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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1999
REGISTRATION NO. 333-80221
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WINK COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<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:
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<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)
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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) