether, based on their preliminary count, the
requisite number of valid and unrevoked consents has been obtained to authorize
or take the action specified in the consents.
Unless the corporation and the Soliciting Stockholders shall agree in
writing to a shorter or longer period, the corporation and the Soliciting
Stockholders shall have 48 hours to review the consents and revocations and to
advise the inspectors and the opposing party in writing as to whether they
intend to challenge the preliminary report of the inspectors. If no written
notice of an intention to challenge the preliminary report is received within 48
hours after the inspectors' issuance of the preliminary report, the inspectors
shall issue to the corporation and the Soliciting Stockholders their final
report containing the information from the inspectors' determination with
respect to whether the requisite number of valid and unrevoked consents was
obtained to authorize and take the action specified in the consents. If the
corporation or the Soliciting Stockholders issue written notice of an intention
to challenge the inspectors' preliminary report within 48 hours after the
issuance of that report, a challenge session shall be scheduled by the
inspectors as promptly as practicable. A transcript of the challenge session
shall be recorded by a certified court reporter. Following completion of the
challenge session, the inspectors shall as promptly as practicable issue their
final report to the corporation and the Soliciting Stockholders, which report
shall contain the information included in the preliminary report, plus all
changes made to the vote totals as a result of the challenge and a certification
of whether the requisite number of valid and unrevoked consents was obtained to
authorize or take the action specified in the consents. A copy of the final
report of the inspectors shall be included in the book in which the proceedings
of meetings of stockholders are recorded.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be
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managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall be not less than six (6) nor more than ten
(10). The exact number of directors shall be eight (8) until changed, within the
limits specified above, by a bylaw amending this Section 3.2, duly adopted by
the board of directors or by the stockholders, or by a duly adopted amendment to
the certificate of incorporation. No reduction of the authorized number of
directors shall have the effect of removing any director before that director's
term of office expires. If for any cause, the directors shall not have been
elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected and until a successor
has been elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholders' meeting called and held
in accordance with the General Corporation Law of Delaware.
Effective upon the effective date of the registration of any class of
securities of the corporation pursuant to the requirements of the Exchange Act
(the "Effective Date"), the directors of the corporation shall be divided into
three classes as nearly equal in size as is practicable, hereby designated Class
I, Class II and Class III. The term of office of the initial Class I directors
shall expire at the first regularly-scheduled annual meeting of the stockholders
following the Effective Date, the term of office of the initial Class II
directors shall expire at the second annual meeting of the stockholders
following the Effective Date and the term of office of the initial Class III
directors shall expire at the third annual meeting of the stockholders following
the Effective Date. At each annual meeting of stockholders, commencing with the
first regularly-scheduled annual meeting of stockholders following the Effective
Date, each of the successors elected to replace the directors of a Class whose
term shall have expired at such annual meeting shall be elected to hold office
until the third annual meeting next succeeding his or her election and until his
or her respective successor shall have been duly elected and qualified. If the
number of directors is hereafter changed, any newly created directorships or
decrease in directorships shall be so apportioned among the classes as to make
all classes as nearly equal in number as is practicable, provided that no
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Directors need not be stockholders unless so required by the certificate
of incorporation or these bylaws, wherein other qualifications for directors may
be prescribed.
Elections of directors need not be by written ballot.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, only
a majority of the board of directors then in office, including those who have so
resigned (until the effective date of such resignation), shall have the power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled only by a majority of the
directors elected by such class or classes or series thereof then in office, or
by a sole remaining director so elected. In the event that no directors elected
by such class or classes of stock or series remain, the majority of the other
directors then in office, although less than a quorum, or a sole remaining
director may fill such vacancy or vacancies.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
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holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors. Whenever the holders of any class or series are entitled to
elect one or more directors by the certificate of incorporation, this Section
3.5 shall apply, in respect to the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and
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place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors. If
any regular meeting day shall fall on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least two
(2) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or telecopy or to the telegraph company at
least four (4) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. If
the meeting is to be held at the principal executive office of the corporation,
the notice need not specify the place of the meeting. Moreover, a notice of
special meeting need not state the purpose of such meeting, and, unless
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.
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3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers shall be filed with the corporate
records or made part of the minutes of the meeting. A waiver of notice need not
specify the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the time
of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of
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the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
3.18 CONDUCT OF BUSINESS
At any meeting of the board of directors, business shall be transacted
in such order and manner as the board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of one or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of
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shares of any series of stock or authorize the increase or decrease of the
shares of any series), (ii) adopt an agreement of merger or consolidation under
Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend
to the stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution or (v) amend the
bylaws of the corporation; and, unless the board resolution establishing the
committee, a supplemental resolution of the board of directors, the bylaws or
the certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, a chief executive
officer, a chief operating officer, a chief technical officer,
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one or more vice presidents (however denominated), one or more assistant
secretaries, a treasurer, one or more assistant treasurers and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.
5.2 APPOINTMENT OF OFFICERS
The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12 of
these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any contract
of employment, any Corporate Officer may be removed, either with or without
cause, by the board of directors at any regular or special meeting of the board
or, except in case of a Corporate Officer chosen by the board of directors, by
any Corporate Officer upon whom such power of removal may be conferred by the
board of directors.
Any Corporate Officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
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Any Administrative Officer designated and appointed by the president may
be removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He or
she shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
The president shall, without limitation, have the authority to execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no
chairman of the board, the vice presidents, if any, in order of their rank as
fixed by the board of directors or, if not ranked, a vice president designated
by the board of directors, shall perform all the duties of the president and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
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5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to
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act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise or
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(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
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7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.4 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the applicable
resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other
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evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
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The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
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8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
8.9 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.10 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.11 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.12 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.13 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
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<PAGE> 32
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
8.14 NOTICES
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery, by mail, postage paid, or by facsimile transmission. Any such notice
shall be addressed to such stockholder, director, officer, employee or agent at
his last known address as it appears on the books of the corporation. The time
when such notice shall be deemed received, if hand delivered, or dispatched, if
sent by mail or facsimile, transmission, shall be the time of the giving of the
notice.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
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<PAGE> 33
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
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<PAGE> 34
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE> 35
CERTIFICATE OF ADOPTION OF BYLAWS
OF
WINK COMMUNICATIONS, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation as
the Incorporator of Wink Communications, Inc. hereby adopts the foregoing
bylaws, comprising thirty-one (31) pages, as the Bylaws of the corporation.
Executed this 30th day of April, 1998.
/s/ Paritosh K. Choksi
----------------------------------------
Paritosh K. Choksi
Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Wink Communications, Inc. and that the foregoing Bylaws,
comprising thirty-one (31) pages, were adopted as the Bylaws of the corporation
on April 30th, 1998, by the person appointed in the Certificate of Incorporation
as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 30th
day of April, 1998.
/s/ Paritosh K. Choksi
----------------------------------------
Paritosh K. Choksi
Secretary
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<PAGE> 1
EXHIBIT 4.1
Number Shares
WCI
[WINK LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN RIDGEFIELD PARK, N.J.
CUSIP 974168 10 6
SEE REVERSE FOR CERTAIN DEFINITIONS AND A
STATEMENT AS TO THE RIGHTS, PREFERENCES,
PRIVILEGES AND LIMITATIONS OF SHARES
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $0.001 PAR VALUE, OF
WINK COMMUNICATIONS, INC.
transferable on the books of the Corporation by the holder hereof in person or
by a duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
AUTHORIZED SIGNATURE
/s/ Howard L. Schrott /s/ Mary Agnes Wilderotter
SPECIMEN SPECIMEN
CHIEF FINANCIAL OFFICER PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
EXHIBIT 4.1
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -.............Custodian............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not to tenants Act ..............................
in common (State)
UNIF TRF MIN ACT -........Custodian (until age......)
(Cust)
...........under Uniform Transfers
(Minor)
to Minors Act.....................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------------
X
---------------------------------------
X
---------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By:
---------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.2
WINK COMMUNICATIONS, INC.
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AGREEMENT is made as of the 30th day of June, 1999, among Wink
Communications, Inc., a California corporation (the "Company") and each of the
individuals and entities listed on Exhibit A hereto, as amended from time to
time to include additional Series D Investors (as hereinafter defined) (referred
to herein individually as "Investor" and collectively as "Investors").
RECITALS
WHEREAS, pursuant to the First Amended and Restated Registration Rights
Agreement dated as of December 21, 1995, the Second Amended and Restated
Investor Rights Agreement dated as of April 17, 1997 and the Third Amended and
Restated Registration Rights Agreement dated as of June 18, 1997, as amended,
(collectively, the "Prior Registration Rights Agreement") among the Company and
certain of the Investors indicated on Exhibit A attached hereto ("Prior
Investors"), the Company granted the Prior Investors certain rights regarding
registration of the Company's securities under the Securities Act of 1933, as
amended ("Registration Rights"); and
WHEREAS, pursuant to the Series A, Series B and Series C Preferred Stock
Purchase Agreements, as amended, (the "Prior Purchase Agreements"), among the
Company and the Prior Investors, the Company granted the Prior Investors certain
rights regarding financial information, records inspection and rights of first
refusal (collectively with the Registration Rights referred to herein as
"Rights"); and
WHEREAS, the Prior Registration Rights Agreement and the Prior Purchase
Agreements set forth all the Rights of the Prior Investors; and
WHEREAS, the purchasers of Series D Preferred Stock (the "Series D
Investors"), in connection with their purchase of shares of the Company's Series
D Preferred Stock pursuant to the Series D Preferred Stock Purchase Agreement
dated as of June 30, 1999, and as may subsequently be amended (the "Series D
Agreement"), desire to obtain such Rights granted pursuant to the Prior
Registration Rights Agreement and the Prior Purchase Agreements; and
WHEREAS, the Company and the Prior Investors, to induce the Series D
Investors to purchase the Series D Preferred Stock, desire to grant the Series D
Investors and other Investors the Rights granted pursuant to the Prior
Registration Rights Agreement and the Prior Purchase Agreements.
NOW, THEREFORE, in consideration of the above and of the mutual promises
set forth herein, the parties hereto agree that, subject to the closing of the
purchase of Series D Preferred
<PAGE> 2
Stock by the Series D Investors pursuant to the Series D Agreement: (i) all
Rights set forth in the Prior Registration Rights Agreement and the Prior
Purchase Agreements are terminated and of no further force and effect; (ii) the
Company hereby grants to the Prior Investors and the Series D Investors the
rights set forth below; and (iii) the Company and the Prior Investors, to induce
the Series D Investors to invest in the Company, hereby accept and agree to the
termination of all prior Rights and accept and agree to be bound by the terms of
this Agreement.
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS. Hereafter, in this Agreement the following
terms shall have the following respective meanings:
"Benchmark Warrants" shall mean the warrants to purchase an
aggregate of 500,000 shares of Common Stock at a price of $6.00 per share issued
to Benchmark Capital Partners, L.P. and Benchmark Founders Fund, L.P. on
July 31, 1996.
"CBS Warrant" shall mean the warrant to purchase up to 125,000
shares of Common Stock (subject to adjustments) at a price of $12.00 per share
(subject to adjustments) issued or to be issued to CBS Corporation.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Conversion Stock" shall mean the Common Stock issued or
issuable upon conversion of the Preferred.
"Disney Warrant" shall mean the warrant to purchase up to
200,000 shares of Common Stock (subject to adjustments) at a price of $12.00 per
share (subject to adjustments) issued or to be issued to The Walt Disney
Company.
"EGI Warrants" shall mean (i) the warrant to purchase up to
75,000 shares of Common Stock at a price of $0.80 per share issued to WC
Investors, LLC (now doing business as "EGI-Wink Investors, LLC") and (ii) the
warrant to purchase up to 50,000 shares of Common Stock at a price of $0.80 per
share issued to EGI-Wink Investors, LLC.
"GECC Warrant" shall mean (i) the warrant or warrants to
purchase an aggregate of up to 900,000 shares of Common Stock (subject to
adjustments) at a price of $8.00 per share (subject to adjustments) issued or to
be issued to General Electric Capital Corporation or its affiliate, including
NBC, Inc. ("NBC") and (ii) the warrant or warrants to purchase an aggregate of
up to 25,000 shares of Common Stock (subject to adjustments) at a price of $9.00
per share (subject to adjustments) issued or to be issued to General Electric
Capital Corporation.
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<PAGE> 3
"Holder" shall mean any Purchaser holding Registrable
Securities, or securities convertible or exercisable for Registrable Securities,
other than the Lender Warrant and Registrable Securities issuable upon exercise
thereof, and any person holding Registrable Securities, or securities
convertible or exercisable for Registrable Securities, other than the Lender
Warrant and Registrable Securities issuable upon exercise thereof, to whom the
rights under this Agreement have been transferred in accordance with Section
2.14 hereof, plus, for purposes of Section 2 (other than Sections 2.4, 2.6 and
2.7) and Section 5, the holder of the Lender Warrant or the Registrable
Securities issued upon exercise thereof.
"Initiating Holders" shall mean any Purchasers or transferees of
Purchasers under Section 2.14 hereof who in the aggregate are Holders of greater
than 25% of the Registrable Securities other than the Registrable Securities
issued upon exercise of the Lender Warrant.
"Lender Warrant" shall mean the warrant to purchase 17,500
shares of Series B Preferred Stock at a price of $4.00 per share issued to
Venture Lending and Leasing, Inc. on September 18, 1996.
"Microsoft Warrant" shall mean the warrant to purchase up to
500,000 shares of Common Stock (subject to adjustments) at a price of $12.00 per
share (subject to adjustments) issued or to be issued to Microsoft Corporation.
"Preferred" shall mean the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the
Company.
"Purchaser" shall mean each Prior Investor and each Series D
Investor.
"Purchasers" shall mean all Prior Investors and all Series D
Investors, referred to collectively.
"Registrable Securities" means (i) the Conversion Stock, (ii)
any Common Stock of the Company issued or issuable in respect of the Conversion
Stock or other securities issued or issuable pursuant to the conversion of the
Preferred upon any stock split, stock dividend, recapitalization, or similar
event (a "Recapitalization"), or any Common Stock otherwise issued or issuable
with respect to the Preferred, (iii) with respect to Section 2 herein (other
than Sections 2.4, 2.6 and 2.7), the shares of Common Stock of the Company
issued or issuable upon conversion of the Preferred Stock issued or issuable
upon exercise of the Lender Warrant, and (iv) the Common Stock of the Company
issued or issuable upon exercise of the Benchmark Warrants, the EGI Warrants,
the CBS Warrants, the Disney Warrant, the GECC Warrant, the Microsoft Warrant,
the Thomson Warrant and the Vulcan Warrant; provided, however, that shares of
Common Stock or other securities shall be treated as Registrable Securities only
if and so long as they have not been (A) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction,
whether in a registered offering, Rule 144 transaction or otherwise, or (B) sold
or are available for sale, in the written opinion of counsel to the Company, in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act, such that all transfer
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<PAGE> 4
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale.
The terms "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 the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 2.4,
2.5 and 2.6 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, 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) and the reasonable fees and disbursements
of one counsel for all Holders in the event of three exercises of a requested
registration provided for in Section 2.4 hereof, in the event of all Company
registrations pursuant to Section 2.5 hereof, and for all Company registrations
on Form S-3 pursuant to Section 2.6 hereof.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 2.2 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth above, all reasonable fees
and disbursements of counsel for any Holder.
"Thomson Warrant" shall mean the warrant or warrants to purchase
an aggregate of up to 50,000 shares of Common Stock (subject to adjustments) at
a price of $12.00 per share (subject to adjustments) issued or to be issued to
Thomson Consumer Electronics, Inc.; provided, however, that all rights granted
hereunder with respect to the Thomson Warrants, and the securities issuable upon
exercise thereof, shall be effective only after and to the extent that such
warrants are actually issued.
"Vulcan Warrant" shall mean the warrant or warrants to purchase
an aggregate of up to 250,000 shares of Common Stock (subject to adjustments) at
a price of either $12.00 and $16.00 per share (subject to adjustments) issued or
to be issued to Vulcan Ventures Incorporated; provided, however, that all rights
granted hereunder with respect to the Vulcan Warrants, and the securities
issuable upon exercise thereof, shall be effective only after and to the extent
that such warrants are actually issued.
SECTION 2
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<PAGE> 5
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
2.1 RESTRICTIONS ON TRANSFERABILITY. The Preferred and the
Conversion Stock shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Section 2, which conditions are intended to
ensure compliance with the provisions of the Securities Act. Each Purchaser will
cause any proposed purchaser, assignee, transferee, or pledgee of the Preferred
or Conversion Stock held by a Purchaser to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 2.
2.2 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred, (ii) the Conversion Stock and (iii) any other securities issued in
respect of the Preferred or the Conversion Stock upon any Recapitalization,
merger, consolidation or similar event shall (unless otherwise permitted by the
provisions of Section 2.3 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
Each Purchaser and Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred or the
Common Stock in order to implement the restrictions on transfer established in
this Section 2.
2.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by any
of the Purchasers to any of its partners or members, or retired partners or
members, or to the estate of any of its partners or members or retired partners
or members, (iii) transfers to a Holder's family members or to trusts for the
benefit of a Holder or a Holder's family members, or (iv) in the case of General
Electric Capital Corporation ("GECC") or NBC, transfers to one or more
affiliates, within the meaning of Rule 501(b) under the Securities Act, of GECC
or NBC otherwise in compliance with this Agreement), unless there is in effect a
registration statement under the Securities Act covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder's
intention to
-5-
<PAGE> 6
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale, assignment
or pledge in sufficient detail, and shall be accompanied, at such Holder's
expense by either (i) an unqualified written opinion of legal counsel, who shall
be and whose legal opinion shall be reasonably satisfactory to the Company,
addressed to the Company, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the Commission to the effect that the
transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the Holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such Holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
2.4 REQUESTED REGISTRATION.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than
1,000,000 shares (appropriately adjusted for Recapitalizations) of Registrable
Securities, or any lesser number of shares if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $20,000,000,
the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after mailing
of such written notice by the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 2.4:
(A) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
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<PAGE> 7
(B) Prior to December 31, 20___;
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(D) After the Company has effected three
such registrations pursuant to this Section 2.4(a), and such registrations have
been declared or ordered effective; or
(E) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed in
the near future, in which case the Company's obligation to use its best efforts
to register, qualify or comply under this Section 2.4 shall be deferred for a
period not to exceed one hundred twenty (120) days from the date of receipt of
written request from the Initiating Holders; provided that the Company may not
exercise this right more than once in any twelve-month period.
Subject to the foregoing clauses (A) through (E), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant
to Section 2.4 is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the notice given pursuant to
Section 2.4(a)(i). In such event, the right of any Holder to registration
pursuant to Section 2.4 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 2.4, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein. The Company shall (together with
all Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders, but subject to the Company's reasonable approval.
Notwithstanding any other provision of this Section 2.4, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement; 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; provided
further, however, that if the number of shares of Registrable Securities to be
included in such underwriting or registration is reduced to less than 75% of the
aggregate number of shares of
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Registrable Securities originally requested for registration pursuant to Section
2.4(a), then such registration or underwriting shall not be counted as one of
the three permitted requests for registration under Section 2.4(a)(D). No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest one hundred (100) shares. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the managing underwriter
and the Initiating Holders. The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from registration and such Registrable
Securities shall not be transferred in a public distribution prior to one
hundred eighty (180) days after the effective date of such registration, or such
other shorter period of time as the underwriters may require.
2.5 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after mailing of such written notice
by the Company, by any Holder.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.5(a)(i). In such event, the right of any Holder to
registration pursuant to Section 2.5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.5, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration (or exclude them entirely). The
Company shall so advise all Holders and other holders distributing their
securities through such underwriting, and the number of shares of Registrable
Securities that may be included in the registration and underwriting (after
inclusion of all shares to be included by the Company) shall be allocated among
all Holders requesting inclusion of Registrable Securities in such registration
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration
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<PAGE> 9
statement; provided, however, that the right of the underwriters to exclude
Registrable Securities from the registration and underwriting as described above
shall be restricted such that (i) the number of Registrable Securities included
in any such registration may not be reduced below twenty-five percent (25%) of
the shares included in the registration, except for a registration relating to
the Company's initial public offering from which all Registrable Securities may
be excluded; and (ii) all shares that are not Registrable Securities and all
shares that are held by persons who are employees or directors of the Company
(or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Securities are so excluded.
To facilitate the allocation of shares in accordance with the above provisions,
the Company may round the number of shares allocated to any Holder or holder to
the nearest one hundred (100) shares. If any Holder or holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, and
shall not be transferred in a public distribution prior to one hundred eighty
(180) days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.5 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
2.6 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate offering price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
Section 2.6 in any six (6) month period or in excess of three registrations
under this Section 2.6. The substantive provisions of Section 2.4(b) shall be
applicable to each registration initiated under this Section 2.6.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.6: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act; (ii) if the Company, within
ten (10) days of the receipt of the request of the initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities); (iii) during
the period starting with the date sixty (60) days prior to the
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<PAGE> 10
Company's estimated date of filing of, and ending on the date six (6) months
immediately following, the effective date of any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective; or (iv) if the Company
shall furnish to such Holder a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its shareholders for
registration statements to be filed in the near future, in which case the
Company's obligation to use its best efforts to file a registration statement
shall be deferred for a period not to exceed one hundred twenty (120) days from
the receipt of the request to file such registration by such Holder.
2.7 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless such new registration
rights, including standoff obligations, are subordinate to the rights of the
Holders hereunder and would not reduce the amount of Registrable Securities of
the Holders which may be included in a registration.
2.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with (i) three registrations pursuant to Section 2.4, (ii) all
registrations pursuant to Section 2.5, and (iii) all registrations pursuant to
Section 2.6 shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other Registration Expenses shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered.
2.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the Registration
Statement has been completed;
(b) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(c) Use its 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;
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<PAGE> 11
(d) 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 underwriters of such offering;
(e) 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.
2.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, members, accountants, legal counsel and agents,
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any final registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, accountants, legal counsel and agents, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers, directors, partners, members, accountants, legal counsel and
agents, and each person controlling such Holder within the meaning of Section 15
of the
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<PAGE> 12
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any final registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however that the total
amount payable in indemnity by a Holder under this Section 2.10(b) shall not
exceed the net proceeds received by such Holder in the registered offering out
of which the obligation to indemnify under this Section 2.10(b) arises.
(c) Each party entitled to indemnification under this
Section 2.10 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action, in which case the Indemnifying Party shall be relieved of
its obligation under this Section 2.10 to the extent of such prejudice, and
provided further that the Indemnifying Party shall not assume the defense for
matters as to which there is a conflict of interest or separate and different
defenses. 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.
2.11 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant
to this Agreement, to the extent not earlier terminated by the terms hereof,
shall terminate as to any Holder at such time as such Holder is able to sell
publicly without registration all Registrable Securities then held by such
Holder, if any, within a ninety (90) day period pursuant to Rule 144 under the
Securities Act or a similar exemption.
2.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as
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<PAGE> 13
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 2.
2.13 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission that may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Purchaser owns any Restricted Securities,
to furnish to the Purchaser forthwith upon request (i) a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public) and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), (ii) a copy of the
most recent annual or quarterly report of the Company, and (iii) such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
2.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted Purchasers under Sections 2.4, 2.5 and 2.6 may be
assigned in connection with any transfer or assignment of Registrable Securities
by a Purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, (ii) such transferee agrees to be
bound hereby and (iii) either (A) such assignee or transferee is reasonably
acceptable to Purchaser and acquires at least 250,000 shares of Preferred and/or
Common Stock issued upon conversion thereof (appropriately adjusted for
Recapitalizations) or options, warrants or convertible securities exercisable or
exchangeable therefor, (B) such transferee is a family member of the Purchaser
or a trust for the benefit of the Purchaser or a family member of the Purchaser,
(C) if Purchaser is a partnership or limited liability company, such transferee
is (w) a general partner or member or retired general partner or member of
Purchaser, (x) such general partner or member or retired general partner's or
member's spouse or siblings or the lineal descendants or ancestors of such
general partner or member or retired partner or member or his spouse, (y) one or
more trusts established for the benefit of any of the foregoing individuals, or
(z) without limitation of the foregoing, with respect to WC Investors, LLC, such
transferee is Sam Zell, Sheli Z. Rosenberg, Rod F. Dammeyer, F. Philip Handy,
Thomas F. Gaffney and Robert P. Saltsman or the spouse or siblings or lineal
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<PAGE> 14
descendants or ancestors of any of the foregoing individuals or one or more
trusts established for the benefit of any of the foregoing individuals (all of
the individuals and trusts referred to in clauses (w), (x), (y) and (z) being
hereinafter referred to as "Partnership/LLC Transferees"), or (D) such
transferee is a corporation, partnership, or limited liability entity and in
such case, an affiliate (within the meaning of Rule 501(b) under the Securities
Act) of GECC or NBC.
2.15 STANDOFF AGREEMENT. Each Holder agrees in connection with the
Company's initial public offering of the Company's securities that, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to publicly sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any securities of the
Company in a public transaction (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration as may be requested by the
underwriters; provided, that the officers and directors of the Company who own
stock of the Company have also agreed to such restrictions.
SECTION 3
INFORMATION AND INSPECTION RIGHTS
3.1 FINANCIAL INFORMATION. The Company will mail the following
reports to each Purchaser for so long as such Purchaser is a holder of any
Shares of Preferred or Common Stock issued upon conversion of the Shares of
Preferred or of warrants or other convertible securities exercisable for or
convertible into shares of Preferred or Common Stock:
(i) As soon as practicable after the end of each fiscal
year, and in any event within ninety (90) days thereafter, consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of income and consolidated statements of cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year and the
budgeted figures for the fiscal year then reported, all in reasonable detail and
audited by independent public accountants selected by the Company.
(ii) As soon as practicable, and in any case within
forty-five (45) days after the end of each fiscal quarter of the Company (except
the last quarter of the Company's fiscal year), quarterly unaudited financial
statements, including an unaudited balance sheet, an unaudited statement of
income and an unaudited statement of cash flows, together with a comparison to
the Company's budget and a statement of the Chief Financial Officer of the
Company that such statements fairly present the consolidated financial position
and consolidated financial results of the Company for the fiscal quarter
covered, subject to appropriate year end adjustments; and
(iii) As soon as practicable and in any event no later than
thirty (30) days after the close of each fiscal year of the Company, an annual
operating budget, prepared on a monthly basis,
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for the next immediate fiscal year. The Company shall also furnish, within a
reasonable time of its preparation, amendments to such annual budget, if any.
3.2 INSPECTION RIGHTS. The Company shall permit each Purchaser
holding at least 250,000 shares of Preferred (or shares of Common Stock issued
upon conversion of the Preferred or any combination thereof or warrants or
convertible securities exercisable for or convertible into at least 250,000
shares of Preferred and/or Common Stock), at such Purchaser's expense, to visit
and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all on reasonable notice and at such reasonable times as may be
requested by such Purchaser. Shares held by a Purchaser and its Partnership/LLC
Transferees shall be aggregated for purposes of meeting the 250,000 minimum
share requirement in this Section 3.2; provided, however, that in the case of
such aggregation, the investor and all Partnership/LLC Transferees shall
together designate one representative to exercise inspection rights pursuant to
this Section 3.2.
3.3 RULE 144A INFORMATION. The Company will provide each Purchaser,
upon request and at such Purchaser's expense, with such reasonable written
information as may be required in order to permit such Purchaser to resell any
shares of the Company's stock pursuant to Rule 144A promulgated under the
Securities Act.
3.4 ASSIGNMENT OF RIGHTS. The rights granted pursuant to this
Section 3 and Section 4 may not be assigned or otherwise conveyed by any
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that any Purchaser may assign
to any transferee, except for a competitor of the Company (as the Company may
determine in its sole discretion), after giving notice to the Company, the
rights granted pursuant to this Section 3 and Section 4 provided that such
transferee agrees to be bound hereby and (i) acquires at least 250,000 shares of
Preferred and/or Common Stock issued upon conversion of the shares of Preferred
(appropriately adjusted for stock splits, stock dividends, recapitalizations and
the like) (or shares of Common Stock issued upon conversion of the Preferred or
any combination thereof or warrants or convertible securities exercisable for or
convertible into at least 250,000 shares of Preferred and/or Common Stock), (ii)
is Partnership/LLC Transferee of a Purchaser, (iii) is another Purchaser or (iv)
in the case of GECC or NBC, is an affiliate within the meaning of Rule 501(b) of
the Securities Act of the transferring Purchaser.
3.5 TERMINATION OF RIGHTS. The rights set forth in this Section 3
shall terminate and be of no further force or effect at the earlier of (i) the
closing of an underwritten public offering pursuant to an effective registration
statement under the Securities Act, covering the offer and sale of Common Stock
for the account of the Company to the public or (ii) such time as the Company is
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
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SECTION 4
RIGHT OF FIRST REFUSAL
4.1 GENERAL. Each Purchaser, and any party to whom such Purchaser's
rights under this Section 4 have been duly assigned in accordance with Section
3.4 (each such Purchaser or assignee being hereinafter referred to as a "Rights
Holder"), who meets the threshold requirements of Section 4.5(iii) hereof shall
have a right of first refusal to purchase such Rights Holder's Pro Rata Share
(as defined below) of all (or any part) of any "New Securities" (as defined in
Section 4.2) that the Company may from time to time issue after the date of this
Agreement. A Rights Holder's "Pro Rata Share" for purposes of this right of
first refusal is the ratio of (a) the number of shares of Common Stock then held
by such Rights Holder or issuable upon conversion of any Preferred Stock then
held by such Rights Holder or upon exercise of the Benchmark Warrants, the CBS
Warrant, the Disney Warrant, the GECC Warrant, the Microsoft Warrant, the
Thomson Warrant, the Vulcan Warrant or the EGI Warrants to the extent any such
warrant(s) is held by such Rights Holder to (b) the total number of shares of
Common Stock outstanding or issuable upon conversion of any Preferred Stock or
upon exercise of the Benchmark Warrants, the CBS Warrant, the Disney Warrant,
the GECC Warrant, the Microsoft Warrant, the Thomson Warrant, the Vulcan Warrant
and the EGI Warrants. Notwithstanding the foregoing, each Rights Holder's "Pro
Rata Share" shall be increased in proportion to the maximum amount by which any
single Rights Holder proposes to purchase more than its Pro Rata Share of the
New Securities, calculated without regard to this sentence; provided, however,
that if the total number of New Securities to be sold is insufficient to permit
satisfaction of the so increased Pro Rata Shares of all Rights Holders, then
each Rights Holder's Pro Rata Share shall be increased only to the extent that
there are sufficient New Securities, and no Rights Holder shall be permitted to
purchase more than its Pro Rata Share as so increased.
4.2 NEW SECURITIES. "New Securities" shall mean any Common Stock or
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
the term "New Securities" does not include:
(i) any shares of the Company's Common Stock or other
securities issued or issuable to employees, officers, directors, contractors,
advisors, consultants, lessors, vendors, lenders, customers or strategic
partners of the Company pursuant to agreements or plans approved by the Board of
Directors of the Company;
(ii) any securities issuable upon conversion of or with
respect to any then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock of the
Company or Common Stock or other securities issuable upon conversion thereof;
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<PAGE> 17
(iii) any options, warrants or rights to purchase any
securities of the Company outstanding on the date of this Agreement
(collectively, "Derivative Securities") and any securities issuable upon the
exercise or conversion of any Derivative Securities;
(iv) shares of the Company's Common Stock or Preferred Stock
issued in connection with any stock split, stock dividend or recapitalization in
which each Right Holder's Pro Rata Share is not reduced;
(v) securities offered by the Company to the public pursuant
to a registration statement filed under the Securities Act;
(vi) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity;
(vii) all shares of the Company's Series C Preferred Stock
sold pursuant to the Series C Agreement, as it may be amended from time to time
in accordance therewith and the Articles of Incorporation of the Company as in
effect on the date hereof; or
(viii) all shares of the Company's Series D Preferred Stock
sold pursuant to the Series D Agreement, as it may be amended from time to time
in accordance therewith, and the Articles of Incorporation of the Company, as
they may be amended from time to time.
4.3 PROCEDURES. In the event that the Company proposes to undertake
an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the "Notice"), describing the
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Rights Holder shall have ten
(10) days from the date of the sending of any such Notice to agree in writing to
purchase such Rights Holder's Pro Rata Share of such New Securities for the
price and upon the general terms specified in the Notice by giving written
notice of the Company and stating therein the quantity of New Securities to be
purchased (not to exceed such Rights Holder's Pro Rata Share). If any Rights
Holder fails to so agree in writing within such ten (10) day period to purchase
such Rights Holder's full Pro Rata Share of an offering of New Securities (a
"Nonpurchasing Holder"), then such Nonpurchasing Holder shall forfeit the right
hereunder to purchase that part of his Pro Rata Share of such New Securities
that he did not so agree to purchase.
4.4 FAILURE TO EXERCISE. In the event that the Rights Holders fail
to exercise in full the right of first refusal within such ten (10) day period,
then the Company shall have 120 days thereafter to sell the New Securities with
respect to which the Rights Holders' rights of first refusal hereunder were not
exercised, at a price and upon general terms not materially more favorable to
the purchasers thereof than specified in the Company's Notice to the Rights
Holders (provided that if the Company actually sells the New Securities at a
price or upon general terms more favorable to the
-17-
<PAGE> 18
purchasers thereof, the Company shall retroactively adjust the price and terms
of the New Securities sold to Rights Holders pursuant to the exercise of their
rights under this Section 4.4 to be such more favorable terms). In the event
that the Company has not issued and sold the New Securities within such 120 day
period, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Rights Holders pursuant
to this Section 4.
4.5 TERMINATION OF RIGHTS. The rights set forth in this Section 4
shall terminate and be of no further force or effect at the earlier of (i) the
closing of an underwritten public offering pursuant to an effective registration
statement under the Securities Act, covering the offer and sale of Common Stock
for the account of the Company to the public; (ii) such time as the Company is
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended; or (iii) with respect to a particular Rights
Holder, at such time as such Rights Holder does not own at least 250,000 shares
of Preferred and/or Common Stock issued upon conversion of the shares of
Preferred and/or warrants or convertible securities exercisable for or
convertible into at least 250,000 shares of Preferred and/or Common Stock
(appropriately adjusted for stock split, stock dividend, stock splits, stock
dividends, recapitalizations and the like). For purposes of calculating the
250,000 minimum share requirement in this Section 4.5(iii), shares held by an
investor and its Partnership/LLC Transferee shall be aggregated.
SECTION 5
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed and construed in
all respects in accordance with the laws of the State of California as applied
to agreements made and performed in California by residents of the State of
California.
5.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes 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
party in any manner by any warranties, representations or covenants except as
specifically set forth herein and therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of a majority of the Registrable Securities may,
with the Company's prior written consent, waive, modify or amend on behalf of
all holders, any provisions hereof, except that any such waiver, modification or
amendment which affects a Purchaser in a manner or to an extent more adverse
than any other Purchaser shall require the prior written consent of such
Purchaser.
5.3 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, at such Purchaser's address set forth in
Exhibit A, or at such other address as such Purchaser shall have furnished to
the Company in writing, (b) if to any other Holder, at such address as such
Holder shall have furnished the Company
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<PAGE> 19
in writing, or until any such Holder so furnishes an address to the Company,
then to and at the address of the last Holder of such shares who has so
furnished an address to the Company, or (c) if to the Company, at the Company's
principal place of business, addressed to the attention of the Corporate
Secretary, or at such other address as the Company shall have furnished to the
Purchasers. Each such notice or other communication shall, unless otherwise
expressly provided herein, be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
5.4 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
5.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
5.7 PRIOR REGISTRATION RIGHTS AGREEMENT. Upon both (i) the execution
of this Agreement by Investors holding (x) a majority of the Registrable
Securities outstanding or deemed to be outstanding immediately prior to the
Closing under the Series D Agreement, and (y) a majority of the Preferred Stock
and Conversion Stock outstanding or deemed to be outstanding immediately prior
to the Closing under the Series D Agreement, and (ii) the initial sale by the
Company of any shares of Series D Preferred Stock, this Agreement shall
supersede and replace the Prior Registration Rights Agreement, which shall be
terminated and cease to have any further force or effect. This Agreement amends
and restates in its entirety that certain Third Amended and Restated Investor
Rights Agreement dated as of June 18, 1997, as amended.
5.8 CONSENT AND WAIVER. By execution of this Agreement, each Prior
Investor hereby (a) consents to the issuance of the Series D Preferred Stock as
contemplated by the Series D Agreement and proposed form of Amended and Restated
Articles of Incorporation attached thereto, and (b) waives its rights of first
refusal (and any related notice rights) with respect to the Company's offer and
sale of Series D Preferred Stock under the Series D Agreement.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
WINK COMMUNICATIONS, INC.
By:
----------------------------------
Its:
----------------------------------
INVESTOR
- -------------------------------------
By:
----------------------------------
Its:
----------------------------------
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 21
THE GOLDMAN SACHS GROUP, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 22
EXHIBIT A
SCHEDULE OF HOLDERS
<TABLE>
<CAPTION>
Name and Address Registrable Securities
- ---------------- ----------------------
<S> <C>
SERIES A INVESTOR
Toshiba Corporation 1,250,000 shares of Series A Preferred
Attn: Hidetaka Yamamoto
Deputy General Manager
Business Planning
Advanced-I Group
1-1, Shibaura 1-Chome,
Minato-ku, Tokyo 105-01,
JAPAN
SERIES B INVESTOR
General Instrument Corporation 600,000 shares of Series B Preferred
2200 Byberry Road
Hatboro, PA 19040
Attn: Dan Moloney, Vice President
Scientific-Atlanta, Inc. 600,000 shares of Series B Preferred
1 Technology Parkway
Atlanta, GA 30092-2967
Attn: General Counsel
Nippon Telegraph and Telephone 600,000 shares of Series B Preferred
Corporation
19-2 Nishi-shinjuku 3-chome
Shinjuku-ku, Tokyo 163-19
JAPAN
Benchmark Capital Partners, L.P. 335,880 shares of Series B Preferred
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Attention: Bruce Dunlevie
Benchmark Founders' Fund, L.P. 39,120 shares of Series B Preferred
2480 Sand Hill Road, Suite 200
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Name and Address Registrable Securities
- ---------------- ----------------------
<S> <C>
Menlo Park, CA 94025
Attention: Bruce Dunlevie
Jordan J. Breslow 2,500 shares of Series B Preferred
Geoworks
960 Atlantic Ave.
Alameda, CA 94501
Deborah G. Dawson 2,500 shares of Series B Preferred Stock
2355 Polk Street, Apt. 403
San Francisco, CA 94109
Christopher T. Del Sesto 5,000 shares of Series B Preferred Stock
44 Seaview Ave.
Cranston, RI 02905-3616
James H. Goldberger 2,500 shares of Series B Preferred Stock
Geoworks
960 Atlantic Avenue
Alameda, CA 94501
Ira M. Hammer 2,500 shares of Series B Preferred Stock
100 East Bellevue, Apt. # 14B
Chicago, IL 60611
Gary A. Jensen 2,500 shares of Series B Preferred Stock
722 Santa Clara Ave. #E
Alameda, CA 94501
Paul Kagan 2,500 shares of Series B Preferred Stock
126 Clock Tower Place
Carmel, CA 93923
Jonathan E. Kaplan 2,500 shares of Series B Preferred Stock
Geoworks
960 Atlantic Avenue
Alameda, CA 94501
Arend Lijphart 2,500 shares of Series B Preferred Stock
4276 Caminito Terviso
San Diego, CA 92122
Leland J. Llevano 2,500 shares of Series B Preferred Stock
Geoworks
960 Atlantic Avenue
</TABLE>
-2-
<PAGE> 24
<TABLE>
<CAPTION>
Name and Address Registrable Securities
- ---------------- ----------------------
<S> <C>
Alameda, CA 94501
Shininchi Makino 2,500 shares of Series B Preferred Stock
Toshiba Corporation
Advanced-I Group
1-1, Shibaura 1-Chome,
Minato-ku, Tokyo 105-01,
JAPAN
Mayer Family Partners, a California 2,500 shares of Series B Preferred Stock
Limited Partnership
1342 Reliez Valley Road
Lafayette, CA 94549
Attention: Gordon Mayer
Sophia Mityagin 2,500 shares of Series B Preferred Stock
3538 Larochelle Drive
Columbus, OH 43221
David W. Scarborough 2,500 shares of Series B Preferred Stock
Geoworks
960 Atlantic Avenue
Alameda, CA 94501
Sadao Shirane 2,500 shares of Series B Preferred Stock
Toshiba Corporation
Advanced-I Group
1-1, Shibaura 1-Chome,
Minato-ku, Tokyo 105-01,
JAPAN
Clive G. Smith 5,000 shares of Series B Preferred Stock
P.O. Box 380790
Cambridge, MA 02238
Bobbie Valladon 2,500 shares of Series B Preferred Stock
Geoworks
960 Atlantic Ave.
Alameda, CA 94501
WS Investment Company 96A 8,750 shares of Series B Preferred Stock
Arthur F. Schneiderman
Herbert P. Fockler
650 Page Mill Road
Palo Alto, CA 94304
</TABLE>
-3-
<PAGE> 25
<TABLE>
<CAPTION>
Name and Address Registrable Securities
- ---------------- ----------------------
<S> <C>
Hidetaka Yamamoto 2,500 shares of Series B Preferred Stock
Toshiba Corporation
Advanced-I Group
1-1, Shibaura 1-Chome,
Minato-ku, Tokyo 105-01,
JAPAN
General Instrument Corporation 550,000 shares of Common Stock in the event
181 West Madison, 49th Floor registration rights are granted with respect to
Chicago, IL 60602 any other shares of Common Stock
Attention: Richard Smith
Venture Lending & Leasing, Inc. Upon exercise of the Lender Warrant, 17,500
Western Technology Investment shares of Series B Preferred Stock*
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Linda Smith
Benchmark Capital Partners, L.P. Upon exercise of the Benchmark Warrants,
2480 Sand Hill Road, Suite 200 441,257 shares of Common Stock
Menlo Park, CA 94025
Attention: Bruce Dunlevie
Benchmark Founders Fund, L.P. Upon exercise of the Benchmark Warrants, 58,743
2480 Sand Hill Road, Suite 200 shares of Common Stock
Menlo Park, CA 94025
Attention: Bruce Dunlevie
</TABLE>
- --------------------------------------------------------------------------------
* Registrable Securities only for purposes of Section 2 (excluding
Sections 2.4, 2.6 and 2.7 thereof) of the Investor Rights Agreement.
-4-
<PAGE> 26
SERIES C INVESTORS
<TABLE>
<S> <C>
WC Investors, LLC 375,000 shares of Series C Preferred Stock
Two North Riverside Plaza
Chicago, IL 60606
Attention: Ellen Havdala
Benchmark Capital Partners, L.P. 82,254 shares of Series C Preferred Stock
Benchmark Founders' Fund, L.P. 11,496 shares of Series C Preferred Stock
2480 Sand Hill Road
Menlo Park, CA 94025
Attention: Bruce Dunlevie
General Partner
Toshiba Corporation 250,000 shares of Series C Preferred Stock
1-1, Shibaura 1-Chome
Minato-ku, Tokyo 105-1
JAPAN
Attention: Hidetaka Yamamoto
General Manager
Business Planning Advanced-I Group
Wells Fargo Bank, Trustee of the 62,500 shares of Series C Preferred Stock
Vision Service Executive Deferred
Compensation Plan
Wells Fargo Bank, N.A.
420 Montgomery Street, 2nd Floor
San Francisco, CA 94104
Attention: Peggy Cowen MAC #0101-021
AJ Trusts Partnership 62,500 shares of Series C Preferred Stock
c/o Morton A. Pactor
Monte Vista Management Company
Stevenson Street, 9th Floor
San Francisco, CA 94105
Pace Communications, Inc. 31,250 shares of Series C Preferred Stock
c/o Bonnie Hunter
1301 Carolina Street
Greensboro, NC 27401
</TABLE>
-5-
<PAGE> 27
<TABLE>
<S> <C>
Samuel Bronfman II Recipient 62,500 shares of Series C Preferred Stock
Pour-Off Trust U/A/D March 1, 1989
Seagram Classics Wine Company
2600 Campus Drive, Suite 160
San Mateo, CA 94403
General Instrument Corporation 187,500 shares of Series C Preferred Stock
GI Analog Network Systems Business Unit
2200 Byberry Road
Hatboro, PA 19040
Attention: Dan Moloney, Vice President
Scientific-Atlanta, Inc. 62,500 shares of Series C Preferred Stock
1 Technology Parkway
Atlanta, GA 30092-2967
Attention: General Counsel
GFI Company 625,000 shares of Series C Preferred Stock
Oklahoma Publishing Company
9000 N. Broadway, 10th Floor
Oklahoma City, OK 73114
Attention: David Story
Dominique Trempont 12,500 shares of Series C Preferred Stock
5 Randall Place
Menlo Park, CA 94025
William K. Hooper, Jr. 31,250 shares of Series C Preferred Stock
1845 Doris Drive
Menlo Park, CA 94025
Gregory D. Thatch 12,500 shares of Series C Preferred Stock
1730 I Street, Suite 220
Sacramento, CA 95814
Teresa A. Dial and Brian T. Burry 18,750 shares of Series C Preferred Stock
Wells Fargo Bank
420 Montgomery Street, 12th Floor
San Francisco, CA 94104
Gerald J. Jeffry, DDS, Inc. Profit Sharing Plan 18,750 shares of Series C Preferred Stock
2730 Lone Tree Way, Suite 1
Antioch, CA 94509
</TABLE>
-6-
<PAGE> 28
<TABLE>
<S> <C>
Jeffry Family Limited Partnership 18,750 shares of Series C Preferred Stock
2730 Lone Tree Way, Suite 1
Antioch, CA 94509
General Electric Capital Corporation 906,250 shares of Series C Preferred Stock
c/o Equity Capital Group
260 Long Ridge Road
Stamford, Connecticut 06927
Margaret & Richard Juang 1,875 shares of Series C Preferred Stock
1211 St. Ann Drive
Erie, PA 16509
Barbara Weisser 1,875 shares of Series C Preferred Stock
RR4 Box 270; WilleyPoint
Oakland, ME 04963
Dennis J. Sullivan, Jr. 5,000 shares of Series C Preferred Stock
Dan Pinger Public Relations
The Historic Cable House
2245 Gilbert Avenue
Cincinnati, OH 45206
David & Patricia Dabbert 1,875 shares of Series C Preferred Stock
3009 Mayfield Way
Michigan City, Indiana 46360
Philip J. Wilderotter 1,875 shares of Series C Preferred Stock
106 Pear Street
Oakhurst, NJ 07755
Corinne LeBovit 1,875 shares of Series C Preferred Stock
309 Branchlands Drive
Charlottesville, VA 22901
The Blinn Family Trust U/D/T Created 2,000 shares of Series C Preferred Stock
October 11, 1994, FBO The Blinn Family
5275 Cross Creek Lane
Reno, NV 89511
Anna-Marie Blinn 2,000 shares of Series C Preferred Stock
2101 Shoreline Dr. #496
Alameda, CA 94501
</TABLE>
-7-
<PAGE> 29
<TABLE>
<S> <C>
John C. Blinn IV 1,000 shares of Series C Preferred Stock
2515 Clarkson
Denver, CO 80205
Barry S. Kassar Trustee, and 2,500 shares of Series C Preferred Stock
Avra Kassar Trustee, the
Kassar Family Trust, UTD 5-4-88
2675 St Tropez Place
La Jolla, CA 92037
Don Catlin 1,875 shares of Series C Preferred Stock
12415 Rochedale Lane
Los Angeles, CA 90049
Eugene H. Felder, Jr. and Johanna S. Felder, 3,750 shares of Series C Preferred Stock
Trustees of the Felder Family Trust,
originally established July 24, 1984
2680 Park Avenue
Laguna Beach, CA 92651-2029
Hidetaka Nakahara 1,875 shares of Series C Preferred Stock
7018 Manila Avenue
El Cerrito, CA 94530
William A. Saupe, DDS and Marcella S. Miranda, 1,875 shares of Series C Preferred Stock
Tenants in Common
2416 Ashby Avenue
Berkeley, CA 94705
Sumie Matsushita 1,875 shares of Series C Preferred Stock
1-9-7 Nan-yodai
Hachioji-shi
Tokyo 192-03 JAPAN
Fereydoun Azarm 13,500 shares of Series C Preferred Stock
2280 Woodard Road
San Jose, CA 95124
Tom and Denise Morrison 625 shares of Series C Preferred Stock
1700 Aubusson Court
Bakersfield, CA 93311
</TABLE>
-8-
<PAGE> 30
<TABLE>
<S> <C>
EGI-Wink Investors, L.L.C. 250,000 shares of Series C Preferred Stock
Two North Riverside Plaza, Suite 1900
Chicago, IL 60606
Attention: Phil Handy
EGI-Wink Investors, L.L.C. Upon exercise of EGI Warrants, 125,000 shares
Two North Riverside Plaza, Suite 1900 of Common Stock
Chicago, IL 60606
Attention: Phil Handy
SZ Investments, L.L.C. 31,250 shares of Series C Preferred Stock
2 North Riverside Plaza, 16th Floor
Chicago, IL 60606
Attention: Bill White
Vulcan Ventures Incorporated 1,162,500 shares of Series C Preferred Stock
110 110th Avenue, Suite 550
Bellevue, WA 98004
Attention: Bill Savoy
General Electric Capital Corporation Upon exercise of GECC Warrant, 525,000 shares
c/o Equity Capital Group of Common Stock
260 Long Ridge Road
Stamford, Connecticut 06927
NBC Multimedia, Inc. Upon exercise of GECC Warrant, 375,000 shares
30 Rockefeller Plaza of Common Stock
New York, New York 10112
CBS Corporation Upon exercise of the CBS Warrant, 125,000
51 West 52nd Street shares of Common Stock
New York, NY 10019
Attention: Fred Reynolds
The Walt Disney Company Upon exercise of the Disney Warrant, 200,000
500 S. Buena Vista Street shares of Common Stock
Burbank, CA 91521
Attention: Michael Dean
Vulcan Ventures Incorporated Upon exercise of the Vulcan Warrant, 250,000
110 110th Avenue, Suite 550 shares of Common Stock
Bellevue, WA 98004
Attention: Bill Savoy
</TABLE>
-9-
<PAGE> 31
<TABLE>
<S> <C>
Thomson Consumer Electronics, Inc. Upon exercise of Thomson Warrant, 50,000 shares
of Common Stock
SERIES D INVESTORS
Microsoft Corporation 2,500,000 shares of Series D Preferred Stock
Microsoft Corporation Upon exercise of Microsoft Warrant, 500,000
shares of Common Stock
</TABLE>
-10-
<PAGE> 1
[WILSON SONSINI GOODRICH & ROSATI, P.C. LETTERHEAD]
July 19, 1999
EXHIBIT 5.1
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We are acting as counsel to Wink Communications, Inc., a Delaware
corporation (the "Company"), in connection with the registration of 4,830,000
shares of the Company's Common Stock, par value $0.001 per share, including
630,000 shares subject to an over-allotment option (collectively, the "Shares"),
pursuant to a Registration Statement on Form S-1 (Registration No. 333-80221),
as amended (the "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The Shares are
being sold by the Company and the Selling Stockholders identified as such in the
Registration Statement.
As counsel for the Company, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and other instruments as we
have deemed necessary for the purposes of rendering this opinion. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity with the
originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that the Shares to be
registered for sale by the Company and the Selling Stockholders have been duly
authorized by the Company, and the Shares to be registered for sale by the
Selling Stockholders are, and the Shares to be registered for sale by the
Company, when issued, delivered and paid for in accordance with the terms of the
underwriting agreement referred to in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be, validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and we consent to the reference of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati, P.C.
<PAGE> 1
EXHIBIT 10.3
WINK COMMUNICATIONS, INC.
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
o to attract and retain the best available personnel for
positions of substantial responsibility,
o to provide additional incentive to Employees, Directors
and Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Wink Communications, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
<PAGE> 2
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
-2-
<PAGE> 3
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1999 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange
Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted
in accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of
Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 2,500,000 Shares, plus an annual increase to be added on
the first day of the Company's fiscal year
-3-
<PAGE> 4
beginning in 1999 equal to the lesser of (i) 1,000,000 shares, (ii) 4% of the
outstanding shares on such date or (iii) a lesser amount determined by the
Board. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
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<PAGE> 5
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
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<PAGE> 6
6. Limitations.
(a) Each Option shall be designated in the Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 500,000
Shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is canceled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the canceled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
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<PAGE> 7
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
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<PAGE> 8
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the
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<PAGE> 9
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted
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<PAGE> 10
Stock Purchase Agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right
is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to
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<PAGE> 11
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be exercisable to
the extent vested for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
(d) Date of Grant. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the Administrator
makes the determination granting such Option or Stock Purchase Right, or such
other later date as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a reasonable time after
the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise
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<PAGE> 12
between the Optionee and the Administrator, which agreement must be in writing
and signed by the Optionee and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of
such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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<PAGE> 13
1999 STOCK PLAN
STOCK OPTION AGREEMENT
UNLESS OTHERWISE DEFINED HEREIN, THE TERMS DEFINED IN THE PLAN SHALL
HAVE THE SAME DEFINED MEANINGS IN THIS OPTION AGREEMENT.
I. NOTICE OF STOCK OPTION GRANT
[OPTIONEE'S NAME AND ADDRESS]
YOU HAVE BEEN GRANTED AN OPTION TO PURCHASE COMMON STOCK OF THE COMPANY,
SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN AND THIS OPTION AGREEMENT, AS
FOLLOWS:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
[TO BE DETERMINED].
<PAGE> 14
Termination Period:
This Option may be exercised for three months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to [TITLE] of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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<PAGE> 15
3. Method of Payment. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may
incur regular federal income tax liability upon exercise of a NSO. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may
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<PAGE> 16
refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies
as an ISO, the Optionee will have no regular federal income tax liability upon
its exercise, although the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal tax purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be an Employee
but remains a Service Provider, any Incentive Stock Option of the Optionee that
remains unexercised shall cease to qualify as an Incentive Stock Option and will
be treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the Shares acquired on the date of
exercise and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price. Any additional gain
will be taxed as capital gain, short-term or long-term depending on the period
that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
-4-
<PAGE> 17
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL
OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION
OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: WINK COMMUNICATIONS, INC.
- ---------------------------------- ----------------------------------------
Signature By
- ---------------------------------- ----------------------------------------
Print Name Title
- ----------------------------------
Residence Address
- ----------------------------------
- ----------------------------------
-5-
<PAGE> 18
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
----------------------------------------
Spouse of Optionee
<PAGE> 19
EXHIBIT A
1999 STOCK PLAN
EXERCISE NOTICE
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
Attention: [TITLE]
1. Exercise of Option. Effective as of today, ________________,
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Wink Communications, Inc. (the
"Company") under and pursuant to the 1999 Stock Plan (the "Plan") and the Stock
Option Agreement dated, 19___ (the "Option Agreement"). The purchase price for
the Shares shall be $, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company
the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
<PAGE> 20
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: WINK COMMUNICATIONS, INC.
- -------------------------------- ----------------------------------------
Signature By
- -------------------------------- ----------------------------------------
Print Name Its
Address: Address:
- -------------------------------- Wink Communications, Inc.
1001 Marina Village Parkway
- -------------------------------- Alameda, CA 94501
----------------------------------------
Date Received
<PAGE> 21
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of _________________, 19___ between
Wink Communications, Inc., a Delaware corporation ("Pledgee"), and
_________________________ ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________________ 19___ (the "Option"), between Pledgor and
Pledgee under Pledgee's 1999 Stock Plan and Pledgor's election under the terms
of the Option to pay for such shares with his promissory note (the "Note"),
Pledgor has purchased _____________ shares of Pledgee's Common Stock (the
"Shares") at a price of $________ per share, for a total purchase price of
$____________. The Note and the obligations thereunder are as set forth in
Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration
of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock
assignment for use in transferring all or a portion of the Shares to Pledgee if,
as and when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, to be executed by Pledgor pursuant to the terms of the Option,
and the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to Pledgee,
its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal
sum of the Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
(b) Encumbrances. The Shares are free of all other
encumbrances, defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common
Stock is now or later becomes margin-listed by the Federal Reserve Board and
Pledgee is classified as a "lender"
<PAGE> 22
within the meaning of the regulations under Part 207 of Title 12 of the Code of
Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee
in making any amendments to the Note or providing any additional collateral as
may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and
additional shares or other securities issued by reason of any such change shall
be delivered to and held by the Pledgee under the terms of this Security
Agreement in the same manner as the Shares originally pledged hereunder. In the
event of substitution of such securities, Pledgor, Pledgee and Pledgeholder
shall cooperate and execute such documents as are reasonable so as to provide
for the substitution of such Collateral and, upon such substitution, references
to "Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth
in the Option or contained in this Security Agreement for a period of 10 days
after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee
shall have the right to accelerate payment of the Note upon notice to Pledgor,
and Pledgee shall thereafter be entitled to pursue its remedies under the
California Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
-2-
<PAGE> 23
8. Withdrawal or Substitution of Collateral. Pledgor shall not
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the
payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree
that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" ----------------------------------------
Signature
----------------------------------------
Print Name
Address:
----------------------------------------
----------------------------------------
"PLEDGEE" WINK COMMUNICATIONS, INC.,
a Delaware corporation
----------------------------------------
Signature
----------------------------------------
Print Name
----------------------------------------
Title
"PLEDGEHOLDER" ----------------------------------------
Secretary of Wink Communications, Inc.
-4-
<PAGE> 25
EXHIBIT C
NOTE
$_______________ [City, State]
__________ __, 19__
FOR VALUE RECEIVED, __________________ promises to pay to Wink
Communications, Inc., a Delaware corporation (the "Company"), or order, the
principal sum of __________________ ______________ ($___________), together with
interest on the unpaid principal hereof from the date hereof at the rate of
_______________ percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on _________________,
19___. Payment of principal and interest shall be made in lawful money of the
United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
----------------------------------------
----------------------------------------
<PAGE> 26
1999 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Notice of Grant.
[GRANTEE'S NAME AND ADDRESS]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
By your signature and the signature of the Company's representative below, you
and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the 1999 Stock Plan and the Restricted
Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made
a part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: WINK COMMUNICATIONS, INC.
- ---------------------------------- ----------------------------------------
Signature By
- ---------------------------------- ----------------------------------------
Print Name Title
<PAGE> 27
EXHIBIT A-1
1999 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is
an Service Provider, and the Purchaser's continued participation is considered
by the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Administrator has granted to the Purchaser a
Stock Purchase Right subject to the terms and conditions of the Plan and the
Notice of Grant, which are incorporated herein by reference, and pursuant to
this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase shares of the Company's
Common Stock (the "Shares"), at the per Share purchase price and as otherwise
described in the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may
be paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service
Provider for any or no reason (including death or disability) before all of the
Shares are released from the Company's Repurchase Option (see Section 4), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company) have an irrevocable, exclusive option (the
"Repurchase Option") for a period of sixty (60) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 4) at the original purchase price per share (the
"Repurchase Price"). The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to
the Purchaser or the Purchaser's executor a check in the amount of the aggregate
Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness
to the Company equal to the aggregate Repurchase Price, or (iii) by a
combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice
and the payment of the aggregate Repurchase Price, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all
<PAGE> 28
rights and interests therein or relating thereto, and the Company shall have the
right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase
Shares hereunder, the Company may designate and assign one or more employees,
officers, directors or shareholders of the Company or other persons or
organizations to exercise all or a part of the Company's purchase rights under
this Agreement and purchase all or a part of such Shares. If the Fair Market
Value of the Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such
Shares, then each such designee or assignee shall pay the Company cash equal to
the difference between the Repurchase FMV and the aggregate Repurchase Price of
such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the Shares
shall be released from the Company's Repurchase Option [ONE YEAR] after the Date
of Grant and __________________ percent (______%) of the Shares [AT THE END OF
EACH MONTH THEREAFTER], provided that the Purchaser does not cease to be a
Service Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from
the Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase
Option shall be delivered to the Purchaser at the Purchaser's request (see
Section 6).
5. Restriction on Transfer. Except for the escrow described in
Section 6 or the transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until such Shares are released from the Company's Repurchase Option in
accordance with the provisions of this Agreement, other than by will or the laws
of descent and distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the
Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the
Repurchase Option, the Purchaser shall, upon execution of this Agreement,
deliver and deposit with an escrow holder designated by the Company (the "Escrow
Holder") the share certificates representing the Unreleased Shares, together
with the stock assignment duly endorsed in blank, attached hereto as Exhibit
A-2. The Unreleased Shares and stock assignment shall be held by the Escrow
Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser
attached hereto as Exhibit A-3, until such time as the Company's Repurchase
Option expires. As a further condition to the Company's obligations under this
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
-2-
<PAGE> 29
(b) The Escrow Holder shall not be liable for any act it may
do or omit to do with respect to holding the Unreleased Shares in escrow while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have
all the rights of a shareholder with respect to the Shares while they are held
in escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any,
issued hereunder shall be endorsed with the following legend (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS
SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
8. Adjustment for Stock Split. All references to the number of
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
9. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The Purchaser
understands that the Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the purchase price for the Shares and the Fair Market
Value of the
-3-
<PAGE> 30
Shares as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to the Repurchase Option. The Purchaser understands that the Purchaser may elect
to be taxed at the time the Shares are purchased rather than when and as the
Repurchase Option expires by filing an election under Section 83(b) of the Code
with the IRS within 30 days from the date of purchase. The form for making this
election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules of California. This Agreement,
subject to the terms and conditions of the Plan and the Notice of Grant,
represents the entire agreement between the parties with respect to the purchase
of the Shares by the Purchaser. Subject to Section 15(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and the terms
and conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to
be given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the
Company's address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
nor prevent that party from thereafter enforcing any other provision of this
Agreement. The rights granted both parties hereunder are cumulative and shall
not constitute a waiver of either party's right to assert any other legal remedy
available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
-4-
<PAGE> 31
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY
PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:_____________________
PURCHASER: WINK COMMUNICATIONS, INC.
- --------------------------------- ----------------------------------------
Signature By
- --------------------------------- ----------------------------------------
Print Name Title
-5-
<PAGE> 32
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto ____________________________________________________________
(__________) shares of the Common Stock of Wink Communications, Inc. standing in
my name of the books of said corporation represented by Certificate No. _____
herewith and do hereby irrevocably constitute and appoint
____________________________________ to transfer the said stock on the books of
the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between Wink Communications, Inc. and
the undersigned dated ___________________, 19__.
Dated: _______________, 19__.
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 33
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
_________, 19__
Corporate Secretary
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
Dear ________________________:
As Escrow Agent for both Wink Communications, Inc., a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively as the "Company") exercises the Company's Repurchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a
<PAGE> 34
certificate or certificates representing so many shares of stock as are not then
subject to the Company's Repurchase Option. Within 90 days after Purchaser
ceases to be a Service Provider, you shall deliver to Purchaser a certificate or
certificates representing the aggregate number of shares held or issued pursuant
to the Agreement and not purchased by the Company or its assignees pursuant to
exercise of the Company's Repurchase Option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
the statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such termination,
the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
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<PAGE> 35
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses or at such other addresses as a party may
designate by ten days' advance written notice to each of the other parties
hereto.
COMPANY: Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
PURCHASER: ----------------------------------------
----------------------------------------
----------------------------------------
ESCROW AGENT: Corporate Secretary
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns.
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<PAGE> 36
18. These Joint Escrow Instructions shall be governed by, and
construed and enforced in accordance with, the internal substantive laws, but
not the choice of law rules, of California.
Very truly yours,
WINK COMMUNICATIONS, INC.
----------------------------------------
By
----------------------------------------
Title
PURCHASER:
----------------------------------------
Signature
----------------------------------------
Print Name
ESCROW AGENT:
- -----------------------------------
Corporate Secretary
-4-
<PAGE> 37
EXHIBIT A-4
CONSENT OF SPOUSE
I, _______________________, spouse of ______________________, have read
and approve the foregoing Restricted Stock Purchase Agreement (the "Agreement").
In consideration of the Company's grant to my spouse of the right to purchase
shares of Wink Communications, Inc., as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: ____________________, 19__
----------------------------------------
Signature of Spouse
<PAGE> 38
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: ______________ shares (the "Shares") of the Common Stock of
Wink Communications, Inc. (the "Company").
3. The date on which the property was transferred is: 19___.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over
time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is: $_________.
6. The amount (if any) paid for such property is: $__________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________, 19__
----------------------------------------
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19__
----------------------------------------
Spouse of Taxpayer
<PAGE> 1
EXHIBIT 10.4
WINK COMMUNICATIONS, INC.
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Wink Communications, Inc., a Delaware
corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as defined
in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or
<PAGE> 2
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Director Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 Shares (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 40,000 Shares (the "First Option") on the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
-2-
<PAGE> 3
(iii) Each Outside Director shall be automatically
granted an Option to purchase 40,000 Shares (a "Subsequent Option") on each
fourth anniversary of the date of grant of his or her First Option (or in the
case of persons who were Outside Directors at the time of the Company's initial
public offering, the fourth anniversary of the last option granted to such
person prior to such initial public offering, and in the case of an Inside
Director who comes to be an Inside Director but also remains a Director, the
fourth anniversary of the date such person ceases to be an Inside Director)
provided he or she is then an Outside Director and has served continuously as a
Outside Director during such four year period.
(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder
shall be as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option
shall become exercisable as to twenty-five (25) percent of the Shares subject to
the First Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to twenty-five (25) percent of the Shares
subject to the Subsequent Option on each anniversary of its date of grant,
provided that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be
-3-
<PAGE> 4
granted under Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the Board or the
shareholders to increase the number of Shares which may be issued under the Plan
or through cancellation or expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
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<PAGE> 5
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided
-5-
<PAGE> 6
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, the sale of substantially all of the assets of
the Company or a like transaction involving the Company, outstanding Options may
be assumed or equivalent options may be substituted by the successor corporation
or a Parent or Subsidiary thereof (the "Successor Corporation"). If an Option is
assumed or substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an
outstanding Option or substitute for it an equivalent option, the Option shall
become vested and exercisable as for up to fifty percent (50%) of the Shares for
which it would not otherwise be exercisable. In such event the Board shall
notify the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and upon the expiration of such
period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be
considered assumed if, following the merger or sale of assets, the Option
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares). If such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
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<PAGE> 7
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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<PAGE> 1
EXHIBIT 10.5
WINK COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Wink Communications, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the
Company.
(d) "Company" shall mean Wink Communications, Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all gross earnings and
commissions, and shall include payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation, but in each
case only to the extent such compensation is paid in cash.
(f) "Designated Subsidiary" shall mean any Subsidiary that
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of
each Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
Offering Period.
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(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of
approximately six (6) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after February 1 and
August 1 of each year and terminating on the last Trading Day in the periods
ending six months later; provided, however, that the first Offering Period under
the Plan shall commence with the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective and ending on
the last Trading Day on or before January 31, 2000. The duration and timing of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase
Plan.
(m) "Purchase Price" shall mean 85% of the Fair Market Value
of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be adjusted by
the Board pursuant to Section 20.
(n) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
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<PAGE> 3
(p) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after February 1 and August 1 each year, or on such other date as the
Board shall determine, and continuing thereafter until terminated in accordance
with Section 20 hereof; provided, however, that the first Offering Period under
the Plan shall commence on the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective and end on
the last Trading Day on or before January 31, 2000. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without shareholder approval if
such change is announced at least five (5) days prior to the scheduled beginning
of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not
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exceeding fifteen percent (15%) of the Compensation which he or she receives on
each pay day during the Offering Period up to a maximum aggregate deduction of
$21,250.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Offering Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Offering Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the
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<PAGE> 5
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
(b) If the Board determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Board may in its sole discretion (x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall
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<PAGE> 6
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason,
he or she shall be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be two hundred fifty thousand (250,000) shares, plus an annual increase to
be added on the first day of the Company's fiscal year beginning in 1999 equal
to the lesser of (i) 75,000 shares, (ii) 0.3% of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.
(b) The participant shall have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE> 7
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves, the maximum number of
shares each participant may purchase each Offering Period (pursuant to Section
7), as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock
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<PAGE> 8
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Offering Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
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(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(i) altering the Purchase Price for any Offering
Period including an Offering Period underway at the time of the change in
Purchase Price;
(ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require
shareholder approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
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23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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EXHIBIT A
WINK COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _________________ hereby elects to participate in the Wink
Communications, Inc. 1999 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):________
__________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for
the shares. I hereby agree to notify the Company in writing
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within 30 days after the date of any disposition of my shares and I will
make adequate provision for Federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of
the shares at the time of such disposition over the purchase price which
I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)____________________________________________________
(First) (Middle) (Last)
___________________________ ________________________________________
Relationship Address
________________________________________
Employee's Social
Security Number: ________________________________________
Employee's Address: ________________________________________
________________________________________
________________________________________
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I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature
(If beneficiary other than spouse)
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EXHIBIT B
WINK COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Wink
Communications, Inc. 1999 Employee Stock Purchase Plan which began on __________
__, 19____ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
----------------------------------------
----------------------------------------
----------------------------------------
Signature:
----------------------------------------
Date:
-----------------------------------
<PAGE> 1
EXHIBIT 10.29
AGREEMENT
This Agreement ("Agreement") is made and entered into as of May 25, 1999
(the "Effective Date"), by and between WINK COMMUNICATIONS, INC., a Delaware
corporation located at 1001 Marina Village Parkway, Alameda, CA 94501 ("Wink"),
and MICROSOFT CORPORATION, a Washington corporation located at One Microsoft
Way, Redmond, WA 98052 ("MS" or "Microsoft").
RECITALS
Whereas, Microsoft develops, markets and licenses computer software and
a variety of services for devices that receive and display video and data
services, including personal computers, settop boxes, televisions and internet
devices;
Whereas, Wink provides viewer response services to video broadcasters
and advertisers as well as software and tools to enable the receipt and display
of certain enhanced content over video using proprietary Wink protocols;
Whereas, contemporaneously with the execution of this Agreement
Microsoft and Wink are executing a stock purchase agreement and related warrant
purchase agreement and other related documents pursuant to which Microsoft is
acquiring an equity position in Wink in return for investing approximately
thirty million dollars ($US30,000,000); and
Whereas, pursuant to the terms of this Agreement, the parties wish to
set forth the terms under which they will cooperate to promote an open industry
standard format for enhanced content, Microsoft software and services for video
and data services and Wink viewer response services;
The parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS
"Activated for Wink" means a Microsoft Video Platform Device that is
Enabled for Wink and (i) the user has registered with the Microsoft content
service for such device and Wink is provided with the necessary information to
fulfill the applicable TV viewer response, (ii) the user has registered with the
Wink Response Network Services or (iii) Wink has the right to obtain revenue
from Wink Response Network Services.
"Annual Revenue Guaranty" means the minimum annual revenue set forth in
Exhibit A to be paid by Wink to Microsoft for each Microsoft Controlled Video
Platform Device that was first Activated for Wink during the applicable Pooling
Period.
"Pooling Period" shall mean the monthly period during a given year in
which a Microsoft Controlled Video Platform Device was first Activated for Wink.
<PAGE> 2
"Revenue Share" means the gross revenues payable by Wink customers to
Wink with respect to or derived from Purchase and Request Transaction Services
in connection with Microsoft Controlled Video Platform Devices Activated for
Wink. [*]
"ATVEF Compliant" means compliant with the Specification for Interactive
Television v.1.1 of the Advanced Television Enhancement Forum.
"Deliverables" shall mean the Wink Response Network Services adapted
for use with Microsoft Video Platforms and the items identified as deliverables
in the Specifications.
"Derivative Technology" shall mean: (i) for copyrightable or copyrighted
material, any localization, translation (including translation into other
computer languages), portation, modification, correction, addition, extension,
upgrade, improvement, compilation, abridgment or other form in which an existing
work may be recast, transformed or adapted; (ii) for patentable or patented
material, any improvement thereon; and (iii) for material which is protected by
trade secret, any new material derived from such existing trade secret material,
including new material which may be protected by copyright, patent and/or trade
secret.
"Enabled for Wink" means a Microsoft Video Platform Device that has the
capability to (a) return TV viewer responses to Wink in accordance with mutually
agreed upon specifications and (b) display ATVEF Compliant content.
"Existing Contracts" shall mean the list of agreements or other
arrangements under which Wink has the obligation to deliver the Wink ICAP Engine
for use on specified Video Platform Devices as set forth in Exhibit B. [*]
"Intellectual Property" shall mean any copyrights, patents (including
patent improvements), patent applications, patent rights, trade secrets, or
other intellectual property rights (but not trademarks, trade names or service
marks) under applicable law.
"International Service Markets" shall mean those countries outside the
United States in which Wink operates a commercially competitive Wink Response
Network Service capable of providing such services to Microsoft Video Platform
Devices.
"Microsoft Controlled Video Platform Device" means a commercially
available Video Platform Device for which Microsoft exclusively controls: (1)
the operating system, (ii) application environment and (3) the content and data
services available for the device, including but not limited to services such as
the Wink Response Network Services.
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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"Microsoft Video Platform Devices" means a Video Platform Device that
makes use of one of the Windows family of operating systems or any other
Microsoft or its subsidiary products that facilitate or enable, or when used
with other products, facilitate or enable the receipt and decoding of analog or
digital television broadcasts or transmissions on a Video Platform Device,
together with any revisions, updates, or upgrades thereto. Personal computers,
WebTV Classic and other internet only terminals shall not be considered a Video
Platform Device for purposes of this Agreement.
"Purchase and Request Transaction Services" shall mean the collection,
aggregation or processing of viewer responses in connection with any purchase,
coupon, information or other transaction, where the viewer response is generated
from content delivered as part of the broadcast signal for video programming.
"Subsidiary" shall mean a partnership, company or other entity in which
more than fifty percent (50%) of the stock entitled to vote for the election of
directors is owned by Microsoft.
"Video Platform Device" means a consumer electronics product that
receives and displays video programming.
"Current Response Network Services" means those specific operational
services for the collection and processing of TV viewer responses for Purchase
and Request and Transaction Services that Wink provides as of the Effective Date
where the TV viewer response is directed to the Wink data center by Wink
customers contracting with Wink for in-video interactive content authored by
Wink (or Wink customers that have contracted with Wink to provide Current
Response Network Services) in the current Wink ICAP format delivered solely as
part of the broadcast signal for video programming. For the avoidance of doubt,
it is understood by the parties that Current Response Network Services do not
include the collection or processing of TV viewer responses collected or
provided: (i) through a web site, (ii) email, (iii) other means managed by the
developer, distributor, advertiser, broadcaster owner, licensee or any other
party directly or indirectly responsible for the content, (iv) through internet
sites, internet portals, or interactive television links and (v) from the WebTV
Network service, MSN or their successors or replacements.
"Wink Response Network Services" means the specific operational services
for the collection and processing of TV viewer responses that Wink provides
where the TV viewer responses are directed to the Wink data center by Wink
customers contracting with Wink for ATVEF Compliant content delivered solely as
part of the broadcast signal for video programming. For the avoidance of doubt,
it is understood by the parties that Wink Response Network Services do not
include the collection or processing of TV viewer responses collected or
provided: (i) through a web site other than www.wink.com, (i) email, (iii) other
means managed by or on behalf of the developer, distributor, advertiser,
broadcaster owner, licensee or any other party directly or indirectly
responsible for the content, (iv) through internet sites, internet portals,
interactive television links and (v) from the WebTV Network service, MSN or
their successors or replacements.
"Wink ICAP Engine" means the proprietary software authored by Wink for
the reception and display of content using the ICAP protocol as described in
Exhibit D.
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2. AREAS OF COOPERATION
2.1 Transaction Processing
2.1.1 Microsoft and Wink will use commercially
reasonable efforts to make Enabled for Wink
those Microsoft Controlled Video Platform
Devices deployed in the United States and
International Service Markets. The parties shall
agree upon the schedules and specifications for
such work and use commercially reasonable
efforts to begin Wink Response Network Services
with respect to such Microsoft Controlled Video
Platform Devices as follows:
(a) [*]
(b) [*]
(c) [*]
2.1.2 During the term of this Agreement, for Microsoft
Controlled Video Platforms deployed in the
United States, Wink will be the exclusive
provider of Current Response Network Services
for Microsoft Controlled Video Platform Devices.
[*]
2.1.3 During the term of this Agreement, for Microsoft
Controlled Video Platforms deployed in the
United States, Microsoft shall not (i) provide
Current Response Network Services to Microsoft
Controlled Video Platforms either directly with
a Subsidiary or
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 5
through a Subsidiary or (ii) contract with a
third party to provide such services.
2.1.4 Wink will maintain a commercially competitive
Wink Response Network Service.
2.1.5 Microsoft and Wink will also use commercially
reasonable efforts to make Enabled for Wink
those Microsoft Video Platforms based on the
primary Microsoft operating system product
offered by Microsoft for television and set top
box devices and its successors that are deployed
in the United States and International Service
Markets. The parties shall agree upon a schedule
and specification for such work. The parties
acknowledge that the primary Microsoft product
for such devices as of the Effective Date is
referred to by Microsoft as TVPak. [*]
2.2 Revenue Share Payments. Each calendar quarter, Wink
shall pay Microsoft [*] of the Revenue Share payable to
Wink during such quarter in connection with the
Microsoft Controlled Video Platform Devices. In the
event that the Revenue Share for a Microsoft Controlled
Video Platform Device payable to Wink during the
applicable calendar quarter exceeds [*], Wink shall pay
Microsoft [*] of the Revenue Share for such calendar
quarter. Such payments shall be remitted within thirty
(30) days of the end of each calendar quarter to such
account as Microsoft may specify from time to time by
written notice. Such payments by Wink shall be
accompanied by a statement setting forth the basis for
the calculation of amounts owed to Microsoft and shall
contain information sufficient for Microsoft to
determine and verify the basis for such calculations.
2.3 Annual Revenue Guaranty. Each Microsoft Controlled Video
Platform shall be assigned a Pooling Period based on the
date such device was Activated for Wink. On the first
anniversary date of the end of the Pooling Period
(twelve (12) months after the end of the Pooling
Period), Wink shall pay Microsoft the difference, if
any, between the total amount of the Revenue Share paid
to Microsoft with respect to such Microsoft Controlled
Video Platform Device during the previous twelve (12)
months and the Annual Revenue Guaranty. In the event
that the Microsoft Controlled Video Platform Device
continues to be capable of Purchase and Request
Transaction Services as of the first anniversary date of
the Pooling Period, Wink shall continue to pay Microsoft
the difference between the Revenue Share and the Annual
Revenue Guaranty on an annual basis as set forth above
until such time as Microsoft has been paid [*] for such
Microsoft Controlled Video Platform Device.
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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Thereafter, on each anniversary date of the Pooling
Period, Wink shall pay Microsoft the difference, if any,
between the Revenue Share paid to Microsoft with respect
to such Microsoft Controlled Video Platform Device
during the previous twelve months and the Prorated
Annual Revenue Guaranty. The Prorated Annual Revenue
Guaranty shall be defined as the Annual Revenue Guaranty
multiplied by the percentage obtained by dividing the
number of months during the previous twelve (12) months
for which the device was capable of Purchase and Request
Transactions by twelve (12). Such payments shall be
remitted each year within thirty (30) days of the twelve
(12) month anniversary date of the applicable Pooling
Period applicable to such device. Payments shall be
remitted to such account as Microsoft may specify from
time to time by written notice and shall be accompanied
by a statement setting forth the basis for the
calculation of amounts owed to Microsoft and shall
contain information sufficient for Microsoft to
determine and verity the basis for such calculations.
2.4 Wink Response Network Services to Microsoft. Upon
request, Wink agrees to provide the Wink Network
Response Services to Microsoft. The rates charged by
Wink for such services shall be [*]. The parties shall
negotiate the rates and payment terms for such services
in good faith following execution of this Agreement.
2.5 ATVEF. Microsoft and Wink desire to enter into a broad
cooperation to promote ATVEF Compliant content, products
and services. In connection with this cooperation,
Microsoft will work to make its operating system
software for Microsoft Video Platforms ATVEF Compliant
and Wink will work to convert its line of products and
services from dependencies on ICAP protocols and the
Wink ICAP Engine to products and services that are ATVEF
Compliant. The specific obligations of each party in
connection with these ATVEF Compliant efforts are set
forth below.
2.5.1 Wink will use commercially reasonable efforts to
make its existing deployed products, platforms
and services ATVEF Compliant.
2.5.2 Wink will use commercially reasonable efforts to
make its Broadcast, Automation and Response
Servers ("Servers") ATVEF Compliant in
connection with Response Network Services
provided to Microsoft Video Platform Devices
that have been Activated for Wink.
2.5.3 Wink will use commercially reasonable efforts to
enhance its Studio Authoring tools to support
ATVEF Compliant content on all Microsoft Video
Platform Devices that have been Activated for
Wink. Wink will use commercially reasonable
efforts to provide developers the ability to
author a Wink application in Wink Studio such
that the Wink application can be successfully
delivered on all Microsoft Video
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 7
Platform Devices that have been Activated for
Wink whether they support the ICAP Engine or
ATVEF Compliant content.
2.5.4 Wink shall use commercially reasonable efforts
to adapt its Broadcast, Automation and Response
Servers to make them ATVEF Compliant. [*]
2.6 Development Expenses. Each party shall bear its own
expenses in connection with the development efforts
necessary to support the parties' respective products
and services as described in this Section 2. In the
event Microsoft desires to hire Wink to provide software
development services in connection with Video Platform
Devices and the parties cooperation under this
agreement, such services shall be billed to Microsoft at
the lowest rates Wink charges for custom software
development.
2.7 Intentionally Left Blank.
2.8 Release of Certain Obligations. Thirty (30) months after
the commercial release of any Microsoft Controlled Video
Platform that is Enabled for Wink ("First Ship Date"),
Microsoft shall have the option of ending its
obligations under Section 2.1.2 and 2.1.3 by providing
Wink with six (6) months advanced written notice of such
intent. [*] In the event that Microsoft exercises this
option:
(a) Wink's obligations with respect to the Annual
Revenue Guaranty in Section 2.3 shall not apply
with respect to Microsoft Controlled Video
Platform Devices after the effective date of
such notice;
(b) the license granted to Microsoft under Section 4
with respect to the Wink ICAP Engine shall be
deemed non-exclusive;
(c) payments made to Microsoft under Section 2.2
(Revenue Share) shall be calculated against
gross revenue payable to Wink for Wink Response
Network Services in connection with Microsoft
Controlled Video Platform Devices; and
(d) Microsoft's obligations under Section 2.1.1
shall not be affected by Microsoft's election
under this Section.
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 8
(e) The parties obligations with respect to Sections
3.1, 3.2 and 4.5 (d) and 4.6 shall no longer
apply.
2.9 Use of Customer Information. From time to time,
Microsoft may make available to Wink certain identifying
and other information concerning end user customers of
Microsoft Video Platform Devices. Wink agrees that it
shall use such information solely to fulfill the
specific Purchase and Request Transaction Service for
which the information has been provided by Microsoft.
Wink shall make no other use of such information without
the written permission of Microsoft in each instance.
Wink shall comply with all privacy and other laws and
regulations concerning governing the use of customer
information in every country or territory in which it
provides Purchase and Request Transaction Services for
Microsoft Video Platform Devices.
2.10 Right to Audit. During the term of this Agreement and
for three (3) years thereafter, Wink agrees to keep all
usual and proper records and books of account and all
usual and proper entries relating to the Purchase and
Request Transaction Services and any services that form
the basis for payments to Microsoft under this Agreement
sufficient to substantiate the amounts owed to
Microsoft. Wink shall maintain on Wink premises such
records for itself and for each Wink Subsidiary which
exercises rights under this Agreement.
(a) In order to verify statements issued by Wink and
Wink's compliance with the terms of this
Agreement, Microsoft may cause (i) an audit to
be made of Wink's and/or Wink's Subsidiaries'
books and records. Any audit shall be conducted
during regular business hours at Wink's and/or
Wink's Subsidiaries' facilities, with prior
notice. Any audit shall be conducted by an
independent certified public accountant selected
by Microsoft.
(b) Wink agrees to provide Microsoft's designated
audit team access to the relevant Wink's and/or
Wink's Subsidiaries' records and facilities.
(c) Prompt adjustment shall be made to compensate
for any errors or omissions disclosed by such
audit. Any such audit shall be paid for by
Microsoft unless material discrepancies are
disclosed. "Material" shall mean five percent
(5%) of the amount that was reported. If
material discrepancies are disclosed, Wink
agrees to pay Microsoft for the costs associated
with the audit. In no event shall audits be made
more frequently than annually unless the
immediately preceding audit disclosed a material
discrepancy.
2.11 Communication. From time to time the parties
shall meet to discuss additional business
opportunities and development plans.
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3. MARKETING AND PROMOTION ACTIVITIES
In order to maximize the mutual benefits of the parties' cooperation
under this Agreement, Wink and Microsoft will work to promote their respective
products and services as described below.
3.1 Promotion of Microsoft Video Platform Devices. Wink and
Microsoft will work together to evangelize and promote
the adoption of Microsoft Video Platform Devices to
potential customers of Wink Response Network Services,
including cable operators, DBS operators, television and
set top box manufacturers. Except as set forth in
Section 4.5 and 4.6, Wink shall evangelize and promote
Microsoft Video Platform Devices on a first priority
basis and shall not evangelize and promote any other
other platforms and services for Video Platform Devices,
including Video Platform Devices that make use of the
Wink ICAP Engine technology, unless such Video Platform
Devices and content for such devices are exclusively
ATVEF Compliant.
3.2 Promotion of Wink Response Network Services and ATVEF
Compliant Content. Microsoft and Wink will work together
to evangelize and promote the adoption of Wink Response
Network Services and ATVEF Compliant content to
potential customers of Microsoft Video Platform Devices,
including cable operators, DBS operators, television and
set top box manufacturers. Microsoft will also use
commercially reasonable efforts to include a reference
to such Wink Response Network Services in its functional
specifications for Microsoft Video Platform Devices. In
addition, Wink and Microsoft shall meet from time to
time to discuss marketing and promotional opportunities,
including opportunities for Wink to participate in
presentations, trade shows and sales and marketing
materials targeted to potential purchasers of Microsoft
Video Platform Devices.
3.3 [*]
4. WINK ICAP ENGINE
Wink and Microsoft acknowledge the mutual benefits to the parties of
concentrating their development and marketing resources on Microsoft Video
Platform Devices, promoting products and services that are compliant with the
industry standard ATVEF specification and offering Microsoft the option to
develop a Video Platform Device offering based on the Wink ICAP Engine or
Derivative Technology thereof. Notwithstanding this mutual objective, the
parties recognize that during a transition period is necessary and beneficial
for Wink to continue to provide Wink Response Network Services based on the Wink
ICAP Engine as set forth below.
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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4.1 License to Wink ICAP Engine Technology. Wink hereby
grants to Microsoft under all its intellectual property,
an exclusive (except as set forth in Section 4.3),
perpetual, royalty-free, fully paid up, worldwide
(except as set forth in Section 4.5) right and license
with respect to Microsoft Video Platform Devices to:
(a) Use, copy, edit, format, modify, translate and
create Derivative Technology of the source and
object code versions of the Wink ICAP Engine;
(b) Reproduce, license, rent, lease or otherwise
distribute, and have reproduced, licensed,
rented, leased or otherwise distributed, to and
by third parties, source and/or object code
versions of the Wink ICAP Engine, and any
Derivative Technology thereof; and
(c) Grant the rights set forth in this Section 4.1
to third parties, including the right to license
such rights to further third parties.
Except as set forth in Section 4.3 below, the foregoing
rights and license rights are exclusive to all parties,
including Wink. [*] Microsoft shall be free to market
products and services based on the Wink ICAP Engine and
Derivative Technology thereof under its own brand names
and trademarks and shall be free to remove Wink brand
names and trademarks. The foregoing rights and licenses
also include a license under any current and future
patents owned or licensable by Wink to the extent
necessary to: combine the Wink ICAP Engine or Derivative
Technology thereof with any hardware and software in
connection with Video Platform Devices.
4.2 Trademarks and Logos. Wink grants to Microsoft and its
Subsidiaries a perpetual, royalty-free, fully paid up,
worldwide right and license in connection with the
promotion, marketing and distribution of its products
and services for Microsoft Video Platform Devices to use
and reproduce the names, logos and screen shots
(collectively, "Wink Marks") used by Wink in connection
with Wink Response Network Services or the Wink ICAP
Engine. Use of the Wink Marks by Microsoft and its
Subsidiaries shall be in accordance with reasonable Wink
guidelines for the Wink Marks as are generally used by
Wink with third parties. MS will maintain quality
standards with respect to its products and services for
Microsoft Video Platform Devices that meet or exceed
industry standards and are at least commensurate with
those for products and services previously distributed
by Microsoft. Wink is the sole owner of all right, title
and interest it possesses as of the Effective
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 11
Date in and to the Wink Marks. No rights or ownership in
and to the Wink Marks are intended to be or shall be
transferred to Microsoft.
4.3 Reservation of Rights. All rights with respect to the
Wink ICAP Engine not granted under this Agreement are
expressly reserved by Wink. Except as otherwise provided
in this Agreement, the license grants set forth in
Section 4 shall not be construed as granting, by
implication, estoppel or otherwise, a license to any
other Wink Intellectual Property.
4.4 Limit on Certain License Rights Outside U.S. The license
rights granted by Wink with respect to the Wink ICAP
Engine shall not apply outside the United States in a
country or territory other than an International Service
Market in connection with:
(a) a Microsoft Video Platform Device deployed
outside the United States that was designed by
Microsoft primarily to display content created
in the Wink ICAP protocol format or a protocol
that was substantially and primarily derived
from the source code to the Wink ICAP Engine.
Wink acknowledges that (i) for purposes of this
Agreement the ATVEF Compliant format is not
substantially and primarily derived from the
Wink ICAP Engine source code and (ii) the
development of protocols or products similar to
the Wink ICAP protocol or Wink ICAP Engine by
persons who at one time had reviewed or worked
with such materials shall not constitute
development that is substantially or primarily
derived from the Wink ICAP protocol; and
(b) the operation of services that constitute
Current Response Network Services.
In the event that Microsoft makes use of the ICAP Engine in violation of
this Section, MS and Wink agree to negotiate a commercially reasonable fee for
such use.
4.5 Treatment of Continuing Obligations and Certain Video
Platform Devices and Customers. Subject to its
obligations with respect to ATVEF in Section 2.2, Wink
may, at its option, continue to sell Wink ICAP Engine
and Wink Response Network Services for Wink ICAP Engine
based Video Platform Devices as follows:
(a) to fulfill legal obligations under Existing
Contracts;
(b) [*]
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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(c) [*]
(d) In the event that both Wink and Microsoft have
fulfilled their obligations under Sections 2.5
and 3, to a customer that has notified Microsoft
of their final decision not to deploy Microsoft
Video Platform Devices and the customer has
elected to deploy a Video Platform Device that
can display ATVEF: Compliant content, the Wink
products or services offered to such customer
for the applicable Video Platform Devices shall
be capable of displaying ATVEF Compliant content
but not content that makes use of the ICAP
protocol. If the customer has elected to deploy
a device that is not capable of displaying ATVEF
Compliant content, the Wink products and
services offered to such customer for the
applicable Video Platform Device may be capable
of displaying content that makes use of the ICAP
protocol. [*]
4.6 [*]
4.7 Error Corrections. Wink shall continue to be responsible
for customer support and error corrections for its line
of Wink ICAP Engine related products, services, tools
and content sold, distributed or licensed by or on
behalf of Wink or its Subsidiaries.
5. NON-ASSERTION OF PATENTS.
[*]
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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Wink for inventions made prior to [*], or for which Wink has or acquires rights
prior to that date.
6. INVESTMENT
Contemporaneously with the execution of this Agreement, Wink and MS
shall enter into a Series D Preferred Stock Purchase Agreement and Related
Warrant Purchase Agreement that set forths the terms and conditions under which
Microsoft will invest approximately $30 million in Wink. This Agreement shall
have no effect until such time as the Stock Purchase Agreement has been executed
and its conditions to funding have been satisfied.
7. CONFIDENTIALITY
The information exchanged by the parties hereunder, including the terms
and conditions hereof, shall be subject to the Non-Disclosure Agreement between
the parties dated May 25, 1999.
8. WARRANTIES
8.1 Wink. Wink warrants and represents that:
8.1.1 It has the full power to enter into this
Agreement and make the assignments and license
rights set forth herein;
8.1.2 It has not previously and will not grant any
rights to any third party that are inconsistent
with the rights granted to Microsoft herein;
8.1.3 Microsoft's exercise of rights granted to
Microsoft hereunder in the Deliverables shall
not infringe any copyright or misappropriate any
trade secret or any other proprietary rights,
other than patent rights, held by any third
party; and
8.1.4 To the best of Wink's knowledge, Microsoft's
exercise of rights granted to Microsoft
hereunder in the Deliverables shall not infringe
or misappropriate any patent rights held by any
third party.
8.1.5 Neither Wink's execution nor performance of this
Agreement will result in a breach of any other
agreement or obligation by which Wink is bound.
8.2 Microsoft. Microsoft warrants and represents that:
8.2.1 It has the full power to enter into this
Agreement and make the assignments and license
rights set forth herein;
8.2.2 It has not previously and will not grant any
rights to any third party that are inconsistent
with the rights granted to Wink herein; and
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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8.2.3 Neither Microsoft's execution nor performance of
this Agreement will result in a breach of any other
agreement or obligation by which Microsoft is
bound.
8.3 Disclaimer. THIS SECTION 8 CONTAINS THE ONLY WARRANTIES
MADE BY MICROSOFT AND WINK. ANY AND ALL OTHER WARRANTIES
ARE EXPRESSLY EXCLUDED AND DECLINED. EXCEPT AS
EXPLICITLY SET FORTH IN SECTION 8, EACH PARTY DISCLAIMS
ANY IMPLIED WARRANTIES, PROMISES AND CONDITIONS,
INCLUDING IMPLIED OR STATUTORY WARRANTIES OF TITLE,
NON-INFRINGEMENT, MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE.
9. TERMINATION
9.1 Term. The term of this Agreement shall commence as of
the Effective Date and shall continue for a period of
ten (10) years or until terminated as provided in this
Section 10.
9.2 Termination for Cause. Either party may suspend
performance and/or terminate this Agreement immediately
upon written notice at any time if:
(a) The other party is in material breach of any
material warranty, term, condition or covenant
of this Agreement, other than those contained in
Section 7, and fails to cure that breach within
thirty (30) days after written notice thereof;
or
(b) The other party is in material breach of Section
7.
A party shall not be considered to be in breach for
purposes of this Section if such breach is directly as a
result of a delay or failure by the other party to
perform an obligation under this Agreement or deliver a
Deliverable for which it is responsible and the first
party has given notice of the breach to the other party
who then fails to cure such breach.
9.3 Effect of Termination. Sections 1, 2.5, 3.3, 7-11 shall
survive termination or expiration of this Agreement. At
Microsoft's option, Sections 2.2 and 2.3 shall survive
expiration or termination of this Agreement with respect
to Microsoft Controlled Video Platform Devices that are
Activated for Wink prior to the expiration or
termination of this Agreement, provided that in the
event MS makes this election, Microsoft's obligations
under Sections 2.1.2 and 2.1.3 shall also survive with
respect to such devices. [*]
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* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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10. LIMITATION OF LIABILITIES
10.1 NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES,
INCLUDING COSTS OF COVER, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND EVEN IN
THE EVENT THAT THE WARRANTIES AND REMEDIES SET FORTH
HEREIN ARE DEEMED TO HAVE FAILED OF THEIR ESSENTIAL
PURPOSE. IN NO EVENT SHALL EITHER PARTIES' LIABILITY
(WHETHER BASED ON AN ACTION OR CLAIM IN CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF ANY CLAIM OR ACTION BASED
UPON OR RELATED TO THIS AGREEMENT EXCEED [*].
10.2 THIS PROVISION HAS NO APPLICATION TO SECTION 7.
11. GENERAL
11.1 Notices. All notices and requests in connection with
this Agreement shall be deemed given as of the day they
are received either by messenger, delivery service, or
in the United States of America mails, postage prepaid,
certified or registered, return receipt requested, and
addressed as follows:
To Wink: To Microsoft:
Wink Communications, Inc. Microsoft Corporation
1001 Marina Village Parkway One Microsoft Way
Alameda, CA 94501 Redmond, WA 98052-6399
Attention: Chief Financial Officer Attention: V.P., Consumer
& Commerce Group
Phone: 510-337-2950 Phone: 425-882-8080
Fax: 510-337-2960 Fax: 425-936-7329
Copy to: Copy to:
Senior Vice President, US Operations Law & Corporate Affairs
Fax: 425-936-7409
or to such other address as a party may designate pursuant to
this notice provision.
11.2 Independent Contractors. Wink is an independent
contractor for Microsoft, and nothing in this Agreement
shall be construed as creating an employer-
- -------------
* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
-15-
<PAGE> 16
employee relationship, a partnership, or a joint venture
between the parties. Each party shall be solely
responsible for its salaries, benefits, and any
applicable taxes, and in no event shall the employees of
one party be considered common law employees of the
other party.
11.3 Taxes. In the event taxes are required to be withheld on
payments made under this Agreement by any U.S. (state or
federal) or foreign government, the paying party may
deduct such taxes from the amount owed the receiving
party and pay them to the appropriate taxing authority.
The paying party shall in turn promptly secure and
deliver to the receiving party an official receipt for
any taxes withheld. The paying party will use reasonable
efforts to minimize such taxes to the extent permissible
under applicable law.
11.4 Governing Law. This Agreement shall be governed by the
laws of the State of Washington as though entered into
between Washington residents and to be performed
entirely within the State of Washington, and Wink
consents to jurisdiction and venue in the state and
federal courts sitting in the State of Washington, King
County. In any action or suit to enforce any right or
remedy under this Agreement or to interpret any
provision of this Agreement the prevailing party shall
be entitled to recover its costs, including reasonable
attorneys' fees.
11.5 Assignment. This Agreement shall be binding upon and
inure to the benefit of each party's respective
successors and lawful assigns. Neither party may assign
this Agreement, whether by contract, sale of assets,
operation of law, merger or otherwise, without the prior
written approval of the other party, which approval may
be withheld in the approving party's sole discretion. In
the event that Microsoft withholds such approval in
connection with a merger by Wink or sale of all or
substantially all of Wink's assets, then Wink shall have
the right to terminate this Agreement in accordance with
its terms upon [*] days prior written notice to
Microsoft.
11.6 Construction. If for any reason a court of competent
jurisdiction finds any provision of this Agreement, or
portion thereof, to be unenforceable, that provision of
the Agreement will be enforced to the maximum extent
permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in
full force and effect. Failure by either party to
enforce any provision of this Agreement will not be
deemed a waiver of future enforcement of that or any
other provision. This Agreement has been negotiated by
the parties and their respective counsel and will be
interpreted fairly in accordance with its terms and
without any strict construction in favor of or against
either party.
11.7 Force Majeure. Neither party shall be liable for failure
or delay in the performance of any of its obligations
under this Agreement if such delay or failure is caused
by circumstances beyond the control of the party
affected.
- -------------
* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
-16-
<PAGE> 17
Strikes or other labor difficulties that are only
capable of being terminated on terms reasonably
unacceptable to the party affected shall not be
considered circumstances within the control of such
party.
11.8 Publicity and Press Matters. The parties anticipate that
they will make a mutually agreed upon announcement or
press release concerning this Agreement at a mutually
agreed upon time based on the following themes: (a) the
parties cooperation around ATVEF Compliant products and
services, (b) promotion by Wink of Microsoft Video
Platforms and (c) promotion by Microsoft of Wink
Response Network Services. Neither party shall make any
other public press release or announcement about this
Agreement or the parties' discussions without the
written consent of the other party.
11.9 Entire Agreement. This Agreement does not constitute an
offer by Microsoft and it shall not be effective until
signed by both parties. This Agreement, the
Non-Disclosure Agreement referenced in Section 7 and the
Exhibits identified below, together constitute the
entire agreement between the parties and merges and
supersedes all prior and contemporaneous communications.
It shall not be modified except by a written agreement
dated subsequent to the date of this Agreement and
signed on behalf of Wink and Microsoft by their
respective duly authorized representatives. This
Agreement may be executed by the parties in
counterparts.
12. EXHIBITS
The following Exhibits are hereby made part of this Agreement
<TABLE>
<S> <C>
Exhibit A Annual Revenue Guaranty
Exhibit B Existing Contracts
Exhibit C Schedule
Exhibit D Wink ICAP Engine
</TABLE>
-17-
<PAGE> 18
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the Effective Date written above.
MICROSOFT CORPORATION WINK COMMUNICATIONS, INC.
/s/ Jon DeVaan /s/ Maggie Wilderotter
- ------------------------------- -------------------------------
By (Sign) By (Sign)
Jon DeVaan Maggie Wilderotter
- ------------------------------- -------------------------------
Name (Print) Name (Print)
VP President & CEO
- ------------------------------- -------------------------------
Title Title
5/25/99 5/25/99
- --------------- ---------------
Date Date
-18-
<PAGE> 19
EXHIBIT A
ANNUAL REVENUE GUARANTY
<TABLE>
<S> <C>
[*]
</TABLE>
- -------------
* Confidential treatment has been requested with respect to certain
portions of this exhibit pursuant to a request for confidential treatment filed
with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
<PAGE> 20
EXHIBIT B
EXISTING CONTRACTS
1. Bresnan Communications, Co. Cable Affiliation Agreement dated 7/29/98
2. Century Communications Corp. Programming Agreement dated 11/21/97
3. Charter Communications Cable Affiliation Agreement dated 10/8/97 with
Attachment D dated 3/16/98 and Attachment E dated 3/12/99
4. Comcast Corporation Cable Affiliation Agreement dated 12/10/98
5. Cox Palos Verdes Cable Affiliation Agreement dated 1/15/99
6. DIRECTV, Inc. Master Affiliation Agreement dated 12/22/98
7. General Instrument Corporation Development and License Agreement dated
6/8/95; Addendum No. 1 dated 1/24/97; Addendum No. 2 dated 8/18/97;
Statement of Work dated 7/10/98 (aka Digital Agreement)
8. Jones Programming Services Inc. Cable Affiliation Agreement dated 5/3/98
9. Pioneer Electronic Corporation Development & License Agreement dated
1/5/98
10. Satellite Services, Inc. Agreement dated 1/1/99 (aka TCI deal)
11. Scientific-Atlanta Development & License Agreement dated 1/15/96;
Amendment No. 1 dated 1/27/98
12. Scientific-Atlanta, Inc. Joint Marketing and Support Agreement dated
8/21/98 (aka Digital Agreement)
13. Thomson Consumer Electronics, Inc. Development and License Agreement
dated 4/14/99
14. Time Warner Cable Master Cable Affiliation Agreement dated 9/23/98
15. Time Warner Cable of New York City System Addendum dated 11/25/98
16. Toshiba American Consumer Products, Inc. Engine License Agreement dated
10/6/97
17. Toshiba Corporation Wink Engine License Agreement dated 9/30/97 and
Amendment No. 1 dated 9/30/97: Amendment dated 1/15/98; Amendment No. 2
dated 12/31/98
18. Toshiba Corporation Wink Online Server for Intertext License Agreement
dated 9/30/97 & Amendment dated 9/30/97; Amendment No. 1 dated 12/31/98
19. Toshiba Corporation Wink Application Server License Agreement & Addendum
dated 9/30/97; Amendment No. 1 dated 4/1/98; Amendment No. 2 dated
4/31/98
20. Toshiba Corporation Agreement of Development of Demonstration Software
dated 1/25/99, Amendment No. 1 dated 2/25/99
<PAGE> 21
EXHIBIT C
SCHEDULE
<PAGE> 22
EXHIBIT D
WINK ICAP ENGINE
The Wink ICAP Engine shall mean the following:
1. Version 1 and 2 of the source and object code for the Wink ICAP
Engine contained in Wink's software control library, including
any tools, compilers and other products or programs necessary to
compile and create the build environment for the Wink ICAP
Engine.
2. Any related documentation which Wink has, or future
documentation which Wink may create in its sole discretion.
<PAGE> 1
EXHIBIT 10.36
WINK COMMUNICATIONS, INC.
WARRANT ISSUANCE AGREEMENT
This Warrant Issuance Agreement is made and entered into as of November
30, 1998 between Wink Communications, Inc., a California corporation (the
"Company"), and Vulcan Ventures Incorporated, a Washington corporation
("Vulcan").
WHEREAS, the Company and Vulcan have entered into certain commercial
agreements and relationships regarding the deployment of the Company's
proprietary software and technology by cable television system operators
affiliated with Vulcan; and
WHEREAS, the Company desires to provide Vulcan with warrants to purchase
Common Stock of the Company in recognition of Vulcan's activities in bringing
about such deployments.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS.
1.1 "Charter" shall mean Charter Communications, Inc., a Delaware
corporation.
1.2 "Common Stock" shall mean the Common Stock of the Company,
par value $0.001 per share, or any class or series of stock issued by the
Company in substitution therefor.
1.3 "Deployment of a Wink Engine" shall mean the completion of
all steps necessary to install and make operational Wink's end-to-end system,
including an analog or digital set-top device containing a Wink Engine, such
that the device is capable of receiving enhanced broadcasting (i.e., interactive
applications integrated with video originated by a broadcaster, content
provider, advertiser or cable programming network) from national and local
broadcasters, advertisers and cable programming services in the Vertical
Blanking Interval (VBI) or MPEG data stream of the video signal.
1.4 "Household" shall mean the residence of one or more persons.
For purposes of this Agreement, a Household shall be counted only once
regardless of the number of persons or deployed Wink Engines in that Household.
1.5 "Recapitalization" shall mean any stock split, reverse split,
stock dividend, recapitalization or the like with respect to the Common Stock.
1.6 "Rights Agreements" shall mean the Third Amended and Restated
Investor Rights Agreement dated as of June 18, 1997, as amended through the date
hereof, and the Third Amended and Registered Founders' Co-Sale Agreement dated
as of June 18, 1997, as amended through the date hereof, each among the Company,
Vulcan and certain other investors in the Company.
<PAGE> 2
1.7 "Shares" shall mean the shares of Common Stock issuable upon
exercise of either Warrant.
1.8 "Vulcan Cable Operator" shall mean Charter or any other cable
television system operator which is affiliated with Vulcan or which Vulcan
controls or has the right to acquire control of (other than a system which has
already deployed Wink Engines or has committed to deploy Wink Engines prior to
December 31, 2000). For purposes of this Agreement, "control" shall have the
meaning ascribed to it under the Federal securities laws, and a cable television
operator shall be deemed to be "affiliated" with Vulcan so long as Paul G. Allen
controls or has the right to acquire control it.
1.9 "Warrants" shall mean the warrants to purchase Common Stock
issued pursuant to Section 2.1 hereof.
1.10 "Wink Engine" shall mean the analog or digital software in
the cable set-top device that decodes Interactive Communicating Application
Protocol (ICAP) applications that Wink supplies to run and operate its enhanced
broadcasting product.
2. ISSUANCE OF WARRANTS.
In consideration for the mutual agreements and promises contained
herein, the Company agrees to issue to Vulcan two Warrants to purchase up to
250,000 shares of Common Stock in the aggregate. The numbers of shares subject
to each Warrant, and the exercisability and other terms and conditions thereof,
are as set forth in the forms of Warrants attached hereto as Exhibits A and B.
Until such time as the actual numbers of Shares subject to each Warrants have
been determined, Vulcan shall be entitled to such rights, and be subject to such
obligations, as are set forth in the Rights Agreements with respect to 250,000
shares of Common Stock, as if the Warrants were then exercisable for such
amount. Once the actual numbers of Shares, if any, subject to each Warrant have
been determined, Vulcan shall be entitled to such rights, and be subject to such
obligations, as are set forth in the Rights Agreements with respect to such
actual numbers of Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Vulcan as follows:
3.1 The Company is a corporation duly organized and existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as currently conducted.
3.2 The Company has all requisite legal and corporate power and
authority to execute and deliver this Agreement and the Rights Agreements, to
issue the Warrants, to issue the Shares upon the exercise of the Warrants and to
carry out and perform its obligations under the terms of this Agreement and the
Rights Agreement.
-2-
<PAGE> 3
3.3 All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Rights Agreements by the Company, the
authorization, issuance and delivery of the Warrants (and the Shares issuable
upon exercise of the Warrants) and the performance of the Company's obligations
hereunder and thereunder has been taken prior to the date hereof. This
Agreement, the Warrants and the Rights Agreements constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as the indemnification provisions of the Rights Agreements may be
limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. The Warrants have been validly issued and have the rights,
preferences and privileges described in the forms of Warrants attached hereto;
the Shares issuable upon exercise of the Warrants have been duly and validly
reserved and, when issued in compliance with the provisions of this Agreement
and the Warrants, will be validly issued, fully paid and non-assessable; and the
Warrants are, and when issued as above such Shares will be, free of any liens or
encumbrances, other than any liens or encumbrances created by Vulcan; provided,
however, that the Warrants (and the Shares issuable upon exercise thereof) may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or in the Rights Agreements. The Warrants (and the
Shares issuable upon exercise thereof) are not subject to any preemptive rights
or rights of first refusal or similar rights which have not been waived.
3.4 The Company is not in violation of any term of its Articles
of Incorporation or Bylaws, or in violation, in any material respect, of any
term or provision of any mortgage, note, indenture, contract, agreement,
instrument, judgment or decree, and, to the best of its knowledge, is not in
violation of any order, statute, rule or regulation applicable to the Company
where such violation would materially and adversely affect the Company. The
execution, delivery, performance of, and compliance with this Agreement and the
issuance of the Warrants (and the Common Stock issuable upon exercise of the
Warrants) have not resulted and will not result in any violation of the
Company's Articles of Incorporation or Bylaws or any material violation of, or
conflict with, or constitute a material default under, any of its agreements,
nor result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company.
4. INVESTMENT REPRESENTATIONS.
Vulcan represents and warrants to the Company as follows:
4.1 Vulcan is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Warrants. Vulcan is
acquiring the Warrants, and will acquire the Shares, for its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" for purposes of the Securities Act of 1933, as amended
(the "Act"), except as provided in Section 4.
4.2 Vulcan understands that the Warrants and the Shares have not
been registered under the Act in reliance upon a specific exemption, which
exemption depends upon, among other
-3-
<PAGE> 4
things, the bona fide nature of its investment intent as expressed herein. In
this connection, Vulcan understands that, in the view of the Securities and
Exchange Commission ("SEC"), the statutory basis for such exemption may be
unavailable if its representation was predicated solely upon a present intention
to hold the Warrants or the Shares for a period of one year or any other fixed
period in the future.
4.3 Vulcan further understands that the Warrants and the Shares
must be held indefinitely and are not fully transferable unless subsequently
registered under the Act or unless an exemption from registration is otherwise
available. Moreover, Vulcan understands that, except as set forth in the Rights
Agreement, the Company is under no obligation to register the Warrants or the
Shares. In addition, the Purchaser understands that the Warrants and the Shares
will be imprinted with a legend which prohibits the transfer of the Warrants or
the Shares unless they are registered or such registration is not required under
the Act in the opinion of counsel reasonably satisfactory to the Company.
4.4 Vulcan is aware of the provisions of Rule 144, promulgated
under the Act, which in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly from the issuer (or from an
affiliate of the issuer), in a non-public offering subject to the satisfaction
of certain conditions, including, in case Vulcan has held the securities less
than two years or is an affiliate of the Company: (1) the resale occurring not
less than one year after the party has purchased and paid for the securities to
be sold; (2) the availability of certain public information about the Company;
(3) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said terms are
defined under the Securities Exchange Act of 1934); (4) the amount of securities
being sold during any three-month period not exceeding certain specified
limitations and (5) the filing of a Notice of Sale on Form 144 as appropriate.
4.5 Vulcan further understands that at the time it wishes to sell
the Warrants or the Shares there may be no public market upon which to make such
a sale, and that, even if such a public market then exists the Company may not
be satisfying the current public information requirements of Rule 144, and that,
in such event, Vulcan would be precluded from selling the Warrants or Shares
under Rule 144 unless (1) a one-year minimum holding period had been satisfied
and (2) it was not at the time of sale nor at any time during the three-month
period prior to such sale an affiliate (as defined under the Act) of the
Company.
4.6 Vulcan further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Act, compliance with Regulation A or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 may have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
that such persons and their respective brokers who participate in such
transaction do so at their own risk.
-4-
<PAGE> 5
5. LEGENDS.
5.1 Each Warrant shall be endorsed with the following legend (in
addition to any legend required by applicable state securities laws):
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED UPON THE EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH SALE, OFFER OR PLEDGE IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND
OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO
RULE 144 OF THE ACT.
5.2 Each certificate representing Shares shall be endorsed with
the following legend (in addition to any legend required by applicable state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
SALE, OFFER OR PLEDGE IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO RULE 144 OF THE
ACT.
5.3 Subject to Section 5.4, the Company need not register a
transfer of any Warrant or any of the Shares unless the conditions specified in
the foregoing legends are satisfied. The Company may also instruct its transfer
agent not to register the transfer of any Warrant or any of the Shares unless
such conditions are satisfied.
5.4 The legend relating to the Act endorsed on the Warrants or a
stock certificate representing the Shares pursuant to this Section 5 and the
stop transfer instructions with respect to the Warrants or the Shares
represented by such certificate shall be removed and the Company shall issue a
new Warrant or certificate, as applicable, without such legend to the holder of
the Warrant or such Shares if the transfer of such Shares is registered under
the Act and a prospectus meeting the requirements of Section 10 of the Act is
available, or if such holder provides to the Company an opinion of counsel for
such holder of the Warrant or the Shares reasonably satisfactory to the Company
or a no-action letter or interpretive opinion of the staff of the SEC to the
effect that a public sale, transfer or
-5-
<PAGE> 6
assignment of such Shares may be made without registration and without
compliance with any restriction such as Rule 144.
6. ASSIGNMENT.
This Agreement shall bind and benefit the respective parties to
this Agreement and their successors and assigns; provided that Vulcan shall not
be entitled to assign the right to purchase any Shares under either Warrant
until such Warrant has been issued, other than to an entity directly or
indirectly controlled by Paul G. Allen, or in which Mr. Allen has an equity
investment of not less than $100 million in value.
7. GENERAL.
7.1 All notices and other communications required or permitted
hereunder shall be effective upon receipt and shall be in writing and may be
delivered in person, by telecopy, overnight delivery service or U.S. mail, in
which event it may be mailed by first-class, certified or registered, postage
prepaid, addressed:
(a) if to Vulcan, at:
Vulcan Ventures Incorporated
110 110th Avenue, N.E.
Suite 550
Bellevue, WA 98004
Attention: William D. Savoy
or at such other address as Vulcan furnishes in writing to the Company, or
(b) if to the Company, at:
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, California 94501
Attention: Maggie Wilderotter
or at such other address as the Company shall have furnished to Vulcan in
writing.
7.2 This Agreement shall be governed in all respects by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within
California.
7.3 The waiver of one breach or default shall not constitute the
waiver of any subsequent breach or default. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
-6-
<PAGE> 7
7.4 Neither this Agreement nor any provisions hereof may be
changed, waived, discharged or terminated orally, but only by a writing signed
by all parties hereto.
7.5 This Agreement, together with the Warrants and the Rights
Agreement, constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter of this Agreement.
7.6 This Agreement may be signed in one or more counterparts,
each of which shall be an original, and all of which together shall be deemed to
constitute one instrument.
7.7 The titles of the paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
7.8 THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION,
IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS
OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Remainder of page intentionally left blank]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth at the beginning of this Agreement.
WINK COMMUNICATIONS, INC. VULCAN VENTURES INCORPORATED
By: /s/ Paritosh K. Choksi By: /s/ William Savoy
------------------------------- ------------------------------
Title: CFO Title: Vice President
---------------------------- --------------------------
Dated: Date: November 30, 1998
---------------------------- ---------------------------
Warrant Issuance Agreement
9
<PAGE> 9
EXHIBIT A
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER OR
PLEDGE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
VOID AFTER JANUARY 31, 2004
WINK COMMUNICATIONS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Vulcan Ventures Incorporated
(the "HOLDER") is entitled to subscribe for and purchase such number (as
adjusted pursuant to Section 4 hereof) of shares of fully paid and
non-assessable Common Stock (the "SHARES") of Wink Communications, Inc., a
California corporation (the "COMPANY") as is determined pursuant to Section 1
hereof, at the price of $12.00 per share (the "EXERCISE PRICE") (as adjusted
pursuant to Section 4 hereof), subject to the provisions and upon the terms and
conditions hereinafter set forth.
1. Number of Shares Subject to Warrant.
(a) Number of Shares Calculation. The number of shares for which
this Warrant may be exercised shall be equal to (i) the number of Households in
which Vulcan Cable Operators deploy a Wink Engine during calendar 1999 and in
which such Wink Engine remains deployed for at least one year after the date of
deployment, divided by (ii) five (5) (subject to appropriate adjustment pursuant
to Section 4 hereof); provided, however, that in no event shall the number of
Shares subject to this Warrant exceed 250,000.
(b) Report on Deployments. In order to enable the calculation set
forth in Section 1(a) to be made, Vulcan shall deliver to the Company on January
5, 2001 a report setting forth the number of Households in which Vulcan Cable
Operators deployed a Wink Engine during
<PAGE> 10
calendar 1999 and in which such Wink Engine remained deployed for at least one
year after the date of deployment. The Company shall have until January 31, 2001
to examine such report and make inquiry as to its accuracy, after which time
(absent any open issues or manifest error) the report shall be deemed to be
accurate.
2. Exercise; Payment.
(a) Time of Exercise. This Warrant shall become exercisable on
the later of (i) February 1, 2001, and (ii) sixteen (16) days after Vulcan has
delivered to the Company a report (which report the Company will have fifteen
(15) days to examine and make inquiry as to its accuracy, after which time
(absent any open issues or manifest error) such report shall be deemed to be
accurate) demonstrating that the number of Households in which Vulcan Cable
Operators have deployed a Wink Engine since January 1, 1999 equals or exceeds
200,000. Notwithstanding the foregoing, if this Warrant has not become
exercisable pursuant to the foregoing sentence by January 16, 2002, then this
Warrant shall terminate and no shares may be purchased hereunder.
(b) Method of Exercise.
(i) Cash Exercise. The purchase rights represented by
this Warrant may be exercised by the Holder, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Attachment 1 duly executed) at the principal office of the Company, and by the
payment to the Company, by certified, cashier's or other check acceptable to the
Company, of an amount equal to the aggregate Exercise Price of the Shares being
purchased.
(ii) Net Issue Exercise. In lieu of exercising this
Warrant for cash, the Holder may elect to receive Shares equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of the Company's Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares purchasable under this Warrant.
A = the fair market value of one share of the Company's Common Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(iii) Fair Market Value. For purposes of this Section 2,
the fair market value of the Company's Common Stock shall mean:
-2-
<PAGE> 11
(A) The closing ask price of the Company's
Common Stock quoted in the NASDAQ Over-the-Counter Market Summary or the closing
price quoted on any exchange on which the Common Stock is listed, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the ten trading days prior to the date of determination of fair market value
(provided, however, if this Warrant is exercised in connection with the
Company's initial offering of its securities to the public, the fair market
value shall be deemed to be the gross price to the public per share in such
offering);
(B) If the Company's Common Stock is not traded
Over-the-Counter or on an exchange, the per share fair market value of the
Common Stock shall be the fair market value price per share as determined in
good faith by the Company's Board of Directors.
(c) Stock Certificates. Any exercise of this Warrant shall be
deemed to have occurred immediately prior to the close of business on the date
of its surrender for exercise as provided above, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of Common Stock so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and non-assessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. Subject to the
provisions of Section 12 hereof, the number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of the Common Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation as the case may be, shall in
connection with such transaction execute a new Warrant, providing that the
holder of this Warrant shall have the right to exercise such new Warrant, and
procure upon such exercise and payment of the same aggregate Exercise Price, in
lieu of the shares of Common Stock theretofore issuable upon
-3-
<PAGE> 12
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation, sale of all or substantially all of the Company's assets or
merger by a holder of an equivalent number of shares of Common Stock. Such new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subsection (a), subject to Section 12 hereof, shall similarly apply to
successive reclassifications, changes, consolidations, mergers, transfers and
the sale of all or substantially all of the Company's assets.
(b) Stock Splits, Dividends and Combinations. In the event that
the Company shall at any time subdivide the outstanding shares of Common Stock
or shall issue a stock dividend on its outstanding shares of Common Stock the
number of Shares issuable upon exercise of this Warrant immediately prior to
such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
5. Notice of Adjustments. Whenever the number of Shares purchasable
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 4
hereof, the Company shall provide notice by first class mail to the holder of
this Warrant setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of Shares which may be purchased and the Exercise
Price therefor after giving effect to such adjustment.
6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of such fractional
shares the Company shall make a cash payment therefor based upon the Exercise
Price then in effect.
7. Representations of the Company. The Company represents that all
corporate actions on the part of the Company, its officers, directors and
shareholders necessary for the sale and issuance of the Shares pursuant hereto
and the performance of the Company's obligations hereunder were taken prior to
and are effective as of the effective date of this Warrant.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof
are being acquired for its own account, for investment and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "ACT"). Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
-4-
<PAGE> 13
(b) The Holder understands that the Warrant and the Shares have
not been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration. The Holder further
understands that the Shares have not been qualified under the California
Securities Law of 1968 (the "CALIFORNIA LAW") by reason of their issuance in a
transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase
of the Shares pursuant to the terms of this Warrant.
9. Restrictive Legend.
The Shares issuable upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH SALE, OFFER OR PLEDGE IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND
OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO
RULE 144 OF THE ACT.
In addition, the Shares issuable upon exercise of this Warrant shall be stamped
or imprinted with all legends required by the Third Amended and Restated
Investor Rights Agreement dated as of June 18, 1997, as amended through the date
of such exercise.
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of Shares bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied. The
-5-
<PAGE> 14
Company may also instruct its transfer agent not to register the transfer of the
Shares, unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder or individual partner of a holder,
in whole or in part, to his spouse or siblings, or to the lineal descendants or
ancestors of such holder or his spouse, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if such transferee were the
original holder hereunder.
(c) In order to effect any transfer of all or a portion of this
Warrant or the Shares, the transferor shall deliver a completed and duly
executed Notice of Transfer (attached hereto as Attachment 3).
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable (to the extent, if at all, it has been come exercisable prior to
such expiration) upon the earlier to occur of:
(a) 5:00 p.m., California local time, on January 16, 2002, if the
Warrant has not become exercisable on or prior to such date;
(b) 5:00 p.m., California local time, on January 31, 2004;
(c) The closing of a merger or consolidation of the Company into
a third party pursuant to which the Company's shareholders immediately prior to
such merger or consolidation own less than fifty percent (50%) of the
outstanding voting securities of the surviving entity; or
(d) The closing of a sale of all or substantially all of the
assets of the Company.
-6-
<PAGE> 15
13. Notices, Etc. All notices and other communications from the Company
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by the Holder.
[Remainder of page intentionally left blank]
-7-
<PAGE> 16
14. Governing Law, Headings. This Warrant is being delivered in the
State of California and shall be construed and enforced in accordance with and
governed by the laws of such State. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
Issued this ____ day of ____________________.
WINK COMMUNICATIONS, INC.
By: /s/ Maggie Wilderotter
-------------------------------------
Maggie Wilderotter
Chief Executive Officer and President
-8-
<PAGE> 17
ATTACHMENT A-1
NOTICE OF EXERCISE
TO: WINK COMMUNICATIONS, INC.
1001 Marina Village Parkway
Alameda, CA 94501
Attention: President
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of WINK COMMUNICATIONS, INC. pursuant to the terms of the attached
Warrant.
2. Method of Exercise (Please mark the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b)(ii)
of the Warrant.
3. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in Section 8 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned hereby
delivers an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Attachment 2.
-------------------------------------
(Signature)
- ------------------- Title:
(Date) ------------------------------
<PAGE> 18
ATTACHMENT A-2
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : _________________________
SELLER : WINK COMMUNICATIONS, INC.
ISSUER : WINK COMMUNICATIONS, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE STOCK
PURCHASE WARRANT ISSUED ON NOVEMBER 30, 1998
AMOUNT : __________ SHARES
DATE : ______________
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Purchaser is
purchasing these Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, Purchaser understands
that, in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if its representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
(c) Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, Purchaser understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired,
<PAGE> 19
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. In particular, the Securities
may be resold in certain limited circumstances subject to the provisions of Rule
144, which requires among other things: (1) the availability of certain public
information about the Company, (2) the resale occurring not less than one year
after the party has purchased, and made full payment for, within the meaning of
Rule 144, the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities not less than two years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) Purchaser agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by the undersigned (other than
those shares included in the registration) without the prior written consent of
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration, and (2) Purchaser further agrees to execute
any agreement reflecting (1) above as may be requested by the underwriters at
the time of the public offering.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 are
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
PURCHASER
By:
------------------------------------
Title:
----------------------------------
Date:
------------------------------------
-11-
<PAGE> 20
ATTACHMENT A-3
NOTICE OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________* shares of Common Stock of WINK
COMMUNICATIONS INC., to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of WINK
COMMUNICATIONS, INC., with full power of substitution in the premises.
Dated:
---------------------
------------------------------------------
By:
---------------------------------------
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
------------------------------------------
(Address)
Signed in the presence of:
- -----------------------------
* Insert here the number of shares without making any adjustment for additional
shares of Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of the Warrant, may be
deliverable upon exercise.
<PAGE> 21
EXHIBIT B
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER OR
PLEDGE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
VOID AFTER JANUARY 31, 2005
WINK COMMUNICATIONS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
----------
THIS CERTIFIES THAT, for value received, Vulcan Ventures Incorporated
(the "HOLDER") is entitled to subscribe for and purchase such number (as
adjusted pursuant to Section 4 hereof) of shares of fully paid and
non-assessable Common Stock (the "SHARES") of Wink Communications, Inc., a
California corporation (the "COMPANY") as is determined pursuant to Section 1
hereof, at the price of $16.00 per share (the "EXERCISE PRICE") (as adjusted
pursuant to Section 4 hereof), subject to the provisions and upon the terms and
conditions hereinafter set forth.
1. Number of Shares Subject to Warrant.
(a) Number of Shares Calculation. The number of shares for which
this Warrant may be exercised shall be equal to (i) the number of Households in
which Vulcan Cable Operators deploy a Wink Engine during calendar 2000 and in
which such Wink Engine remains deployed for at least one year after the date of
deployment, divided by (ii) five (5) (subject to appropriate adjustment pursuant
to Section 4 hereof); provided, however, that in no event shall the number of
Shares subject to this Warrant exceed 250,000 less the number of Shares subject
to the other warrant issued pursuant to the Warrant Issuance Agreement dated as
of November 30, 1998.
(b) Report on Deployments. In order to enable the calculation set
forth in Section 1(a) to be made, Vulcan shall deliver to the Company on January
15, 2002 a report setting
<PAGE> 22
forth the number of Households in which Vulcan Cable Operators deployed a Wink
Engine during calendar 2000 and in which such Wink Engine remained deployed for
at least one year after the date of deployment. The Company shall have until
January 31, 2002 to examine such report and make inquiry as to its accuracy,
after which time (absent any open issues or manifest error) the report shall be
deemed to be accurate.
2. Exercise; Payment.
(a) Time of Exercise. This Warrant shall become exercisable on
February 1, 2002; provided, however, that if, on or prior to December 31, 2001,
Vulcan has not delivered to the Company a report (which report the Company will
have fifteen (15) days to examine and make inquiry as to its accuracy, after
which time (absent any open issues or manifest error) such report shall be
deemed to be accurate) demonstrating that the number of Households in which
Vulcan Cable Operators have deployed a Wink Engine since January 1, 1999 equals
or exceeds 200,000, then this Warrant shall terminate and no shares may be
purchased hereunder.
(b) Method of Exercise.
(i) Cash Exercise. The purchase rights represented by
this Warrant may be exercised by the Holder, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Attachment 1 duly executed) at the principal office of the Company, and by the
payment to the Company, by certified, cashier's or other check acceptable to the
Company, of an amount equal to the aggregate Exercise Price of the Shares being
purchased.
(ii) Net Issue Exercise. In lieu of exercising this
Warrant for cash, the Holder may elect to receive Shares equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the Holder a number of
shares of the Company's Common Stock computed using the following formula:
X = Y(A-B)
------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares purchasable under this Warrant.
A = the fair market value of one share of the Company's Common Stock.
B = the Exercise Price (as adjusted to the date of such calculation)
(iii) Fair Market Value. For purposes of this Section 2,
the fair market value of the Company's Common Stock shall mean:
-2-
<PAGE> 23
(A) The closing ask price of the Company's
Common Stock quoted in the NASDAQ Over-the-Counter Market Summary or the closing
price quoted on any exchange on which the Common Stock is listed, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the ten trading days prior to the date of determination of fair market value
(provided, however, if this Warrant is exercised in connection with the
Company's initial offering of its securities to the public, the fair market
value shall be deemed to be the gross price to the public per share in such
offering);
(B) If the Company's Common Stock is not traded
Over-the-Counter or on an exchange, the per share fair market value of the
Common Stock shall be the fair market value price per share as determined in
good faith by the Company's Board of Directors.
(c) Stock Certificates. Any exercise of this Warrant shall be
deemed to have occurred immediately prior to the close of business on the date
of its surrender for exercise as provided above, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of Common Stock so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and non-assessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. Subject to the
provisions of Section 12 hereof, the number and kind of securities purchasable
upon the exercise of this Warrant and the Exercise Price therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of the Common Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation as the case may be, shall in
connection with such transaction execute a new Warrant, providing that the
holder of this Warrant shall have the right to exercise such new Warrant, and
procure upon such exercise and payment of the same aggregate Exercise Price, in
lieu of the shares of Common Stock theretofore issuable upon
-3-
<PAGE> 24
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation, sale of all or substantially all of the Company's assets or
merger by a holder of an equivalent number of shares of Common Stock. Such new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subsection (a), subject to Section 12 hereof, shall similarly apply to
successive reclassifications, changes, consolidations, mergers, transfers and
the sale of all or substantially all of the Company's assets.
(b) Stock Splits, Dividends and Combinations. In the event that
the Company shall at any time subdivide the outstanding shares of Common Stock
or shall issue a stock dividend on its outstanding shares of Common Stock the
number of Shares issuable upon exercise of this Warrant immediately prior to
such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
5. Notice of Adjustments. Whenever the number of Shares purchasable
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 4
hereof, the Company shall provide notice by first class mail to the holder of
this Warrant setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of Shares which may be purchased and the Exercise
Price therefor after giving effect to such adjustment.
6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of such fractional
shares the Company shall make a cash payment therefor based upon the Exercise
Price then in effect.
7. Representations of the Company. The Company represents that all
corporate actions on the part of the Company, its officers, directors and
shareholders necessary for the sale and issuance of the Shares pursuant hereto
and the performance of the Company's obligations hereunder were taken prior to
and are effective as of the effective date of this Warrant.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise thereof
are being acquired for its own account, for investment and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended (the "ACT"). Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
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<PAGE> 25
(b) The Holder understands that the Warrant and the Shares have
not been registered under the Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) thereof, and that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Act or is exempted from such registration. The Holder further
understands that the Shares have not been qualified under the California
Securities Law of 1968 (the "CALIFORNIA Law") by reason of their issuance in a
transaction exempt from the qualification requirements of the California Law
pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase
of the Shares pursuant to the terms of this Warrant.
9. Restrictive Legend.
The Shares issuable upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH SALE, OFFER OR PLEDGE IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND
OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO
RULE 44 OF THE ACT.
In addition, the Shares issuable upon exercise of this Warrant shall be stamped
or imprinted with all legends required by the Third Amended and Restated
Investor Rights Agreement dated as of June 18, 1997, as amended through the date
of such exercise.
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of Shares bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied. The
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<PAGE> 26
Company may also instruct its transfer agent not to register the transfer of the
Shares, unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder or individual partner of a holder,
in whole or in part, to his spouse or siblings, or to the lineal descendants or
ancestors of such holder or his spouse, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if such transferee were the
original holder hereunder.
(c) In order to effect any transfer of all or a portion of this
Warrant or the Shares, the transferor shall deliver a completed and duly
executed Notice of Transfer (attached hereto as Attachment 3).
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable (to the extent, if at all, it has been come exercisable prior to
such expiration) upon the earlier to occur of:
(a) 5:00 p.m., California local time, on January 16, 2002, if the
condition set forth in Section 2(a) has not been satisfied as of December 31,
2001;
(b) 5:00 p.m., California local time, on January 31, 2005;
(c) The closing of a merger or consolidation of the Company into
a third party pursuant to which the Company's shareholders immediately prior to
such merger or consolidation own less than fifty percent (50%) of the
outstanding voting securities of the surviving entity; or
(d) The closing of a sale of all or substantially all of the
assets of the Company.
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<PAGE> 27
13. Notices, Etc. All notices and other communications from the Company
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by the Holder.
[Remainder of page intentionally left blank]
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<PAGE> 28
14. Governing Law, Headings. This Warrant is being delivered in the
State of California and shall be construed and enforced in accordance with and
governed by the laws of such State. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
Issued this ____ day of ____________________.
WINK COMMUNICATIONS, INC.
By: /s/ Maggie Wilderotter
-----------------------------------
Maggie Wilderotter
Chief Executive Officer and President
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<PAGE> 29
ATTACHMENT B-1
NOTICE OF EXERCISE
TO: WINK COMMUNICATIONS, INC.
1001 Marina Village Parkway
Alameda, CA 94501
Attention: President
1. The undersigned hereby elects to purchase __________ shares of Common
Stock of WINK COMMUNICATIONS, INC. pursuant to the terms of the attached
Warrant.
2. Method of Exercise (Please mark the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b)(ii)
of the Warrant.
3. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in Section 8 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned hereby
delivers an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Attachment 2.
------------------------------------------
(Signature)
- ----------------------------------- Title:
(Date) ------------------------------------
<PAGE> 30
ATTACHMENT B-2
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : _________________________
SELLER : WINK COMMUNICATIONS, INC.
ISSUER : WINK COMMUNICATIONS, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE STOCK PURCHASE WARRANT
ISSUED ON NOVEMBER 30, 1998
AMOUNT : __________ SHARES
DATE : ______________
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Purchaser is
purchasing these Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, Purchaser understands
that, in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if its representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
(c) Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, Purchaser understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired,
<PAGE> 31
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. In particular, the Securities
may be resold in certain limited circumstances subject to the provisions of Rule
144, which requires among other things: (1) the availability of certain public
information about the Company, (2) the resale occurring not less than one year
after the party has purchased, and made full payment for, within the meaning of
Rule 144, the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities not less than two years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) Purchaser agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by the undersigned (other than
those shares included in the registration) without the prior written consent of
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration, and (2) Purchaser further agrees to execute
any agreement reflecting (1) above as may be requested by the underwriters at
the time of the public offering.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 are
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
PURCHASER
By:
---------------------------------------
Title:
------------------------------------
Date:
-------------------------------------
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<PAGE> 32
ATTACHMENT B-3
NOTICE OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________* shares of Common Stock of WINK
COMMUNICATIONS INC., to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of WINK
COMMUNICATIONS, INC., with full power of substitution in the premises.
Dated:
-----------------------
------------------------------------------
By:
---------------------------------------
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
-------------------------------------------
(Address)
Signed in the presence of:
- -----------------------------
* Insert here the number of shares without making any adjustment for additional
shares of Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of the Warrant, may be
deliverable upon exercise.
<PAGE> 1
EXHIBIT 10.40
WINK COMMUNICATIONS, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 17, 1999 between Wink Communications,
Inc., a California corporation (the "Company"), and Howard L. Schrott
("Purchaser").
WHEREAS Purchaser is an employee of or consultant to the Company whose
continued affiliation with the Company is considered to be important for the
Company's continued growth; and
WHEREAS in order to provide Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for Purchaser to continue to
participate in the affairs of the Company, the Company is willing to sell to
Purchaser and Purchaser desires to purchase shares of Common Stock according to
the terms and conditions hereof;
THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to sell to Purchaser and Purchaser
agrees to purchase from the Company 250,000 shares of the Company's Common Stock
(the "Stock") at a price of $8.00 per share, for an aggregate purchase price of
$2,000,000.00. The purchase price for the Stock shall be paid by a full recourse
promissory note in substantially the form attached hereto as Exhibit A (the
"Note"). Purchaser shall be required to execute and deliver a Security Agreement
in the form attached hereto as Exhibit B. The Note shall be secured by a pledge
of the Stock purchased by the Note pursuant to the Security Agreement. Upon such
payment, the Company shall issue a duly executed certificate evidencing the
Stock in the name of Purchaser to be held pursuant to the escrow described in
Section 7 hereof.
2. REPURCHASE OPTION AND RELEASE OF SHARES.
(a) REPURCHASE OPTION.
(i) In the event of any voluntary or involuntary
termination of Purchaser's employment by or consulting services to the Company
(including as a result of death or disability) before all shares of the Stock
are released from the Company's repurchase option under Section 2(b) below, the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company) have an irrevocable, exclusive option for a period of
twenty-four (24) months from such date to repurchase all or any portion of the
Stock which has not been released from the repurchase option described in this
Section 2 (the "Repurchase Option") at the time of such termination at the
original purchase price per share. The Repurchase Option shall be exercised by
the Company by written notice to Purchaser or his/her executor (with a copy to
the Escrow Agent described in Section 7 hereof) and, at the Company's option,
(A) by delivery to Purchaser or his/her executor with such notice of a check in
the amount of the aggregate repurchase price for the Stock being repurchased,
(B) by cancellation by the Company of an amount of Purchaser's indebtedness to
the Company equal to the aggregate repurchase price for the Stock being
repurchased, or (C) by a combination of (A) and (B) so that the combined
<PAGE> 2
payment and cancellation of indebtedness equals such aggregate repurchase price.
Upon delivery of such notice and the payment of the aggregate repurchase price
in any of the ways described above, the Company shall become the legal and
beneficial owner of the Stock being repurchased and all rights and interests
therein or relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of shares of the Stock being repurchased by
the Company.
(ii) Whenever the Company shall have the right to
repurchase shares of the Stock hereunder, the Company may designate and assign
one or more employees, officers, directors or shareholders of the Company or
other persons or organizations to exercise all or a part of the Company's
repurchase rights under this Agreement and to purchase all or a part of such
Stock; provided that if the aggregate fair market value of the Stock to be
repurchased on the date of such designation or assignment ("Repurchase FMV")
exceeds the aggregate repurchase price of the Stock to be repurchased, then each
such designee or assignee shall pay the Company cash equal to the difference
between the Repurchase FMV and the aggregate repurchase price of the Stock which
such designee or assignee shall have the right to repurchase.
(b) RELEASE OF SHARES FROM REPURCHASE OPTION.
(i) One-fourth (1/4th) of the Stock shall be
released from the Company's Repurchase Option on May 17, 2000 and 1/48th of the
Stock shall be released from the Company's Repurchase Option on each monthly
anniversary of May 17, 2000 until all shares of the Stock have been released;
provided in each case that there has not been any voluntary or involuntary
termination prior to each such date of release.
(ii) This Agreement shall not confer upon Purchaser
any right with respect to employment by the Company, nor shall it interfere with
or affect in any manner the right or power of the Company, or a parent or
subsidiary of the Company, to terminate Purchaser's employment or consulting
relationship with the Company, which right is hereby reserved.
(c) SPECIAL TERMINATION OF REPURCHASE OPTION. In the event
0of any of the following transactions (a "Corporate Transaction"):
(i) A merger or acquisition in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
(ii) The sale, transfer or other disposition of all
or substantially all of the assets of the Company; or
(iii) Any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the Company's
outstanding voting stock is transferred to holders different from those who held
the stock immediately prior to such merger,
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<PAGE> 3
then the Repurchase Option shall automatically lapse as to 50% of the number of
shares then still subject to the Repurchase Option, and Purchaser shall acquire
a vested interest in such Shares, effective upon the consummation of such
Corporate Transaction; provided, however, that Purchaser's employment or
consulting services shall not have terminated prior to the consummation of such
Corporate Transaction.
3. STOCK SPLITS, ETC. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of
cash and/or property, stock split or other change in the character or amount of
any of the outstanding securities of the Company; or
(b) Subject to Section 2(c) hereof, there is any
consolidation, merger or sale of all, or substantially all, of the assets of the
Company; then, in such event, any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of the Stock shall be immediately subject to this
Agreement and be included in the word "Stock" for all purposes with the same
force and effect as the shares of Stock currently subject to the Repurchase
Option and other terms of this Agreement. While the aggregate repurchase price
payable upon execution of the Repurchase Option shall remain the same after each
such event, the repurchase price per share of Stock shall be appropriately
adjusted.
4. RESTRICTION ON TRANSFER. Purchaser shall not sell, transfer,
pledge, hypothecate or otherwise dispose of any shares of the Stock which remain
subject to the Repurchase Option. The Company shall not be required (i) to
transfer on its books any shares of Stock which shall have purportedly been sold
or transferred in violation of any of the provisions set forth in this
Agreement, or (ii) to treat as owner of such shares or to accord the right to
vote as such owner or to pay dividends to any purported transferee to whom such
shares shall have been purportedly transferred.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The share certificate evidencing the Stock
issued hereunder shall be endorsed with the following legends (in addition to
any legends required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
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<PAGE> 4
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order
to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
6. PURCHASER'S REPRESENTATIONS AND COVENANTS. In connection with
the purchase of the Stock, Purchaser hereby represents and warrants to the
Company as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS.
Purchaser is purchasing the Stock solely for Purchaser's own account for
investment and not with a view to or for sale in connection with any
distribution of the Stock or any portion thereof and not with any present
intention of selling, offering to sell or otherwise disposing of or distributing
the Stock or any portion thereof. Purchaser also represents that the entire
legal and beneficial interest of the Stock is being purchased, and will be held,
for Purchaser's account only, and neither in whole or in part for any other
person. Purchaser either (i) has a pre-existing business or personal
relationship with the Company or at least one of its officers, directors or
controlling persons, or (ii) by reason of Purchaser's business or financial
experience (or the business or financial experience of Purchaser's professional
advisors who are unaffiliated with and who are not compensated by the Company or
any affiliate or selling agent of the Company, directly or indirectly), can be
reasonably assumed to have the capacity to evaluate the merits and risks of an
investment in the Company and to protect Purchaser's own interests in connection
with this transaction.
(b) RESIDENCE. Purchaser's principal residence is within the
State of California and is located at the address indicated beneath Purchaser's
signature below.
(c) INFORMATION CONCERNING COMPANY. Purchaser has discussed
the Company and its plans, operations and financial condition with the Company's
officers and has received all such information as Purchaser has deemed necessary
and appropriate to enable Purchaser to evaluate the financial risk inherent in
making an investment in the Stock. Purchaser has received satisfactory and
complete information concerning the business and financial condition of the
Company in response to all inquiries in respect thereof.
(d) ECONOMIC RISK. Purchaser realizes that the purchase of
the Stock will be a highly speculative investment and involves a high degree of
risk. Purchaser is able, without impairing Purchaser's financial condition, to
hold the Stock for an indefinite period of time and to suffer a complete loss on
Purchaser's investment.
(e) RESTRICTED SECURITIES. Purchaser understands and
acknowledges that:
(i) The Stock has not been registered under the
Securities Act of 1933, as amended, in reliance upon a specific exemption
therefrom, which exemption depends upon, among
-4-
<PAGE> 5
other things, the bona fide nature of Purchaser's investment intent as expressed
herein. In this connection, Purchaser understands that, in the view of the
Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if Purchaser's representation was predicated solely
upon a present intention to hold the Stock for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Stock, or for a period of one year or any
other fixed period in the future.
(ii) The Stock must be held indefinitely unless it is
subsequently registered under the Securities Act or unless an exemption from
such registration is otherwise available. Purchaser further acknowledges and
understands that the Company is under no obligation to register the Stock. In
addition, Purchaser understands that the certificate evidencing the Stock will
be imprinted with a legend which prohibits the transfer of the Stock unless it
is registered or such registration is not required in the opinion of counsel
satisfactory to the Company.
(f) DISPOSITION UNDER RULE 144. Purchaser understands that:
(i) The shares of Stock are restricted securities
within the meaning of Rule 144 promulgated under the Securities Act; that the
exemption from registration under Rule 144 will not be available in any event
for at least one (1)) year from the date of purchase and payment of the Stock,
and even then will not be available unless (i) a public trading market then
exists for the Common Stock of the Company, (ii) adequate information concerning
the Company is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Stock may be
made only in limited amounts in accordance with such terms and conditions of
Rule 144;
(ii) That at the time Purchaser wishes to sell the
Stock there may be no public market upon which to make such a sale; that, even
if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144; and that, in such event,
Purchaser would be precluded from selling the Stock under Rule 144 even if the
one (1) year minimum holding period had been satisfied; and
(iii) In the event all of the requirements of Rule 144
are not satisfied, registration under the Securities Act or compliance with
Regulation A or another registration exemption will be required; that,
notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering or pursuant to Rule 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales; and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
(g) FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting Purchaser's representations set forth above, Purchaser further agrees
that Purchaser shall in no event make any disposition of all or any portion of
the Stock unless and until:
-5-
<PAGE> 6
(i) Either:
(A) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition, and such
disposition is made in accordance with said Registration Statement; or
(B) (1) Purchaser 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;
(2) Purchaser shall have furnished the Company with an opinion of Purchaser's
counsel to the effect that such disposition will not require registration of
such shares under the Securities Act; and (3) such opinion of Purchaser's
counsel shall have been concurred in by counsel for the Company, and the Company
shall have advised Purchaser of such concurrence; and,
(ii) The shares of Stock proposed to be transferred
are no longer subject to the Repurchase Option set forth in Section 2 hereof,
and Purchaser shall have complied with the Standoff Agreement set forth in
Section 9 hereof.
(h) VALUATION OF COMMON STOCK.
(i) Purchaser understands that the Stock has been
valued by the Company's Board of Directors and that the Company believes this
valuation represents a fair attempt at reaching an accurate appraisal of its
worth. Purchaser understands, however, that the Company can give no assurances
that such price is in fact the fair market value of the Stock, and that it is
possible that, with the benefit of hindsight, the Internal Revenue Service would
successfully assert that the value of the Stock on the date of purchase is
substantially greater than so determined.
(ii) If the Internal Revenue Service were to succeed
in a tax determination that the Stock had a value greater than that upon which
this transaction is based, the additional value would constitute ordinary income
to Purchaser as of the date of its receipt. The additional taxes (and interest)
due would be payable by Purchaser. There is no provision for the Company to
reimburse Purchaser for that tax liability, and Purchaser assumes all
responsibility therefor. Furthermore, in the event such additional value
represents more than twenty-five percent (25%) of Purchaser's gross income for
the year in which the value of the shares would be taxable, the Internal Revenue
Service would have six (6) years from the due date for filing the return for
such year (or the actual filing date of the return if filed thereafter) within
which to assess Purchaser the additional tax and interest which would then be
due.
(iii) The Company would have the benefit, in any such
transaction, if a determination was made prior to the three (3) year statute of
limitations period affecting the Company, of an increase in its deduction for
compensation paid, which would offset its operating profits, or, if the Company
were not profitable at such time, would create net operating loss carry-forwards
arising from operations in that year.
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<PAGE> 7
(i) SECTION 83(b) ELECTION.
(i) Purchaser understands that Purchaser (and not
the Company) is responsible for Purchaser's own federal, state, local or foreign
tax liability and any other tax consequences that may arise as a result of the
transactions contemplated by this Agreement. Purchaser agrees to rely solely on
the determinations of Purchaser's tax advisors or Purchaser's own
determinations, and not on any statements or representations by the Company or
any of its attorneys or agents, with regard to all tax matters.
(ii) Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the amount paid for the Stock and the fair market value
of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" includes the right of the Company to buy back the Stock
pursuant to the Repurchase Option. (In the event the Company has registered any
of its shares under the Securities Exchange Act of 1934, "restriction" with
respect to officers, directors and ten percent (10%) shareholders also means the
period after the purchase of the Stock during which such officer, director and
ten percent (10%) shareholders could be subject to suit under Section 16(b) of
the Securities Exchange Act.)
(iii) Purchaser understands that Purchaser may elect
to be taxed at the time the Stock is purchased rather than when and as the
Repurchase Option (or Section 16(b) restrictions) lapse by filing an election
under Section 83(b) of the Code with the Internal Revenue Service within thirty
(30) days after the date of purchase of the Stock. The form for making this
election is attached hereto as Exhibit C. PURCHASER ACKNOWLEDGES THAT IT IS
PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE
ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THAT THE
COMPANY OR ITS REPRESENTATIVES MAKE THIS FILING ON PURCHASER'S BEHALF.
7. ESCROW. As security for the faithful performance of the terms of
this Agreement and to ensure the availability for delivery of the Stock upon
exercise of the Repurchase Option, Purchaser agrees to deliver to and deposit
with the Secretary of the Company, or such other person designated by the
Company, as escrow agent in this transaction ("Escrow Agent"), two Stock
Assignments duly endorsed (with date and number of shares blank) in the form
attached hereto as Exhibit D, together with the certificate or certificates
evidencing the Stock. Such documents are to be held by the Escrow Agent and
delivered by the Escrow Agent pursuant to the Joint Escrow Instructions of the
Company and Purchaser set forth in Exhibit E attached hereto and incorporated by
this reference, which instructions shall also be delivered to the Escrow Agent
upon execution hereof.
8. ARBITRATION.
(a) ELECTION OF ARBITRATION. At the option of either party,
any and all disputes or controversies whether of law or fact and of any nature
whatsoever arising from or respecting this
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<PAGE> 8
Agreement shall be decided by arbitration by the American Arbitration
Association in accordance with the rules and regulations of that Association.
(b) SELECTION OF ARBITRATORS. The arbitrators shall be
selected as follows: In the event the Company and Purchaser agree on one
arbitrator, the arbitration shall be conducted by such arbitrator. In the event
the Company and Purchaser do not so agree, the Company and Purchaser shall each
select one independent, qualified arbitrator, and the two arbitrators so
selected shall select the third arbitrator. The Company reserves the right to
object to any individual arbitrator who shall be employed by or affiliated with
a competing organization.
(c) CONDUCT OF ARBITRATION. Arbitration shall take place in
San Francisco, California or any other location mutually agreeable to the
parties. Reasonable notice of the time and place of arbitration shall be given
to all persons other than the parties as shall be required by law, and such
persons or their authorized representatives shall have the right to attend
and/or participate in all the arbitration hearings in such manner as the law
shall require.
(d) SECRECY OF PROCEEDINGS. At the request of either party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained by
the arbitrators in secrecy under seal, available for the inspection only of the
Company or Purchaser and their respective attorneys and their respective
experts, who shall agree in advance and in writing to receive all such
information confidentially and to maintain such information in secrecy until
such information shall become generally known.
(e) RELIEF. The arbitrators, who shall act by majority vote,
shall be able to decree any and all relief of an equitable nature (including
without limitation such relief as temporary restraining orders or temporary
and/or permanent injunctions), and shall also be able to award damages, with or
without an accounting and costs. The decree or judgment of an award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
9. STANDOFF AGREEMENT. Purchaser agrees, in connection with an
initial public offering of the Company's equity securities, upon request of the
Company or the underwriters managing such offering, (i) not to sell, make any
short sale of, loan, grant any option for the purchase of or otherwise dispose
of any shares of Stock (other than those included in the registration, if any)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) from the effective date of such registration) as may be requested by the
Company or such underwriters, and (ii) to execute any agreement regarding (i)
above as may be requested by the Company or underwriters at the time of the
public offering; provided, that the officers and directors of the Company who
own stock of the Company also agree to such restrictions.
10. RIGHT OF FIRST REFUSAL.
(a) RIGHT. Purchaser hereby grants the Company a right of
first refusal (the "First Refusal Right") in connection with any proposed sale
or other transfer of Stock which is no longer subject
-8-
<PAGE> 9
to the Repurchase Option. For purposes of this Section 10, the term "transfer"
shall include any assignment, pledge, encumbrance or other disposition for the
value of Stock intended to be made by Purchaser. Nothing in this Section 10
shall be construed to confer upon Purchaser the right to transfer any shares
that remain subject to the Repurchase Option.
(b) NOTICE OF DISPOSITION. In the event Purchaser desires to
accept a bona fide third-party offer for any or all Stock which is no longer
subject to the Repurchase Option (the shares subject to such offer to be
hereinafter called, for the purpose of this Section 10, the "Target Shares"),
Purchaser shall promptly (i) deliver to the Secretary of the Company written
notice (the "Disposition Notice") of the offer, which notice shall describe the
basic terms and conditions thereof, including the proposed purchase price, and
(ii) provide satisfactory proof that the disposition of the Target Shares to the
third-party offeror would not be in contravention of the provisions of this
Agreement, including without limitation, Section 6 hereof.
(c) EXERCISE OF RIGHT. The Company (or its assignees) shall,
for a period of thirty (30) days following receipt of the Disposition Notice,
have the right to repurchase all, but not less than all, of the Target Shares
upon substantially the same terms and conditions specified therein. Such right
shall be exercisable by written notice (the "Exercise Notice") delivered to
Purchaser prior to the expiration of the thirty day exercise period. If such
right is exercised with respect to the Target Shares, then the Company (or its
assignees) shall effect the repurchase of the Target Shares, including payment
of the purchase price, not more than five (5) business days after the delivery
of the Exercise Notice; and at such time Purchaser shall deliver to the Company
the certificates representing the Target Shares to be repurchased, each
certificate properly endorsed for transfer. To the extent any of the Target
Shares are at the time remain in escrow under Section 7 even though they are not
longer subject to the Repurchase Option, the certificates for such shares shall
automatically be released from escrow and surrendered to the Company for
cancellation. The Target Shares so purchased shall thereupon be cancelled and
cease to be issued and outstanding shares of the Company's Common Stock.
(d) NON-CASH CONSIDERATION. Should the purchase price
specified in the Disposition Notice be payable in property other than cash or
evidences of indebtedness, the Company (or its assignees) shall have the right
to pay the purchase price in the form of cash equal in amount to the value of
such property. If Purchaser and the Company (or its assignees) cannot agree on
such cash value within ten (10) days after the Company's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by Purchaser and the Company (or its assignees). If Purchaser
and the Company cannot agree on an appraiser within twenty (20) days after the
Company's receipt of the Disposition Notice, each shall select an appraiser of
recognized standing, and the two appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by Purchaser and the Company. The
closing of the purchase of the Targeted Shares by the Company shall then be held
on the later of (i) the fifth business day following delivery of the Exercise
Notice, or (ii) the 15th day after such cash valuation shall have been made.
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<PAGE> 10
(e) DISPOSITION OF TARGET SHARES. In the event an Exercise
Notice is not given to Purchaser within thirty (30) days following the date of
the Company's receipt of the Disposition Notice, Purchaser shall have a period
of thirty (30) days thereafter, in which to sell or otherwise dispose of the
Target Shares upon terms and conditions (including the purchase price) no more
favorable to a third-party purchaser than those specified in the Disposition
Notice; provided, however, that any such sale or disposition must not be
effected in contravention of the provisions of this Agreement, including without
limitation, Section 6 hereof. In the event Purchaser does not sell or otherwise
dispose of all Target Shares within the specified thirty (30) day period, the
First Refusal Right shall continue to be applicable to any subsequent
disposition of the Target Shares by Purchaser until such right lapses in
accordance with Section 10(g).
(f) STOCK SPLITS, ETC. In the event of any stock dividend,
stock split, recapitalization or other transaction affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration,
then any new, substituted or additional securities or other property which is by
reason of such transaction distributed with respect to the Stock shall be
immediately subject to the First Refusal Right.
(g) LAPSE OF RIGHT. The First Refusal Right shall lapse and
cease to have effect upon the occurrence of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act, covering the offer and sale of the Company's Common Stock in the
aggregate amount of at least $10,000,000.
11. GOVERNING LAW. This Agreement shall be governed and construed by
the laws of the State of California as applied to agreements made and performed
in California by residents of the State of California.
12. MISCELLANEOUS.
(a) RIGHTS AS SHAREHOLDER. Subject to the provisions and
limitations hereof, Purchaser may, during the term of this Agreement, exercise
all rights and privileges of a shareholder of the Company with respect to the
Stock deposited in escrow pursuant to Section 7 hereof.
(b) FURTHER ASSURANCES. The parties agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement.
(c) NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery (including by express courier) or upon deposit in the United States
Post Office, by First Class mail with postage and fees prepaid, addressed to
Purchaser at his/her address shown on the Company's employment records and to
the Company at the address of its principal corporate offices (attention:
President) or at such other address as such party may designate by ten (10)
days' advance written notice to the other party.
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<PAGE> 11
(d) ASSIGNMENT. The Company may assign its rights and
delegate its duties under this Agreement, including Section 2 hereof. This
Agreement shall inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser, his/her heirs, executors, administrators, successors and
assigns. The rights of Purchaser under this Agreement may be assigned only with
the prior written consent of the Company.
(e) AUTHORIZATION OF TRANSFER. Purchaser hereby authorizes
and directs the Secretary or transfer agent of the Company to transfer the Stock
as to which the Repurchase Option has been exercised from Purchaser to the
Company or the Company's assignees.
(f) NO EFFECT ON EMPLOYMENT/CONSULTING RELATIONSHIP.
PURCHASER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS EMPLOYEE OR CONSULTANT OF THE COMPANY FOR ANY PERIOD OR
AT ALL. NOTHING IN THIS AGREEMENT SHALL AFFECT IN ANY MANNER WHATSOEVER OR
INTERFERE WITH THE RIGHT OR POWER OF THE COMPANY, OR A PARENT OR SUBSIDIARY OF
THE COMPANY, TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP WITH
THE COMPANY AT ANY TIME, FOR ANY OR NO REASON, WITH OR WITHOUT CAUSE.
(g) WAIVER. Either party's failure to enforce any provision
or provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(h) ADVICE OF COUNSEL. Purchaser has reviewed this Agreement
in its entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original and all of which
together shall constitute one instrument.
(i) ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties with respect to the purchase of Common Stock by
Purchaser, may be modified or amended only in writing signed by both parties,
and satisfies all of the Company's obligations to Purchaser with regard to the
issuance or sale of securities.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
WINK COMMUNICATIONS, INC., HOWARD L. SCHROTT
a California corporation
By: /s/ Maggie Wilderotter /s/ Howard L. Schrott
------------------------------- ----------------------------------------
(Signature)
Title: President & CEO
-------------------------------
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<PAGE> 13
CONSENT OF SPOUSE
I, __________________________, spouse of Howard L. Schrott, have read
and approve the foregoing Agreement. In consideration of the granting to my
spouse of the right to purchase shares of Wink Communications, Inc., as set
forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Agreement and agree to be bound
by the provisions of the Agreement insofar as I may have any rights in the
Agreement or in any shares issued pursuant thereto under the community property
laws of the State of California or similar laws relating to marital property in
effect in the state of our residence as of the date of the signing of the
Agreement.
Dated: ____________________
----------------------------------------
(Signature of Spouse)
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<PAGE> 14
EXHIBIT A
PROMISSORY NOTE
$2,000,000.00 Alameda, California
May 17, 1999
FOR VALUE RECEIVED, Howard L. Schrott promises to pay to Wink
Communications, Inc., a California corporation (the "Company"), or order, the
principal sum of Two Million Dollars ($2,000,000.00), together with interest on
the unpaid principal hereof from the date hereof at the rate of 6.4% per annum,
compounded annually.
Principal and interest shall be due and payable on May 17, 2009. Should
the undersigned fail to make full payment of principal or interest for a period
of 10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay without penalty all or any
portion of the principal or interest owing hereunder.
This Note is subject to the terms of the Restricted Stock Purchase
Agreement, dated as of May 17, 1999. This Note is secured by a pledge of the
Company's Common Stock under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned. This Note shall be governed and construed in accordance with the
laws of the State of California.
----------------------------------------
Howard L. Schrott
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<PAGE> 15
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of May 17, 1999 between Wink
Communications, Inc., a California corporation ("Pledgee"), and Howard L.
Schrott ("Pledgor").
Recitals
Pursuant to Pledgor's purchase of Stock under the Restricted Stock
Purchase Agreement dated May 17, 1999, between Pledgor and Pledgee, and
Pledgor's election to pay for such Stock with her promissory note (the "Note"),
Pledgor has purchased 250,000 shares of Pledgee's Common Stock (the "Shares") at
a price of $8.00 per share, for a total purchase price of $2,000,000.00. The
Note and the obligations thereunder are as set forth in Exhibit B to the
Restricted Stock Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration
of the transfer of the Shares to Pledgor under the Restricted Stock Purchase
Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges
all of such Shares (herein sometimes referred to as the "Collateral")
represented by certificate number C-402, duly endorsed in blank or with
executed stock powers, and herewith delivers said certificate to the Secretary
of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the
terms and conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and the Pledgeholder shall not
encumber or dispose of such Shares except in accordance with the provisions of
this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to Pledgee,
its successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal
sum of the Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
b. Encumbrances. The Shares are free of all other
encumbrances, defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common
Stock is now or later becomes margin-listed by the Federal Reserve Board and
Pledgee is classified as a "lender" within the meaning of the regulations under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"),
Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or
providing any additional collateral as may be necessary to comply with such
regulations.
<PAGE> 16
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and
additional shares or other securities issued by reason of any such change shall
be delivered to and held by the Pledgee under the terms of this Security
Agreement in the same manner as the Shares originally pledged hereunder. In the
event of substitution of such securities, Pledgor, Pledgee and Pledgeholder
shall cooperate and execute such documents as are reasonable so as to provide
for the substitution of such Collateral and, upon such substitution, references
to "Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights and options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth
in the Restricted Stock Purchase Agreement or contained in this Security
Agreement for a period of 10 days after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
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<PAGE> 17
9. Term. The within pledge of Shares shall continue until the
payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree
that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of California.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" By:
-------------------------------------
Howard L. Schrott
Address:
----------------------------------------
----------------------------------------
"PLEDGEE" WINK COMMUNICATIONS, INC.
a California corporation
By:
-------------------------------------
Title:
----------------------------------
"PLEDGEHOLDER"
----------------------------------------
Secretary of
Wink Communications, Inc.
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<PAGE> 19
EXHIBIT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Internal Revenue Code Section, to include in his/her gross income for the
current taxable year, the amount of any compensation taxable to him/her in
connection with his/her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
<TABLE>
<S> <C> <C> <C>
NAME :TAXPAYER: Howard L. Schrott SPOUSE:__________
ADDRESS :TAXPAYER: SPOUSE:__________
IDENTIFICATION # :TAXPAYER:___________________ SPOUSE:__________
TAXABLE YEAR :TAXPAYER:___________________ SPOUSE:__________
</TABLE>
2. The property with respect to which the election is made is described as
follows:
250,000 shares of Common Stock of Wink Communications, Inc., a
California corporation (the "Company").
3. The date on which the property was transferred is: May 17, 1999.
4. The property is subject to the following restrictions:
Restriction on sale or transfer of the stock in accordance with Common
Stock Purchase Agreement with the Company dated May 17, 1999.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is: $2,000,000.00.
6. The amount (if any) paid for such property: $2,000,000.00.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: __________________, 19___
----------------------------------------
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: __________________, 19___
----------------------------------------
Spouse of Taxpayer
<PAGE> 20
EXHIBIT D
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement dated as of May 17, 1999 (the "Agreement"), Howard L. Schrott
("Purchaser") hereby sells, assigns and transfers
unto________________________________________________ (______________) shares of
the Common Stock of Wink Communications, Inc., a California corporation,
standing in the undersigned's name on the books of said corporation represented
by certificate no. _______ herewith, and does hereby irrevocably constitute and
appoint ___________________ attorney to transfer the said stock on the books of
the said corporation with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated ________________ HOWARD L. SCHROTT
----------------------------------------
Signature
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the corporation to exercise its
"Repurchase Option" set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE> 21
EXHIBIT E
JOINT ESCROW INSTRUCTIONS
May 17, 1999
Secretary
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, California 94501
Dear Sir:
As Escrow Agent for both Wink Communications, Inc., California
corporation ("Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, to which a copy
of these Joint Escrow Instructions is attached as Exhibit C, in accordance with
the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively for convenience herein as the "Company") exercises the
Repurchase Option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing such purchase at
the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of such notice.
2. At the closing, you are directed (a) to date the stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, in accordance with the Agreement, against the simultaneous delivery to
you of the purchase price (by check, wire transfer or promissory note) for the
number of shares of stock being purchased pursuant to the exercise of the
Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as Purchasers
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with the Department of Corporations of
the State of California of an Application for Consent to Transfer Securities
Subject to Legend or Escrow Condition pursuant to Section 25151 of the
California Corporation Securities Law of 1968. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder
of the Company while the stock is held by you.
<PAGE> 22
4. Upon written request of Purchaser, but no more than once per
calendar year, unless the Repurchase Option has been exercised, you will deliver
to Purchaser a certificate or certificates representing so many shares of stock
as are not then subject to the Repurchase Option. Within two months after the
Company's Repurchase Option expires, you will deliver to Purchaser a certificate
or certificates representing the aggregate number of shares sold and issued
pursuant to the Agreement and not purchased by the Company or its assignees
pursuant to exercise of the Repurchase Option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely, and shall be protected in
relying or refraining from acting, on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and of any
arbitrator provided for in the Agreement, and are hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court and of any such
arbitrator. In case you obey or comply with any such order, judgment or decree,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
the Statute of Limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE> 23
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be an officer of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of any
arbitrator provided for in the Agreement or of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you
shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery (including
by express courier) or upon deposit in the United States Post Office, by First
Class mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses, or at such other addresses as a
party may designate by ten days' advance written notice to each of the other
parties hereto.
COMPANY: Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
Attention: President
PURCHASER: Howard L. Schrott
ESCROW AGENT: Secretary
Wink Communications, Inc.
1001 Marina Village Parkway
Alameda, CA 94501
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions. You do not become
a party to the Agreement.
-3-
<PAGE> 24
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
WINK COMMUNICATIONS, INC.
a California corporation
By:
-------------------------------------
Its:
-------------------------------------
HOWARD L. SCHROTT
----------------------------------------
(Signature)
ESCROW AGENT:
- -----------------------------------
-4-
<PAGE> 1
EXHIBIT 10.43
SECOND AMENDMENT TO
MASTER AFFILIATION AGREEMENT
This amendment (the "Second Amendment") to the Master Affiliation Agreement
dated December 22, 1998, as amended in the First Amendment dated March 8, 1999
(as so amended, the "Master Agreement"), by and between Wink Communications,
Inc., a California corporation ("Wink"), whose address is 1001 Marina Village
Parkway, Alameda, CA 94501 and DIRECTV, Inc., a California Corporation, whose
address is 2230 East Imperial Highway, El Segundo, CA 90245, is dated June 28,
1999.
The parties agree to amend the Master Agreement as follows:
1. DIRECTV's obligation, as set forth in the seventh sentence of Section 3.1
of the Master Agreement, to pay Wink 50% of the non-recurring engineering
fees detailed in the Engine Statement of Work (up to a maximum [*]) is
hereby waived.
2. DIRECTV's obligation to pay Wink an aggregate [*] and Wink's obligation to
reimburse DIRECTV such funds, both as set forth in Section 5.4 of the
Master Agreement, are both hereby waived.
3. The current Section 3.2, repeated for convenience below:
3.2. The parties agree that the active participation and support of DIRECTV
System Manufacturers is essential to the parties ability to deploy
Interactive Wink Programs to Wink-enabled DIRECTV System Receivers. Wink
agrees to license the Wink Engine to any DIRECTV System Manufacturer on
the terms defined in Exhibit I. DIRECTV agrees to use commercially
reasonable efforts to encourage both Thomson Consumer Electronics and
Hughes Network Systems to enter into such license agreements with Wink
under terms substantially similar to those defined in Exhibit I for the
product which each manufacturer reasonably anticipates as its highest
volume DIRECTV System Receiver offered in 1999 and covering all shipments
after January 1, 1999 of such DIRECTV System Receivers to DIRECTV
subscribers located in the United States; provided, however, that in no
event shall DIRECTV have any obligation to encourage the inclusion of any
Wink technology into (i) Thomson Consumer Electronics' DIRECTV System
Receiver other than Thomson's 4.5 Version of the DIRECTV System Receiver,
or (ii) any Hughes Network Systems DIRECTV System Receiver introduced to
market after January 1, 2000. Notwithstanding anything herein to the
contrary, either party, upon written notice to the other party, may
terminate this Master Agreement, without any liability to the other party
in the event that Thomson Consumer Electronics has not entered into a
licensing agreement with Wink, as is contemplated above, within thirty
(30) days of the Effective Date.
Is hereby replaced with the following new Section 3.2:
3.2. Wink agrees to license the Wink Engine to any DIRECTV System Manufacturer
on the terms defined in Exhibit I. For purposes of the Master Agreement
and the Second Amendment, the following definitions shall apply:
o "Baseline" shall mean the lowest priced model(s) offered at retail
by each DIRECTV System Manufacturer (and "step-up" models based on
the same hardware design) and the models purchased by DIRECTV for
the PRIMESTAR swap out program.
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
Page 1
<PAGE> 2
o "TCE" shall mean Thomson Consumer Electronics
o "Philips" shall mean Philips Electronics B.V.
o "HNS" shall mean Hughes Network Systems
o "Sony" shall mean Sony Electronics
o the TCE 4.5 DIRECTV System Receivers, the first generation Baseline
DIRECTV System Receiver models from Philips and the first generation
Baseline DIRECTV System Receiver models from HNS based on the
"Everest" processor shall collectively be referred as "Guaranteed
Wink Models"
o DIRECTV System Receivers which meet the Wink Engine hardware
requirements, per the specification in Exhibit P, as amended by
mutual agreement, shall be referred to as "Wink-capable DIRECTV
System Receivers."
(a) WINK-CAPABLE HARDWARE
DIRECTV shall use its best commercial efforts to establish a contractual
agreement with each applicable manufacturer to provide that each
Guaranteed Wink Model will be a Wink-capable DIRECTV System Receiver on
first shipment to both retailers and to DIRECTV (for the PRIMESTAR swap
out program use)(each such agreement, an "OEM Agreement"). DIRECTV further
agrees to use commercially reasonable efforts to encourage all DIRECTV
System Receiver manufacturers to ensure that new Baseline models launched
by such manufacturers after March 31, 2000 but prior to January 1, 2002
meet the Wink Engine Requirements.
(b) WINK ENGINE RELEASE SCHEDULE
DIRECTV shall use commercially reasonable efforts to provide that
Wink-capable DIRECTV System Receivers, excluding those models listed in
Exhibit O, be scheduled (as approved by DIRECTV in cooperation with the
participating DIRECTV System Manufacturer and Wink) to include a Wink
Engine as soon as practicable, as determined by DIRECTV in its reasonable
discretion, after such model is released commercially. Notwithstanding the
above and subject to completion and the terms of the applicable OEM
Agreement, DIRECTV shall provide that DIRECTV System Receivers which are
Guaranteed Wink Models and are produced prior to January 1, 2002, include
a Wink Engine (whether enabled via satellite download or installation at
the factory in accordance with Section 3.2(d)). DIRECTV agrees to use
commercially reasonable efforts to secure a commitment and schedule for
the earliest possible release date for the Wink Engine for both the TCE
4.5 platform and the first generation Philips platform for both retail
sales and PRIMESTAR swap out program use. DIRECTV also agrees to require
HNS to provide a Wink Engine (subject to HNS execution of a license
agreement with Wink, as described below) with the new Everest-based
Baseline models at the time of commercial launch of such Guaranteed Wink
Model (provided that DIRECTV shall retain the right, in its sole
discretion, to postpone the launch of the Wink Engine, if the simultaneous
launch of such Guaranteed Wink Model and the associated Wink Engine is
delaying the commercial introduction of such Guaranteed Wink Model. The
parties agree that the mutual objective of the parties is to launch the
Wink Engine on the TCE 4.5 platform before April 1, 2000 and on the
Philips platforms before July 1, 2000, and Wink acknowledges and accepts
that the attainment of those target dates is dependent on active
participation and support by the applicable manufacturer. DIRECTV
understands and accepts that in order to utilize the Wink Engine, DIRECTV
System Manufacturers must execute a license agreement with Wink on terms
substantially identical to those defined in Exhibit I.
(c) PRODUCT LINE TRANSITIONS
DIRECTV shall encourage TCE to discontinue its earlier Baseline model (TCE
4.0) after December 31, 1999, and encourage HNS to discontinue its earlier
Baseline models three (3)
<PAGE> 3
months following commercial launch of the "Everest" Baseline model.
Notwithstanding the above, Wink acknowledges that manufacturing and/or
supply constraints may prevent a timely transition to Wink-capable
platforms for TCE and HNS. The parties agree that DIRECTV shall notify
Wink of delays in such transitions as soon as possible, and that DIRECTV
shall utilize commercially reasonable efforts to assist the applicable
manufacturer in the resolution of such problems as quickly as possible.
Wink further acknowledges and agrees that in the event of any such
manufacturing and/or supply constraints, as determined by DIRECTV in its
sole discretion, DIRECTV shall have the right to allow the continuation of
the manufacturing of any model of DIRECTV System Receiver by any
manufacturer.
(d) DOWNLOADING AND FACTORY INSTALLING THE WINK ENGINE
During the term, DIRECTV shall use commercially reasonable efforts to
download the Wink Engine to all Wink-capable DIRECTV System Receivers as
soon as practicable, as determined by DIRECTV in its reasonable
discretion, after acceptance of the Wink Engine by DIRECTV and the
applicable manufacturer in accordance with DIRECTV's standard practices
("the Acceptance Date"), and in any event no more than sixty (60) days
after the Acceptance Date, and to require DIRECTV System Manufacturers to
install the Wink Engine in new units manufactured at their factories
(rather than downloaded via satellite) as soon as practicable, as
determined by DIRECTV in its reasonable discretion.
(e) DE-INSTALLING THE WINK ENGINE
DIRECTV shall take no specific actions to (i) de-install or disable a
previously downloaded or installed Wink Engine in a Wink-enabled DIRECTV
System Receiver, unless the installation or download of the Wink Engine
has had a material adverse effect on the performance of such Wink-enabled
DIRECTV System Receiver as determined by DIRECTV in its sole discretion,
or such Wink-enabled DIRECTV System Receiver is used in a SMATV system,
hotel or other commercial establishment, or (ii) disable the collection of
Wink Responses from Interactive Wink Programs in any Wink-enabled DIRECTV
System Receivers, through the Term of the Master Agreement. The foregoing
limitations in this Subsection 3.2(e) shall not apply to the extent
compliance will, or could reasonably be expected to, subject DIRECTV to a
lawsuit or other legal action, provided that DIRECTV has (a) given Wink
thirty days prior notice and time to respond to such concerns and (b)
demonstrated to Wink's reasonable satisfaction that such concerns are not
adequately addressed by the indemnity provided to DIRECTV by Wink under
the Agreement.
(f) UNIT VOLUMES, PRESS RELEASE
The parties acknowledge that, based on mutual good faith estimates, the
foregoing commitments are expected to provide that at least four million
(4,000,000) DIRECTV System Receivers will be Wink-enabled prior to January
1, 2002, provided, however, DIRECTV makes no guarantee regarding the
actual number of DIRECTV System Receivers that will be Wink-enabled. The
parties further agree to prepare a joint press release which will include
the parties intent to deploy at least four million (4,000,000)
Wink-enabled DIRECTV System Receivers by December 31, 2001. This release
shall be issued as soon as is practicable once Wink has executed license
agreements with Philips and HNS and shall incorporate the announcement of
Philips and/or HNS as Wink licensees. DIRECTV agrees to use commercially
reasonable efforts to encourage those manufacturers to enter into such
agreements (in a form substantially similar to Exhibit I in the Master
Agreement) with Wink by June 30, 1999. The parties further agree that if
Wink has executed agreements with Philips and HNS by July 10, 1999, the
parties shall collaborate to issue such press release prior to or during
the Satellite Broadcasters Convention in July 1999.
<PAGE> 4
(g) WINK PREMIUM SUBSIDY
In return for these commitments by DIRECTV and the purchase by DIRECTV (or
an affiliate of DIRECTV) of one million two hundred and forty nine
thousand nine hundred and ninety nine shares (1,249,999) shares of Wink's
Series D Preferred Stock at twelve dollars ($12.00) dollars per share
pursuant to the Stock Purchase Agreement referenced below, Wink agrees to
pay DIRECTV an amount per Wink-enabled DIRECTV System Receiver equal to
the lesser of
(i) [*]
(r) [*] of the incremental cost per unit quoted by the applicable
DIRECTV System Manufacturer to include the Wink Engine (including
the minimum amount of hardware as defined in Exhibit P) for the Wink
Engine in each Wink-enabled DIRECTV System Receiver, over the amount
such manufacturer has quoted to DIRECTV, on the assumption that the
Wink Engine was not a requirement (the "Wink Premium").
DIRECTV agrees to use reasonable efforts to provide that the Wink Premium
quoted by a DIRECTV System Manufacturer reflects the lowest incremental
cost attributable to the Wink feature, compared to the features required
by DIRECTV and those otherwise planned by such manufacturer, and agrees to
provide Wink with written notification of the Wink Premium quoted by
manufacturers and the hardware components attributed to Wink. The parties
agree that if a manufacturer quotes DIRECTV a Wink Premium in excess of
[*] for a specific model other than the Guaranteed Wink Models, DIRECTV
shall not be obligated to require the manufacturer to make such model meet
the Wink Engine Requirements.
Such payments shall not be considered Incremental Wink Revenues for
DIRECTV under the Master Agreement. The payments shall be made by Wink to
DIRECTV quarterly for all Wink-enabled DIRECTV System Receivers through
the Term on:
(x) the later of the date of shipment by the applicable manufacturer if
the Wink Engine is installed at the factory;
(y) the date of the Wink Engine download to such DIRECTV System Receiver
if the Wink Engine is downloaded.
DIRECTV shall submit a quarterly report to Wink containing a good faith
estimate of the total number of Wink-enabled DIRECTV System Receivers (by
manufacturer and model) for which Wink must make payments to DIRECTV, and
Wink shall pay DIRECTV promptly upon receipt of such report. Such reports
from DIRECTV shall be subject to the audit rights per Section 14.12 of the
Master Agreement. The parties agree that Wink's cumulative payments to
DIRECTV under the Second Amendment shall not exceed the total price of the
Wink Series D Preferred Stock purchased by DIRECTV (or an affiliate of
DIRECTV) (e.g. $15,000,000).
(h) Notwithstanding anything to the contrary set forth in this section
3.2, the parties agree and understand that DIRECTV's efforts to download
the Wink Engine to Wink -- capable DIRECTV System Receivers may be
unsuccessful for reasons beyond the control of DIRECTV such as, for
example, end user's failure to properly set up or maintain such equipment,
and DIRECTV shall not be deemed to have breached any of its obligations
hereunder if a certain number of Wink -- capable DIRECTV System Receivers
have not been Wink enabled by the applicable date, provided DIRECTV has
made commercially reasonable efforts to achieve such result.
<PAGE> 5
3. The current Section 3.3, repeated for convenience below:
3.3. Wink shall, at Wink's sole cost and expense (including taxes and freight),
purchase for and on behalf of DIRECTV and deliver to DIRECTV at such
location as DIRECTV shall designate, all equipment (including total
system-redundant equipment for back-up use) necessary to run the Wink
Software and to enable DIRECTV's insertion of Interactive Wink Programs,
including Wink Virtual Channels pursuant to Section 3.9, into DIRECTV's
signals (the "Equipment"), with the exception that any personal computers
utilizing or running Microsoft Windows 95 or Windows NT required to
operate the Wink Software will be provided by DIRECTV, at DIRECTV's sole
cost and expense, and such computers shall not be deemed Equipment
hereunder. The parties agree that Wink shall have no obligation to provide
any additional equipment that may be required to enable storage or
insertion of Interactive Wink Programs not provided by Wink or by a
Programmer (as defined below) as part of such Programmer's video signal.
All Equipment provided by Wink to DIRECTV hereunder shall become the sole
property of DIRECTV upon installation at DIRECTV's Facilities, as defined
below.
Is hereby replaced with the following new Section 3.3:
3. Wink shall reimburse DIRECTV [*] (the "Equipment Cap") for all equipment
(including total system-redundant equipment for back-up use) necessary to
run the Wink Software, download the Wink Engine and to enable DIRECTV's
insertion and/or transmission of Interactive Wink Programs, including Wink
Virtual Channels pursuant to Section 3.9, into DIRECTV's signals (the
"Equipment"). Payments for Equipment against the Equipment Cap shall be
subject to presentation to Wink of a detailed invoice and schedule from
DIRECTV, and made by Wink on the earlier of thirty days following an
initial public offering of Wink stock (if any) and December 31, 1999. The
parties agree that DIRECTV shall provide all other equipment necessary to
run the Wink Software, download the Wink Engine, and enable DIRECTV's
insertion and/or transmission of Interactive Wink Programs, including Wink
Virtual Channels, into DIRECTV's signal, with the exception that the
purchase by DIRECTV of equipment specifically required for the
transmission of Interactive Wink Programs with DIRECTV's planned
"local-into-local" broadcasts shall be optional. Wink shall have no
obligation to reimburse DIRECTV for equipment costs or provide any
equipment to DIRECTV under the Master Agreement or this Second Amendment,
except as provided in this Section 3.3. The parties agree that if DIRECTV
elects to terminate the Master Agreement prior to the expiration of the
fifth year of the Term and Wink has not breached the Master Agreement,
DIRECTV shall reimburse Wink [*] of the actual amount reimbursed by Wink
under this section 3.3. The parties also agree that all equipment solely
related to the transmission of the Interactive Wink Programs (as opposed
to networking equipment and equipment used to download the Wink Engine and
other software) shall be dedicated by DIRECTV to such services during the
Term. The parties have prepared the attached Exhibit Q to identify the
equipment which shall be dedicated to the transmission of the Interactive
Wink Programs. Such Exhibit may be amended during the Term by mutual
agreement of the parties.
4. Contemporaneously with the execution of the Second Amendment, Wink and
DIRECTV (or an affiliate of DIRECTV) shall enter into a Series D Preferred
Stock Purchase Agreement that sets forth the terms and conditions under
which DIRECTV shall invest approximately $14,999,988 in Wink. The Second
Amendment shall have no effect until such time as the Preferred Stock
Purchase Agreement has been executed and the stock purchase is effective.
The parties agree that unless DIRECTV (or an affiliate of DIRECTV)
executes the Preferred Stock Purchase Agreement and provides the required
funds to Wink on or before July 1, 1999, the Second Amendment shall be
void.
<PAGE> 6
5. In the event of any inconsistency between the Second Amendment and the
Master Agreement or any other agreement between the parties, the Second
Amendment shall be deemed to be controlling. In all other respects, the
Master Agreement shall continue in full force and effect.
WINK COMMUNICATIONS, INC. DIRECTV, Inc.
By: /s/ MARY AGNES WILDEROTTER By: /s/ BRADLEY BEALE
----------------------------- -----------------------------
Name: Mary Agnes Wilderotter Name: Bradley Beale
----------------------------- -----------------------------
Title: President/CEO Title: Vice President
----------------------------- -----------------------------
<PAGE> 7
EXHIBIT O.: MODELS WHICH ARE NOT REQUIRED TO INCLUDE A WINK ENGINE
[*]
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
<PAGE> 8
EXHIBIT P.: MINIMUM HARDWARE REQUIREMENTS FOR THE WINK ENGINE
o 28 CISC MIPS available for Wink processing while the DIRECTV System
Receiver is decoding MPEG video, DIRECTV guide data
o Ability to receive single SCID data streams of at least than 400 kbits/sec
while also receiving the Wink Service Map, DIRECTV guide data, etc.
o 704x480x256 color graphics, no video or other memory limitations on
drawing the entire screen in all colors with or without video display (the
parties agree and accept that the HNS Everest Baseline models may not
completely meet this requirement, and agree that in no event shall the
resolution and color depth with or without video display be inferior to
that provided on the TCE 4.5 platform)
o Translucency and/or alpha blending
o MPEG Decoder capable of continuously displaying a static I-Frame
o 2400 baud modem
o 4kB NVRAM
o 512kB Flash
o 512kB RAM (for applications and Wink Engine data structures; does not
include drawing buffers, downstream data buffers, etc.)
o support for downloading of Wink Engine, upgrades to same
Optional, but recommended:
o Hardware flicker filter
o BitBLTs
[*]
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
<PAGE> 9
EXHIBIT Q: EQUIPMENT DEDICATED TO TRANSMISSION OF INTERACTIVE WINK PROGRAMS
CRBC
A180C (2 tickers) (4 SUN)
Bridge Workstations (4 B1000)
Sun Ultra 5 (2 Ethernet cards)
Studio computer
Terminal Server
TTX 742 (Norpak)
LABC
A180C (2 tickers, 1 spare)
Bridge Workstations (4 B1000)
Sun Ultra 5 (Ethernet cards)
Studio computer
Terminal Server
TTX742 (Norpak)
NEL
A180C (2 tickers)
Sun Ultra 5 (2 Ethernet cards)
Studio Computer
Terminal Server
TTX742 (Norpak)
<PAGE> 10
[DIRECTV LETTERHEAD]
June 28, 1999
Allan Thygesen
Senior Vice President
Programming and Advertising
Wink Communications
1001 Marina Village Parkway
Alameda, California 94501
Dear Allan:
The purpose of this letter is to conform the conversations that we have had
regarding the collection and use of DIRECTV subscriber information obtained
from Wink-enabled DIRECTV System receivers. As I mentioned, DIRECTV is in the
process of formulating a subscriber privacy policy to address this and similar
issues that will arise as the capabilities and functions of DIRECTV System
receivers continue to develop. We recognize that Wink has spent a significant
amount of time thinking about these types of issues for its own business, and
we welcome your offer to provide input as DIRECTV develops this policy. We will
allow you to review the proposed policy as it relates to the Wink services
during our internal preparation with the understanding that DIRECTV will retain
the sole right to decide on the final version.
At the time that the DIRECTV policy is finalized, we would expect that Wink and
DIRECTV will discuss together the implementation of such privacy policy with
respect to the Wink services. It is both parties understanding and expectation
that Wink and DIRECTV will work together in good faith to implement such policy,
with the understanding that Wink's pre-existing agreements with other
constituents will be acknowledged and considered in preparation of a mutually
acceptable implementation with respect to the Wink services on the DIRECTV
platforms.
Allan, if this letter accurately summarizes the understanding of Wink and
DIRECTV on this matter, kindly confirm by signing below and returning a copy to
my attention.
Respectfully yours,
/s/ LAWRENCE CHAPMAN
------------------------------
Lawrence Chapman
Executive Vice President
DIRECTV
Acknowledged and Agreed:
Wink Communications
By: /s/ ALLAN THYGESEN Date: 6/28/99
-------------------------- ------------------
<PAGE> 1
EXHIBIT 10.44
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER OR
PLEDGE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO RULE
144 OF THE ACT.
VOID AFTER MAY 30, 2004
WINK COMMUNICATIONS, INC.
WARRANT TO PURCHASE 500,000 SHARES OF COMMON STOCK
----------
THIS CERTIFIES THAT, for value received, Microsoft Corporation (the
"HOLDER") is entitled to subscribe for and purchase 500,000 shares (as adjusted
pursuant to Section 3 hereof) of fully paid and nonassessable Common Stock (the
"SHARES") of Wink Communications, Inc., a California corporation (the
"COMPANY"), at the price of $12.00 per share (the "EXERCISE PRICE") (as adjusted
pursuant to Section 3 hereof), subject to the provisions and upon the terms and
conditions hereinafter set forth.
1. Exercise; Payment.
(a) Time of Exercise. This Warrant may be exercised, in
whole or in part, at any time or from time to time, on any business day, before
5:00 p.m., California local time, after May 26, 1999, for the full or any
partial number of Shares for which this Warrant is then exercisable.
(b) Method of Exercise.
(i) Cash Exercise. The purchase rights represented
by this Warrant may be exercised by the Holder, in whole or in part, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company, and by the
payment to the Company, by wire transfer or by certified, cashier's or other
check acceptable to the Company, of an amount equal to the aggregate Exercise
Price of the Shares being purchased.
<PAGE> 2
(ii) Net Issue Exercise. In lieu of exercising this
Warrant, the Holder may elect to receive Shares equal to the value of this
Warrant (or the portion thereof being exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares purchasable under this Warrant (or
the portion thereof being exercised).
A = the Fair Market Value of one share of the Company's
Common Stock.
B = the Exercise Price (as adjusted to the date of such
calculation).
(iii) Fair Market Value. For purposes of this Warrant,
the "Fair Market Value" of the Company's Common Stock shall mean:
A. The average of the closing ask prices of
the Company's Common Stock quoted in the NASDAQ Over-the-Counter Market Summary
or the closing prices quoted on any exchange on which the Common Stock is
listed, whichever is applicable, as published in the Western Edition of The Wall
Street Journal for the ten trading days (or such lesser number of days as the
Company's stock has been so traded) prior to the date of determination of fair
market value; provided, however, if this Warrant is exercised in connection with
an IPO, the fair market value shall be the gross price to the public per share
in such offering.
B. If the Company's Common Stock is not
traded Over-The-Counter or on an exchange, the per share fair market value of
the Common Stock shall be the fair market value price per share as determined in
good faith by the Company's Board of Directors.
(c) Stock Certificates. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of Common Stock
so purchased shall be delivered to the Holder within a reasonable time and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the shares with respect to which this Warrant has not have been
exercised shall be issued to the Holder.
2. Stock Fully Paid; Reservation of Shares. All of the Shares
issuable upon the exercise of this Warrant will, upon issuance and receipt of
the Exercise Price therefor, be fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issuance thereof. During the period
within which this Warrant may be exercised, the Company shall at all times have
authorized and reserved for issuance sufficient shares of its Common Stock to
provide for the full exercise of this Warrant.
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<PAGE> 3
3. Adjustment of Exercise Price and Number of Shares.
Notwithstanding anything to the contrary in this Warrant:
(a) Adjustments. The Exercise Price per share of this
Warrant shall be subject to adjustment from time to time as follows:
(i) Issuance of Common Stock and Common Stock
Equivalents. If, after the date of original issuance of this Warrant but prior
to an IPO effectuated through a firm commitment underwriting at a price per
share (prior to underwriter commissions and offering expenses) of not less than
$12.00 per share (as appropriately adjusted for any subsequent stock splits,
stock dividends, reclassifications or recapitalizations) and with gross proceeds
to the Company (prior to underwriter commissions and offering expenses) of not
less than $10,000,000, the Company shall issue (or, pursuant to Subsection
(a)(ii)(3) hereof, shall be deemed to have issued) any Common Stock other than
"Excluded Stock" (as defined below) for a consideration per share less than the
then current Fair Market Value of the Common Stock immediately prior to the
issuance of such Common Stock (excluding stock dividends, subdivisions,
split-ups, combinations, dividends or recapitalizations covered by Subsections
(a)(iv), (v), (vi) and (vii)), the Exercise Price in effect immediately after
each such issuance shall forthwith be adjusted to a price equal to (A) the
product of such Exercise Price multiplied by (B) the quotient obtained by
dividing:
(1) an amount equal to the sum of
(y) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
exercise of this Warrant, or deemed to have been issued pursuant to Subsections
(a)(ii)(3) and (a)(iii)) immediately prior to such issuance, plus
(z) the number of shares of Common
Stock the consideration received by the Company upon such issuance would have
purchased at the then current Fair Market Value of the Common Stock, by
(2) (y) the total number of shares of
Common Stock outstanding immediately prior to such issuance of Common Stock
(including any shares of Common Stock issuable upon exercise of this Warrant or
deemed to have been issued pursuant to Subsections (a)(ii)(3) and (a)(iii)) plus
(z) the number of shares of Common
Stock actually issued in the transaction which resulted in the adjustment
pursuant to this Subsection (a)(i).
In each such case the Holder, upon the exercise hereof, shall be entitled to
receive, in lieu of the shares of Common Stock theretofore receivable upon the
exercise of this Warrant, a number of shares of Common Stock determined by (i)
dividing the Exercise Price then in effect by the Exercise Price as adjusted as
provided above as a result of such sale and (ii) multiplying the quotient by the
number of shares of Common Stock called for on the face of this Warrant.
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<PAGE> 4
(ii) Treatment of Certain Issuances. For the purposes
of any adjustment of the Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant pursuant to Subsection (a)(i), the
following provisions shall be applicable:
(1) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any discounts or commissions paid or incurred by the
Company in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as reasonably
determined by the board of directors of the Company, in accordance with
generally accepted accounting principles.
(3) In the case of the issuance of (x)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (y) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (z) options to purchase or rights
to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Subsections (a)(ii)(1) and
(a)(ii)(2) above), if any, received by the Company upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby;
(B) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities, or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
Company for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
additional minimum consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in Subsections (a)(ii)(1) and (a)(ii)(2) above);
(C) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Exercise Price shall forthwith be
readjusted to such Exercise Price as would have obtained had the adjustment made
upon (x) the issuance of such options, rights or
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<PAGE> 5
securities not exercised, converted or exchanged prior to such change or (y) the
options or rights related to such securities not converted or exchanged prior to
such change, as the case may be, been made upon the basis of such change; and
(D) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Exercise Price shall forthwith be readjusted to
such Exercise Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights relate to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iii) Excluded Stock. "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and
outstanding on the date hereof;
(2) all shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
of the Company (in each case, outstanding on the date of this Warrant), and the
Common Stock into which such shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are
convertible;
(3) up to 17,500 shares of Series B
Preferred Stock of the Company, 500,000 shares of Common Stock, and 125,000
shares of Common Stock issuable upon exercise of warrants issued to Venture
Lending & Leasing, Inc., Benchmark Capital Partners, L.P. and Benchmark Founders
Fund, L.P., and WC Investors, LLC, respectively, up to 375,000 shares of Common
Stock issuable upon exercise of warrants issued to NBC Multimedia, Inc., up to
550,000 shares of Common Stock issuable upon exercise of the warrants issued to
General Electric Capital Corporation, shares of Common Stock issuable upon
exercise of warrants issued to The Walt Disney Company or its affiliates and
shares of Common Stock issuable upon exercise of warrants issued to CBS
Corporation; and
(4) up to 6,589,546 shares of Common Stock
(and/or options or warrants therefor) issued after February 1, 1995 (and net of
any repurchases) to employees, officers, directors, contractors, advisors,
consultants of the Company pursuant to incentive agreements or plans approved by
the Board of Directors of the Company.
All outstanding shares of Excluded Stock (including shares issuable upon
conversion of the Company's Series A Preferred Stock , the Series B Preferred
Stock, the Series C Preferred Stock and Series D Preferred Stock) shall be
deemed to be outstanding for all purposes of the computations of
Subsection(a)(i).
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<PAGE> 6
(iv) Stock Splits and Stock Dividends. If the number
of shares of Common Stock outstanding at any time after the date of original
issuance of this Warrant is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Exercise Price
shall be proportionately decreased and the number of shares of Common Stock
issuable on exercise of this Warrant shall be increased in proportion to such
increase of outstanding shares. Such adjustment shall become effective at the
close of business on the date the dividend, subdivision or split-up becomes
effective.
(v) Reverse Stock Splits. If the number of shares of
Common Stock outstanding at any time after the date of original issuance of this
Warrant is decreased by a combination of the outstanding shares of Common Stock,
then, on the effective date of such combination, the Exercise Price shall be
proportionately increased and the number of shares of Common Stock issuable on
exercise of this Warrant shall be decreased in proportion to such decrease in
outstanding shares. Such adjustment shall become effective at the close of
business on the date the combination becomes effective.
(vi) Certain Dividends. In case the Company shall
declare a dividend upon its Common Stock generally payable otherwise than out of
retained earnings or shall distribute to all holders of its Common Stock shares
of its capital stock (other than Common Stock), stock or other securities of
other persons, evidences of indebtedness issued by the Company or other persons,
assets (excluding cash dividends) or options or rights (excluding options to
purchase and rights to subscribe for Common Stock or other securities of the
Company convertible into or exchangeable for Common Stock), then, in each such
case, the Exercise Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the date of such dividend or distribution by a
fraction, the numerator of which is the Aggregate Valuation of the Company as of
such date less the fair market value of the cash, securities, indebtedness,
assets or rights so distributed and the denominator of which is the Aggregate
Valuation of the Company. For purposes hereof, "Aggregate Valuation of the
Company" shall mean the Fair Market Value of one share of the Company's Common
Stock, determined in the manner set forth in Section 1(b)(iii), multiplied by
the total number of shares of Common Stock outstanding (including any shares of
Common Stock issuable upon exercise of this Warrant, or deemed to have been
issued pursuant to Subsections 3(a)(ii)(3) and 3(a)(iii)) as of such date.
(vii) Reorganization; Reclassification. In the case,
at any time after the date of original issuance of this Warrant, of any capital
reorganization, or any reclassification of the stock of the Company (other than
as a result of a stock dividend or subdivision, split-up or combination of
shares), the consolidation or merger of the Company with or into another person
(other than a consolidation or merger in which the Company is the continuing
entity and which does not result in any change in the Common Stock), or a sale
or transfer of all or substantially all of the Company's assets, this Warrant
shall, after such reorganization, reclassification, consolidation, merger or
sale, be exercisable for the kind and aggregate number of shares of stock or
other securities or property of the Company or other entity to which the Holder
would have been entitled if, immediately prior to such reorganization,
reclassification, consolidation, merger or sale, such Holder had exercised this
Warrant in full (subject to all adjustments under this Section 3). The
provisions of this clause (vii)
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<PAGE> 7
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers or sales.
(viii) All calculations under this Subsection (a) shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as appropriate.
(b) Minimal Adjustments. No adjustment in the Exercise Price
need be made if such adjustment would result in a change in the Exercise Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Exercise Price. If, after one or more adjustments to the
Exercise Price pursuant to this Section 3, the Exercise Price cannot be reduced
further without falling below the greater of (i) $0.001 or (ii) the lowest
positive exercise price legally permissible for warrants to acquire shares of
Common Stock, the Company shall make further adjustment to compensate the
holder, consistent with the foregoing principles, as the Board of Directors,
acting in good faith, deems necessary, including an increase in the number of
Shares issuable upon exercise of outstanding Warrants and/or a cash payment to
the holder.
4. Notice of Adjustments. Whenever the number of Shares purchasable
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3
hereof, the Company shall provide notice by first class mail to the holder of
this Warrant setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of Shares which may be purchased and the Exercise
Price therefor after giving effect to such adjustment.
5. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of such fractional
shares the Company shall make a cash payment therefor based upon the Exercise
Price then in effect.
6. Representations of the Company. The Company represents that all
corporate actions on the part of the Company, its officers, directors and
shareholders necessary for the sale and issuance of the Shares pursuant hereto
and the performance of the Company's obligations hereunder have been taken prior
to and are effective as of the effective date of this Warrant.
7. Representations and Warranties by the Holder. The Holder
represents and warrants to the Company as follows:
(a) This Warrant and the Shares issuable upon exercise
thereof are being acquired for its own account, for investment and not with a
view to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act of 1933, as amended (the
"ACT"). Upon exercise of this Warrant, the Holder shall, if appropriate under
applicable securities laws, confirm in writing, in a form satisfactory to the
Company, that the securities issuable upon exercise of this Warrant are being
acquired for investment and not with a view toward distribution or resale.
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<PAGE> 8
(b) The Holder understands that the Warrant and the Shares
have not been registered under the Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Act pursuant to Section 4(2) thereof, that they must be held by the Holder
indefinitely, and that the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "CALIFORNIA LAW") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquiring this Warrant and the Shares issuable upon exercise hereof and
of protecting its interests in connection herewith.
(d) The Holder is able to bear the economic risk of the
purchase of the Shares pursuant to the terms of this Warrant.
8. Restrictive Legend.
The Shares issuable upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE ACT. COPIES OF THE INSTRUMENT COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
9. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of Shares
bearing the restrictive legend set forth in Section 8 hereof, unless the
conditions specified in such legend are satisfied. The Company may also instruct
its transfer agent not to register the transfer of the Shares, unless one of the
conditions specified in the legend referred to in Section 8 hereof is satisfied.
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<PAGE> 9
(b) Notwithstanding the provisions of paragraph (a) above,
no opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder or individual partner of a holder,
in whole or in part, to his spouse or siblings, or to the lineal descendants or
ancestors of such holder or his spouse, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if such transferee were the
original holder hereunder.
(c) In order to effect any transfer of all or a portion of
this Warrant or the Shares, the transferor shall deliver a completed and duly
executed Notice of Transfer (attached hereto as Exhibit C).
10. Associated Rights. The Company covenants that the initial Holder
shall be entitled to all such rights as the Company has granted to investors in
the Company generally, including all rights including but not limited to the
registration rights, information rights and rights of first refusal and co-sale,
pursuant to the Third Amended and Restated Investor Rights Agreement dated as of
June 18, 1997, as amended to date (the "Rights Agreement"), including the waiver
by each holder of the subordination rights in paragraph 2.7 contained in the
Rights Agreement, and the Third Amended and Restated Founder's Co-Sale Agreement
dated as of June 17, 1997, as amended. The Company agrees to take promptly all
appropriate steps to obtain all necessary waivers and consents from existing
investors and amend such agreements to provide the initial Holder and its
permitted assignees with such rights.
11. Rights of Shareholders. Notwithstanding Section 10 hereof,
holder of this Warrant shall be entitled, as a Warrant holder, to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no
longer be exercisable upon the earlier to occur of:
(a) 5:00 p.m., California local time, on May 30, 2004.
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<PAGE> 10
(b) The closing of a merger or consolidation of the Company
into a third party pursuant to which the Company's shareholders immediately
prior to such merger or consolidation own less than fifty percent (50%) of the
outstanding voting securities of the surviving entity;
(c) The closing of a sale of all or substantially all of the
assets of the Company; or
13. Notices, Etc. All notices and other communications from the
Company to the Holder shall be mailed by first class registered or certified
mail, postage prepaid or sent by nationally recognized express courier, at such
address as may have been furnished to the Company in writing by the Holder.
14. Governing Law, Headings. This Warrant is being delivered in the
State of California and shall be construed and enforced in accordance with and
governed by the laws of such State. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
Issued this 26 day of May, 1999.
WINK COMMUNICATIONS, INC.
By: /s/ Maggie Wilderotter
-------------------------------------
Maggie Wilderotter
Chief Executive Officer and President
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<PAGE> 11
EXHIBIT A
NOTICE OF EXERCISE
TO: WINK COMMUNICATIONS, INC.
1001 Marina Village Parkway
Alameda, CA 94501
Attention: President
1. The undersigned hereby elects to exercise the attached Warrant
as to __________ shares of Common Stock of WINK COMMUNICATIONS, INC. pursuant to
the terms of such Warrant.
2. Method of Exercise (Please mark the applicable blank):
___ The undersigned elects to exercise the attached Warrant
by means of a cash payment, and tenders herewith payment
in full for the purchase price of the shares being
purchased, together with all applicable transfer taxes,
if any.
___ The undersigned elects to exercise the attached Warrant
by means of the net exercise provisions of Section
1(b)(ii) of the Warrant.
3. Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
---------------------------------
(Name)
---------------------------------
---------------------------------
(Address)
4. The undersigned hereby represents and warrants that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares and all representations and warranties
of the undersigned set forth in Section 7 of the attached Warrant are true and
correct as of the date hereof. In support thereof, the undersigned hereby
delivers an Investment Representation Statement in a form substantially similar
to the form attached to the Warrant as Exhibit B.
----------------------------------------
(Signature)
- ------------------------------------- Title:
(Date) ----------------------------------
<PAGE> 12
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : _________________________
SELLER : WINK COMMUNICATIONS, INC.
COMPANY : WINK COMMUNICATIONS, INC.
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE STOCK PURCHASE WARRANT
ISSUED ON _________, 1999
AMOUNT : __________ SHARES
DATE : ______________
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Purchaser is purchasing these Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
(b) Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of its investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if its representation was predicated solely upon a present intention
to hold these Securities for the minimum capital gains period specified under
tax statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, Purchaser
understands that the Company is under no obligation to register the Securities,
other than as set forth in the Third Amended and Restated Investor Rights
Agreement dated June 18, 1997 and as may be subsequently amended. In addition,
Purchaser understands that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
the Company receives an opinion of counsel reasonably acceptable to it stating
that such sale or transfer is exempt from the registration and prospectus
delivery requirements of the Securities Act.
<PAGE> 13
(d) Purchaser is familiar with the provisions of Rule 144,
promulgated under the Securities Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions.
The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities not
less than two years, (2) the availability of certain public information about
the Company, (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934), and (4) the amount
of securities being sold during any three month period not exceeding the
specified limitations stated therein.
(e) Purchaser agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by the undersigned (other than
those shares included in the registration) without the prior written consent of
the Company or the underwriters managing such initial underwritten public
offering of the Company's securities for one hundred eighty (180) days from the
effective date of such registration, and (2) Purchaser further agrees to execute
any agreement reflecting (1) above as may be requested by the underwriters at
the time of the public offering.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 are
not exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
PURCHASER
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
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<PAGE> 14
EXHIBIT C
NOTICE OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________* shares of Common Stock of WINK
COMMUNICATIONS, INC., to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of WINK
COMMUNICATIONS, INC., with full power of substitution in the premises.
Dated: ____________________
----------------------------------------
By:
-------------------------------------
(Signature must conform in all respects
to name of Holder as specified on the
face of the Warrant)
-------------------------------------
(Address)
Signed in the presence of:
- -------------------------------
* Insert here the number of shares without making any adjustment for
additional shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise.
<PAGE> 1
EXHIBIT 10.45
Effective Date: May 1, 1998
INFORMATION SERVICES AGREEMENT
Between GE Information Services, Inc. ("GEIS"), 401 North Washington Street,
Rockville, Maryland 20850 and Wink Communications ("Wink"), with its principal
office at 1001 Marina Village Parkway, Alameda, California 94501.
Now Therefore, the parties herby agree to the following:
I. SERVICES PROVIDED
1.1 GEIS will provide Wink the services ("Services") as stated in this
Agreement and in the Schedule A attached hereto in accordance with
the terms of this Agreement and subject to the prices and any
special terms contained in the Schedule B attached hereto. Wink is
responsible for obtaining, installing and maintaining the equipment,
communication lines and services necessary to connect to the
Services, unless otherwise stated in the applicable Schedule.
II. TERM; CHANGES; PAYMENT; TAXES
2.1 The term of this Agreement shall commence as of May 1, 1998
("Effective Date") and shall continue for a period of sixty (60)
months, unless sooner terminated as provided herein. The term of
this Agreement may thereafter be renewed for subsequent terms of
two (2) years each upon the mutual written agreement of the
parties. The provisions of Sections 2.3, 3.2, 3.3, 3.4, 4.3, 6.1,
6.2, 7.1, 8.2 through 8.6, 10.4 and 10.7 shall survive any
termination or expiration of this Agreement.
2.2 Either party may (i) supplement or make changes to its rules of
operations, access procedures, security procedures and standards,
or (ii) modify or withdraw any particular Service; provided,
however, that any such changes referenced in this Section 2.2 shall
be subject to the following:
(a) The parties agree that any change, addition, deletion or
modification to the Services referenced in this Agreement
must be accomplished in accordance with this section,
irrespective of whether this section is expressly referenced
in connection with such Services. Either party may at any
time, by written request, propose changes, deletions or
additions to the Services. Such request shall be in a written
form clearly noting that it is a Change Order Request
("Change Order Request"). Any such Change Order Request shall
be subject to the change order process more particularly
described below:
(i) Either party may submit to the other party a Change
Order Request during the term of this Agreement. All
Change Order Requests shall state in detail the
request, including, if applicable, estimated costs
associated with the Change Order Request.
(ii) Not more than ten (10) business days from the date of
receipt of a Change Order Request, the receiving party
shall complete and return to the requesting party a
detailed response for each item on the Change Order
Request, which shall consist of proposed action items,
including, if applicable, a time frame for the
conducting of a Unix Deployment Process ("UDP"), along
with any proposed modifications to the initial Change
Order Request and a quote for any GEIS fees to Wink to
implement the Change Order Request for any non-GEIS
developed applications.
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(iii) If, after completion of steps (i) and (ii) herein
above, the parties are not in agreement with respect
to the proposed changes, including without
limitation identification of any necessary
third-party software, the parties shall meet to
negotiate in good faith any such proposed changes.
The failure of the parties to agree after what
either party, in its discretion, deems a reasonable
period of time, shall entitle either party to
provide the other with a notice of dispute and
trigger the internal dispute resolution procedures
more particularly described in Article X.
(iv) Each party shall bear its own expenses with respect
to preparing such Change Order Requests and
responses thereto, provided, however, that if a UDP
is necessary in order for a Change Order Request to
be formulated [*]
(v) During the Change Order Process, the scope of
Services and fees, as provided herein and in the
then-current Schedule and/or Exhibit, shall remain
in full force and effect.
(b) Accepted Change Order Requests shall be incorporated into
amendments to this Agreement, which shall be executed by both
parties and incorporated herein accordingly.
2.3 Except for the items contained in the attached Schedule B, which are
inclusive of any applicable taxes, and unless agreed to otherwise by
the parties, Wink shall be responsible for any sales, use, property
or other taxes payable with respect to machines, software or
services purchased from GEIS by Wink. In lieu of paying such taxes,
Wink will provide GEIS with a tax-exemption certificate acceptable
to the taxing authorities. Wink and GEIS shall cooperate with one
another to minimize any sales or use taxes for which Wink is liable.
Wink further agrees that it shall be responsible for paying
separately all costs associated with third party software identified
in any Change Order as third party software.
2.4 Fixed monthly charges for Services initiated or terminated in
accordance with Article VIII of this Agreement during a calendar
month will be prorated. Invoices are payable upon receipt in U.S.
dollars. Invoices not paid within thirty (30) days from date of
invoice are subject to interest charges at an annual rate equal to
the prime rate listed in the Wall Street Journal for the date of
invoice plus two percentage points, or at the maximum lawful
interest rate allowable, whichever is lower. GEIS will give written
notice of any non-payment and specify a cure period of at least
fifteen (15) days. If an invoice remains unpaid after the cure
period expires, GEIS may, reserving all other legal remedies and
rights, implement the dispute resolution procedures more
particularly described in Article X below.
III. USE OF SERVICES
3.1 Wink will use the Services in accordance with applicable law,
including data privacy laws and communication regulations and
tariffs, and any applicable GEIS standard conditions of use
established by GEIS from time to time and provided to, and agreed
to, by Wink. In particular, Wink will not use any Service to export
or re-export technical data in violation of U.S. export control laws
and regulations.
(a) GEIS reserves the right to immediately terminate access or
take other actions it reasonably believes to be necessary to
comply with the law.
(b) In the event GEIS determined within its reasonable discretion
that Wink is not using the Services in accordance with the
terms and conditions of this Agreement, GEIS may
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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terminate access or take such other action it believes
necessary to conform Wink's use of the Service to the terms
and conditions of this Agreement, provided that Wink has
failed within a reasonable period of time to discontinue using
the Services in the manner in question upon notice from GEIS.
(c) GEIS agrees to grant Wink online access to its applications
and data at all times, provided, however, that it is
understood by the parties that such applications and data may
not be available during scheduled maintenance hours and
periods of Server Unavailability (as defined in Article V).
(d) GEIS will use commercially reasonable efforts to avoid
impacting response or service level availability to the
standard access processes that may occur through the use of
SQL Read-Only queries by Wink, defined as the Application
Interface, by defining the SQL Read-Only queries with
specified priorities which are deemed lower than the
commercial service processes.
(e) GEIS will use commercially reasonable efforts to avoid
impacting response or service level availability to the
standard access process that may occur through "ad hoc"
reporting processes by defining such processes with specified
priorities which are deemed lower than the commercial service
processes.
(f) GEIS will inform Wink of proposed advances for operating and
application support software in the form of a Change Order
Request. In the event Wink elects not to proceed with the
proposed advance in operating and application support
software, and the vendor for such software discontinues
supporting that version or release of such software, the
warranties contained in Sections 5.1 and 5.2 below shall not
be applicable until such time as Wink proceeds with the
proposed advance. Wink shall pay for personnel services for
advances in operating system and application support software
at GEIS's then-current list prices, under the applicable terms
and conditions of the Personnel Services Agreement ("PSA")
entered into by the parties on November 10, 1998 [*]
3.2 Wink shall defend, indemnify and hold GEIS harmless from and against
any and all costs and damages finally awarded or made in settlement
or compromise in a suit or proceeding by third parties against GEIS
which GEIS incurs on account of the use of the Services by Wink or
Wink's clients who have been granted access to the Services by Wink
("Wink's Clients"), including, but not limited to claims relating to
the content of materials available for online access by Wink's
Clients to the Services, provided that Wink is notified in writing
and given authority, information and assistance to defend and/or
settle or compromise such suit or proceeding. Wink, however, shall
not be responsible for any compromise or settlement of any such suit
or proceeding made without Wink's consent.
3.3 GEIS will not monitor the files, messages or other content of the
Services. If GEIS receives information that causes GEIS to
reasonably believe it may incur legal liability on account of the
type of files, messages or other content of the Services provided by
Wink or Wink's Clients, GEIS shall provide written notice to Wink of
such potential liability and has the right to remove any such
materials within a reasonable period of time, but in no event sooner
than forty-eight (48) hours after such written notice. If Wink
reasonably disagrees with GEIS's belief, GEIS and Wink shall jointly
obtain (at joint expense) an opinion from the law firm of King and
Spalding, Washington D.C., or such other similar firm as the parties
may reasonably agree upon, as to the potential liability of Wink
and/or GEIS on account of the type of files, messages or other
content of the Services provided by Wink or Wink's Clients.
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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3.4 GEIS shall defend, indemnify and hold Wink harmless from and
against any and all costs and damages finally awarded or made in
settlement or compromise in a suite or proceeding by third parties
against Wink which Wink incurs on account of the gross negligence
or willful misconduct of GEIS's employees, agents or contractors
in providing the Services to Wink, provided that GEIS is notified
in writing and given authority, information and assistance to
defend and/or settle or compromise such suit or proceeding. GEIS,
however, shall not be responsible for any compromise or settlement
of any such suit or proceeding made without GEIS's consent.
3.5 Wink will use the User Numbers (as defined herein) assigned to it
only from the country locations authorized for those Users Numbers.
In the event of use from unauthorized locations, Wink will pay the
list prices applicable to that use. Wink's payment will be without
prejudice to other legal remedies available to GEIS. For purposes
of this agreement, "User Numbers" means an identification number
assigned to Wink by GEIS for purposes of accessing teleprocessing
services and recording resources consumed.
3.6 In the event Wink is granted Administrative User (as defined
herein) capability, Wink will employ that capability in accordance
with the terms and conditions of this Agreement, promptly notify
GEIS of each User Number it validates, and safeguard the
Administrative User capability from unauthorized use. Wink is
responsible for all non-standard charges incurred as a result of
usage in User Numbers for which only Wink has Administrative User
capability. For purposes of this Agreement, "Administrative User"
means a Wink administrator that has been granted authority by GEIS
to perform security related activities.
IV. SECURITY AND CONFIDENTIALITY
4.1 GEIS will provide reasonable physical security for Wink's
computer-stored files and programs and will make reasonable security
procedures available to enable Wink to protect those files and
programs from unauthorized access. Wink is responsible for
selecting and using the security procedures made available by GEIS
as well as other procedures and measures necessary to safeguard
and back-up its files, data and programs.
4.2 Should Wink's files, data, or programs be lost or destroyed directly
due to the fault of GEIS, GEIS's sole obligation, and Wink's
exclusive remedy, will be the reconstruction of Wink's files, data,
or programs, provided Wink furnishes the data required or the data
is available to GEIS on storage media in GEIS's possession or
control.
4.3 Wink acknowledges that GEIS's employees and representatives may
gain access to Wink's data in the course of providing Services to
Wink. GEIS will protect from unauthorized disclosure or access Wink
data in its possession to which its employees or representatives
gain access by using the same degree of care that GEIS takes to
protect its own data of a similar nature. However, this obligation
will not apply to Wink data which is or becomes publicly available
without fault on the part of GEIS, is already in GEIS's possession
prior to the time GEIS gains access to the data under this
Agreement, is independently developed by GEIS, or is rightfully
obtained from third parties.
V. WARRANTIES
5.1 Commencing with the installation of Version 2 of the Wink Data
Center ("Wink Data Center"), as more fully defined in the PSA and
if used by Wink in accordance with the terms and conditions of this
Agreement and during the hours of 5:00 a.m. to 8:00 p.m., Pacific
Time, Monday through Friday, but exclusive of maintenance hours from
12:00 a.m. to 4:00 a.m., Pacific Time and GEIS-recognized holidays
("Peak Time Hours"), [*] The term "Server" means the GEIS specific
computers and their
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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directly connected central communications processor(s) which directly
provide access to Wink files and applications.
For purposes of this agreement "Server Unavailability" will be calculated
as follows:
Each consecutive one (1) minute interval that the Server is
unavailable during a calendar month will accrue as one (1) minute of
Server Unavailability.
5.2 Commencing with the installation of Version 2 of the Wink Data Center and
if used by Wink in accordance with the terms and conditions of this
Agreement and during the hours of 8:00 p.m. to 5:00 a.m., Pacific Time,
Monday through Friday, and all hours on Saturday, Sunday and Federal
holidays, but exclusive of maintenance hours from 12:00 a.m. to 4:00 a.m.,
Pacific Time ("Off Peak Time Hours"), GEIS warrants that the Server used by
GEIS to provide the Services will be available for use ninety-five percent
(95%) of the total Off Peak Time Hours is a calendar month.
5.3 The warranties contained in Sections 5.1 and 5.2 above shall only be
applicable in the event Server unavailability is caused by GEIS and GEIS's
sole obligation for failure to meet such warranties shall be as follows:
[*]
5.4 GEIS further warrants that each Service, if used by Wink in accordance with
the terms and conditions of this Agreement, will perform substantially in
accordance with the applicable specifications mutually established by GEIS
and Wink (the "Specifications"). GEIS's sole obligations for failure to
meet this warranty will be to attempt to correct any failure to meet
warranted performance which materially impairs the operation of the
affected Service. [*]
5.5 The warranties and remedies stated in this Agreement are exclusive and
shall only apply to failures which are reported to GEIS in writing within
sixty (60) days after the date of the failure or as recorded by GEIS's
systems, as such systems are modified by GEIS to monitor such performance.
NO OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, APPLY TO THE
SERVICES.
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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5.6 GEIS DOES NOT WARRANT THAT ITS SERVICES WILL MEET WINK'S REQUIREMENTS
OR THAT THE OPERATION OF THE SERVICES WILL BE UNINTERRUPTED OR
ERROR-FREE. WINK ASSUMES THE RESPONSIBILITY TO TAKE ADEQUATE
PRECAUTIONS AGAINST DAMAGES TO ITS OPERATIONS WHICH COULD BE CAUSED BY
DEFECTS, INTERRUPTIONS, OR MALFUNCTIONS IN THOSE SERVICES.
5.7 EXCEPT AS EXPRESSLY AGREED TO IN WRITING BY THE PARTIES, WINK IS
SOLELY RESPONSIBLE FOR ALL CONTENT OF ANY DATABASE PROVIDED BY OR ON
BEHALF OF WINK AND ASSUMES THE ENTIRE RISK OF USING SUCH DATABASES.
NEITHER GEIS NOR ANY OF ITS EMPLOYEES, AGENTS, CONTRACTORS,
INFORMATION PROVIDERS, LICENSORS OR OTHER SUPPLIERS (COLLECTIVELY
"SUPPLIERS") MAKE ANY WARRANTIES OR REPRESENTATIONS CONCERNING THE
ACCURACY, COMPLETENESS, PERFORMANCE OR USEFULNESS OF THE CONTENT OF
ANY DATABASE. THE POSTING OF INFORMATION ON ANY DATABASE OR BULLETIN
BOARD IS EXPRESSLY PROHIBITED IF IT VIOLATES ANY APPLICABLE FEDERAL OR
STATE LAW OR INFRINGES THE INTELLECTUAL PROPERTY RIGHTS OR MISUSES
PROPRIETARY INFORMATION OF A THIRD PARTY.
5.8 WINK IS SOLELY RESPONSIBLE FOR ENSURING THAT ANY POSTING MADE BY WINK
TO THE WINK DATA CENTER DOES NOT CONTAIN ANY VIRUS OR OTHER COMPUTER
SOFTWARE CODE OR ROUTINE DESIGNED TO DISABLE, ERASE, IMPAIR OR
OTHERWISE DAMAGE THE SOFTWARE OR DATA OF ANY OTHER USER OF THE
DATABASE OR CATALOG. WINK WILL INDEMNIFY AND HOLD GEIS HARMLESS FROM
ANY LIABILITY, COSTS OR DAMAGES ARISING OUT OF CLAIMS OR SUITS BY SUCH
USER CAUSED BY ANY SUCH VIRUS OR SOFTWARE.
5.9 ACCESS TO AND USE OF THE INTERNET, IF PROVIDED THROUGH GEIS, IS
PROVIDED ON AN "AS IS," "AS AVAILABLE" BASIS, WITHOUT WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED. GEIS WILL NOT BE LIABLE FOR ANY
DAMAGES OF ANY KIND OR NATURE WHATSOEVER RESULTING FROM THE INABILITY
OF WINK TO MAKE OR MAINTAIN ONLINE CONNECTIONS TO GEIS BY MEANS OF THE
INTERNET.
VI. LIMITATIONS OF LIABILITY
6.1 AS A MATERIAL CONDITION FOR ENTERING INTO THIS AGREEMENT, AND IN
REGARD TO ANY AND ALL CAUSES ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE SERVICES, INCLUDING BUT NOT LIMITED TO CLAIMS OF
NEGLIGENCE, BREACH OF CONTRACT OR WARRANTY, FAILURE OF A REMEDY TO
ACCOMPLISH ITS ESSENTIAL PURPOSE OR OTHERWISE, THE PARTIES AGREE:
[*]
(b) NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (EVEN IF THE OTHER PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), INCLUDING, BUT
NOT LIMITED TO, LOST PROFITS OR SAVINGS, LOSS OF USE OF SERVICES,
COST OF CAPITAL, COST OF SUBSTITUTE SERVICES OR FACILITIES,
DOWNTIME COSTS, OR DAMAGES AND EXPENSES ARISING OUT OF THIRD
PARTY CLAIMS.
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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6.2 THE REMEDIES SPECIFIED IN THIS AGREEMENT ARE EXCLUSIVE.
VII. FORCE MAJEURE
7.1 Except for the failure to make payments when due, neither party
will be liable to the other by reason of any failure in
performance of this Agreement if the failure arises out of the
unavailability of third party communication facilities or
energy sources, acts of God, acts of the other party, acts of
governmental authority, fires, strikes, delays in
transportation, riots or war, or any cause beyond the
reasonable control of that party. If any such event prevents
Wink from accessing the Services and continues for more than
one (1) month, Wink may terminate the Schedule(s) for the
affected Service(s) upon delivery of notice to GEIS.
VIII. TERMINATION
8.1 Either party may terminate this Agreement for cause if the
other party materially breaches this Agreement, and the
breaching party fails to substantially cure such breach within
ninety (90) days after receiving written notice specifying the
breach. If a breach cannot be reasonably cured within ninety
(90) days, the breaching party may provide the nonbreaching
party with a plan for cure of such breach which, if accepted by
the nonbreaching party, shall permit the breaching party to
implement the designated cure and thereafter proceed with all
due diligence to substantially cure the breach.
8.2 [*]
8.3 [*]
8.4 [*]
8.5 Upon the expiration of this Agreement, GEIS will provide to Wink
[*] of personnel services to assist in the transition of Wink's
applications and data from a GEIS-operated facility to a
Wink-operated or third party operated environment. Three (3)
months prior to the effective date of any such expiration, Wink
and GEIS shall meet and agree upon a transition plan reasonably
designed to permit the transition and migration of the Wink Data
Center (including all software and data thereof) from GEIS to
Wink or a third party provider. [*]
8.6 Upon the termination or expiration of this Agreement, if
requested by Wink, GEIS will promptly return to Wink all
Wink-owned applications, data and materials in GEIS's
possession.
IX DEFINITION OF RELATIONSHIP
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[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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9.1 Each party and its employees are independent contractors in
relation to the other party with respect to all matters arising
under this Agreement. Nothing herein shall be deemed to
establish a partnership, joint venture, association or
employment relationship between the parties. Each party shall
remain responsible, and shall indemnify and hold harmless the
other party, for the withholding and payment of all Federal,
state and local personal income, wage, earning, occupation,
social security, worker's compensation, unemployment, sickness
and disability insurance taxes, payroll levies or employees
benefit requirements (under ERISA, State law or otherwise) now
existing or hereafter enacted and attributable to themselves
and their respective employees.
X. GENERAL PROVISIONS
10.1 The provisions of this Agreement are for the sole benefit of
the parties, and not for the benefit of any other persons or
legal entities.
10.2 Neither party may assign this Agreement without the prior
written consent of the other party, which consent will not be
unreasonably withheld; provided, however, that either party may
assign this Agreement, without consent, to a successor in
interest to substantially all of the business of that party to
which the subject matter of this Agreement relates.
10.3 If any part or parts of this Agreement are held to be invalid,
the remaining parts of the Agreement will continue to be valid
and enforceable provided the remainder of this Agreement can be
and is reformed to reflect the substance of the intent of the
parties.
10.4 This Agreement will be governed by the law of the State of
Maryland, excluding its conflict-of-laws rules. Each party
waives the right to jury trial in any suit based upon or
arising out of this Agreement.
10.5 The headings in this Agreement are for reference purposes only;
they will not affect the meaning or construction of the terms
of this Agreement.
10.6 Any action of any kind by either party arising out of this
Agreement must be commenced within two (2) years from the date
the right, claim, demand or cause of action shall first arise.
10.7 Before either party may initiate legal proceedings regarding
this Agreement, the party shall first refer such matter to the
chief executive officer of such party or his or her designee.
Following such referral, the chief executive officer or his or
her designee shall take all reasonable steps to resolve such
disagreement within two (2) weeks of the date of referral
thereof and shall negotiate in good faith, with each other to
such end. If the disagreement is not resolved in the course of
such negotiations between the chief executive officers or their
designees, the chief executive officers or their designees
shall consult with a neutral third party mediator and shall use
their reasonable best efforts to procure a determination from
such mediator within two (2) weeks of the date on which the
mediator was first consulted. Unless such chief executive
officers or their designees agree to the contrary in writing,
any advice or decision of the mediator shall not be binding
upon the parties. It is understood that the parties shall each
carry their own burden for any costs or associated legal fees
for any such mediation.
10.8 Any notice under this Agreement shall be given in writing by
personal delivery or by mail directed to the address of the
party which is set forth in this Agreement or to such other
address as may be substituted by notice to the other party. All
notices shall be effective upon receipt.
10.9 This Agreement (including the applicable Schedules and Exhibit)
contains the complete and exclusive understanding of the
parties with respect to the subject matter hereof. No waiver,
alteration, or modification of any of the provisions hereof
will be binding unless in writing and
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signed by a duly authorized representative of the party to be
bound. Neither the course of conduct between the parties nor
trade usage will act to modify or alter the provisions of this
Agreement. If Wink issues a purchase order or other similar
document it shall be for Wink internal purposes and, therefore,
even if it is acknowledged by GEIS, the terms and conditions of
such purchase order or similar document will have no effect on
this Agreement or the Services.
GE INFORMATION SERVICES, INC. WINK COMMUNICATIONS
By: /s/ ROBERT BROOKS By: /s/ TIM TRAVAILLE
--------------------------------- ----------------------------------
Name: Robert Brooks Name: Tim Travaille
------------------------------- --------------------------------
Title: Mgr., Manufacturing Solutions Title: Sr. Vice-President, Operations
------------------------------ & Deployments
-------------------------------
Date: 6/14/99 Date: 6/3/99
------------------------------- --------------------------------
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SCHEDULE A
WINK DATA CENTER SERVICE DESCRIPTION
HOSTING SERVICES
The following is a description of the application hosting service that GEIS
will provide in relation to the Wink Data Center application. The hardware
used to host the Wink Data Center is currently configured with two
dedicated Sun Ultra 2300s with 512 megabites of memory and 12-16 gigabytes
of usable disk storage ("Hardware Configuration"). Primary LAN segments are
10/100 base T. The Backup and Recovery LAN is 100 megabit Ethernet. Cisco
routers are used to manage access to the hosting environment from GEIS's
and Wink's networks. However, the actual hardware and software
configuration at any time will be dictated primarily by two factors:
GEIS STANDARD HOSTING PRACTICES: Such standard hosting practices are
generic in nature and are intended to provide Wink with a general
framework of GEIS' operating procedures. For Wink's reference, a
high-level description of GIS' standard hosting practices is contained
herein.
WINK'S SPECIFIC DEFINED REQUIREMENTS: It is expected that the specific
requirements of the Wink Data Center application will be dynamic. To
assist Wink in understanding how GEIS intends to support the Wink Data
Center application, GEIS is providing to Wink herein an outline of its
understanding of the first phase of the specific Wink-defined Wink
Data Center design and development requirements, which requirements
are intended to serve as a boundary for the applications that GEIS has
committed to host for Wink.
The manufacturer performance rating for the Hardware Configuration, using
SPECint_rate95 was 219. For the term of this Agreement, the Hardware
Configuration will equal or exceed the current Hardware Configuration and
will be capable of processing at a SPECrate_int95 of 219 or better.
Additionally, GEIS tested the Wink Data Center in its production
environment, including the abovementioned Hardware Configuration, on
November 10, 1998, using specific Wink-provided test data and with no other
applications or users consuming Hardware Configuration resources. Under
these conditions, the Wink Data Center was able to process 83 transactions
per second. Wink understands and agrees that GEIS does not make any
warranty or representation with respect to the processing or throughput
capabilities of the Wink Data Center application or the Hardware
Configuration. Wink further understands that actual throughput in the
production environment will be impacted by various factors, including, but
not limited to, software changes, reporting queries, database updates,
database capacity, applications installed on the Hardware Configuration
and/or consuming Hardware Configuration resources, and the number of users
utilizing Hardware Configuration resources.
SERVER CONFIGURATION
In general, an application may be deployed to a single server, or it may be
split among multiple specialized servers. While deployment to a single
server represents a preferred, simpler approach, a variety of factors
including security considerations, connectivity requirements and
performance requirements may drive the need to deploy to multiple servers.
The decision regarding which configuration is appropriate for Wink's hosted
applications is made by GEIS as part of the production design process.
GEIS will utilize and support the operating environment for the Wink Data
Center for all operating system and application supporting software within
GEIS ownership. Operating system and application support software shall
include but not be limited to the following initial vendor supported
systems:
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Sun Solaris 2.6
Actra ECXpert V1.0.2
Oracle 7 Workgroup Server 7.3.3
Perl 5,002
WU-FTPD 2.4.1
All operating system and application support software will operate within
two (2) levels of the applicable vendor's most recently released version for
commercial services.
High Availability
[GRAPHIC]
Application Failover Configuration
This figure illustrates a 4 + 1 configuration where each
application server fails to the spare device. The current status
of failover capability at GEIS is as follows:
Solaris: Manual failover in less than four hours. Alternatives for
automated failover are under evaluation.
STORAGE CONFIGURATIONS
Wink's storage environment initially will be configured on a high
availability disk.
BACKUP AND RECOVERY
Weekly full system backups and daily incremental backups are completed,
standard, for all storage systems. Most systems have been migrated from
using direct DAT tape backup to an automated DLT (digital linear tape)
robotics backup system, under control of Open(TM)Vision NetBackup software.
The DAT and DLT backup tapes are produced once a week and taken off-site at
each center.
PROBLEM IMPACT
GEIS uses the reported problem impact stated by Wink as the primary method
for determining escalation of a given problem. The following four classes
are used to measure the impact of a given problem in the Wink Data Center:
SEVERE: Problem has caused severe impact to the Wink Data Center.
There is no work around for the problem and because of the
nature of the problem, it is felt that the impact may go on
for a protracted period of time. Such problems are
immediately referred by GEIS Client
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Services to the appropriate on-call Processing Platform
Engineering resource. A Client Services Manager is
immediately notified of severe problems. The problem will
continue to be escalated upward as long as the problem is
open.
MAJOR: The problem impacts large portions of the Wink Data Center
for an extended period of time. Such problems are
immediately referred by GEIS Client Services to the
appropriate on-call Processing Platform Engineering
resource. A Client Service Manager is notified as soon as
reasonably possible. Further escalation will occur if
needed.
MODERATE: The problem causes moderate impact to the Wink Data Center.
An electronic ticket is generated and taken by the first
available technician within the Client Services. Moderate
problems are not escalated to on-call support after normal
GEIS support hours.
MINOR: Nuisance problems or informational inquiries are considered
minor or nominal. An electronic ticket is generated and
taken by the first available technician once higher priority
calls are addressed. Minor and Nominal problems are not
escalated to on-call support after normal GEIS support
hours.
QUALITY CALL
Ordinarily, GEIS personal conduct a "Quality Call" every GEIS business day
to escalate problems to senior management, engineering, operations, and
support personnel. Moderate, Major, and Severe problems are automatically
flagged in GEIS's client services call tracking system to be included in
the next Quality Call. During the Quality Call, problems are reviewed and
action items are generated as needed. Resources from across the business
are called upon to assist in problem resolution. Problems are updated daily
and remain open in the Quality Calls until resolved.
CAL ESCALATION
GEIS's Client Services uses the reported problem impact stated by Wink as
the primary method for determining the escalation of a given problem. It
is, therefore, Wink's responsibility to communicate as accurately as
reasonably possible the impact when opening a ticket and to adjust the
severity if the impact changes. A case number will identify Wink's problem
and is used to track the issue throughout the problem resolution process.
GEIS PROBLEM ESCALATION GUIDELINES
GEIS escalates problems internally, on an estimated time-frame basis, as
outlined in the following table.
<TABLE>
<CAPTION>
IMPACT CLIENT SERVICES PROCESSING PLATFORM ENGINEERING SPECIALIST
------ --------------- ------------------------------- ----------
<S> <C> <C> <C>
Severe Immediate 30 Minutes 1 Hour
Major 30 Minutes 2 Hours 4 Hours
Moderate 1 Day 2 Days (via Quality Call) 2 Days (Quality Call)
Minor None None None
</TABLE>
Sales Escalation:
Tier 1. Minor issues are addressed by the Account Executive. The
Account Executive is authorized to use local resources to fix
the problem.
Tier 2. Minor to moderate problems are addressed by the Region Manager.
Problems are taken to this level when no additional resources
are available at the local level.
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<PAGE> 13
Tier 3. Moderate to major problems are handled at the Area Level.
Problems are brought to this level when resources are no
longer available at the region level.
Tier 4. Severe problems are addressed by the applicable GEIS Vice
President or senior manager, Problems are escalated to this
level when resources have been exhausted at the area level.
LAN CONFIGURATIONS AND TECHNOLOGIES
The following diagram describes the local network architecture used in
the current GEIS Unix hosting environment:
[CHART]
HIGH LEVEL NETWORK ARCHITECTURE
SECURITY
GEIS data centers are physically secured both through electronic means
and with a 24 x 7 third-party security staff. Physical firewalls
separate major portions of the largest centers and all centers are
equipped with:
o Video surveillance, infra-red & motion detection systems
o Automated environment systems ensuring constant temperature &
humidity with remote management and alarms
o Heat, smoke and water detection systems
o Automatic fire extinguishing systems using environmentally
safe INERGEN
o Redundant power feeds from local utilities
o Uninterruptable Power Supply with battery backup & diesel
turbines
Network security is provided via packet-filtering routers which block all
services except those required to reach the application. Administrative
access to all servers is governed by firewalls which perform keystroke
logging. Systems at GEIS are audited with a Type 1 audit once every 18
months by an independent agency. Published results of these audits are
available upon request.
APPLICATION STAGING AND DEPLOYMENT
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<PAGE> 14
Applications that have successfully completed a UDP review are first staged
to a pre-production environment where operability testing is performed by a
GEIS-assigned Application Engineer and Database Administrator.
APPLICATION ENGINEERS AND DBAs
A GEIS Application Engineer is assigned to the Wink Data Center
application. Application Engineers are involved in the earliest stages of
the application lifecycle, but, provided that the application has
successfully completed a UDP review, GEIS Application Engineers begin to
drive the project at the staging and deployment phase.
A GEIS Database Administrator is assigned to each application which
utilizes a relational or object relational database manager.
STAGING ENVIRONMENT
Application operability testing is performed in the Staging Environment to
the deployment of the application to the production environment. During
staging, the assigned Application Engineer and Database Administrator complete
the following tests:
o Application installation and de-installation;
o Application startup and shut down;
o Application and Database backup and recovery;
o Application and Database failover and recovery;
o Application and Database trapping on failure conditions;
o MIB definition validation;
o Application and Database performance testing;
Upon completion of operability testing, the application is deployed to
production servers.
SPECIFIC DEFINED REQUIREMENTS
The core of the Wink Data Center is Netscape's ECXpert product, which
serves to:
o receive data from cable operators and billing service providers;
o verify trading partner relationships;
o move data through appropriate processing steps;
o provide document tracking and audit trail; and
o schedule subsequent processing and data delivery;
Subscriber Accounts processing:
o provides a data store for information about Wink subscribers;
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o updated with files supplied Wink;
o may also be updated using a browser based GUI.
Response Transactions processing:
o files sent by Wink;
[*]
Order Tracking:
o Order data from responses will be saved in a tracking data store;
o Order acknowledgments from suppliers will be posted to the same data
store; and
o A browser-based GUI will provide access to the order tracking
information.
UIC Registration:
o UIC mapping and routing data will be kept in a data store;
o Updating will be accomplished with a browser based GUI;
o Response processing will use this data to decode response payloads;
and
o Reporting will use this data to generate headings and data
descriptions.
Application Administration provides data stores and browser based GUIs for:
o Unix account registration;
o Customer Service Representative Registration;
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 16
o Trading Partner definition and relationships;
o Review of Exception Response Transactions; and
o ECXpert job scheduler updates.
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SCHEDULE B
WINK DATA CENTER
PRICE SCHEDULE
(U.S. ACCESS AND USE ONLY)
Subject to Section 2.4 of the Agreement, the following prices will apply during
the term of the Agreement and this Price Schedule commencing as of the date of
GEIS's written certification that Version 1a of the Wink Data Center is
deployed and fully functional. Such prices are in lieu of any and all other
charges specified in GEIS's Information Services Price Schedule which might
otherwise be applicable. The prices set forth below are firm for a period of
sixty (60) months, and thereafter shall be at such rate as agreed to in writing
by the parties.
[*]
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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<PAGE> 18
[*]
- ---------------
[*] Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
Page 18
<PAGE> 1
EXHIBIT 11.1
WINK COMMUNICATIONS, INC.
COMPUTATION OF HISTORICAL AND PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
PRO FORMA(2)
HISTORICAL(1) -------------------------
------------------------------------------------ SIX MONTHS
SIX MONTHS YEAR ENDED ENDED
YEAR ENDED DECEMBER 31, ENDED JUNE 30, DECEMBER 31, JUNE 30,
---------------------------- ----------------- ------------ ----------
1996 1997 1998 1998 1999 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss................ $(5,884) $(9,166) $(14,036) (5,777) $(9,201) $14,036 $(9,201)
======= ======= ======== ======= ======= ======= =======
Weighted average common
shares outstanding.... 8,128 9,269 10,072 9,948 10,656 10,072 10,656
Unvested portion of
weighted average
shares subject to
repurchase rights..... (1,696) (1,932) (1,118) (1,253) (691) (1,118) (691)
Assumed conversion of
Preferred Stock into
Common Stock on
January 1, 1999, or at
date of original
issuance, if later.... -- -- -- -- -- 6,244 7,867
Weighted average common
equivalent shares
outstanding(3)........ -- -- -- -- -- -- --
------- ------- -------- ------- ------- ------- -------
Weighted average common
and common equivalent
shares outstanding.... 6,432 7,337 8,954 8,695 9,965 15,198 17,832
======= ======= ======== ======= ======= ======= =======
Basic and diluted net
loss per share........ $ (0.91) $ (1.25) $ (1.57) $ (0.66) $ (0.92) $ (0.92) $ (0.52)
======= ======= ======== ======= ======= ======= =======
</TABLE>
- ---------------
(1) See computation of historical net loss per share in Note 1 to the
Consolidated Financial Statements.
(2) See computation of pro forma net loss per share in Note 1 to the
Consolidated Financial Statements.
(3) Due to the Company's net losses, inclusion of common equivalents shares in
the Computation of diluted net loss per share would be antidilutive.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 1 to Registration
Statement on Form S-1 (Registration No. 333-80221) of our report dated February
23, 1999 relating to the consolidated financial statements of Wink
Communications, Inc., which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
San Jose, California
July 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1998 AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 CONTAINED IN THE
COMPANY'S REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 16,892 44,794
<SECURITIES> 4,441 28,662
<RECEIVABLES> 239 241
<ALLOWANCES> 0 30
<INVENTORY> 0 0
<CURRENT-ASSETS> 21,873 74,617
<PP&E> 3,463 3,933
<DEPRECIATION> 1,701 2,140
<TOTAL-ASSETS> 23,920 76,717
<CURRENT-LIABILITIES> 4,430 19,185
<BONDS> 0 0
0 0
8 12
<COMMON> 11 11
<OTHER-SE> 19,106 57,369
<TOTAL-LIABILITY-AND-EQUITY> 23,920 76,717
<SALES> 517 620
<TOTAL-REVENUES> 517 620
<CGS> 513 205
<TOTAL-COSTS> 15,212 11,360
<OTHER-EXPENSES> 813 1,590
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 154 51
<INCOME-PRETAX> (14,036) (9,201)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (14,036) (9,201)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,036) (9,201)
<EPS-BASIC> (1.57) (0.92)
<EPS-DILUTED> (1.57) (0.92)
</TABLE>
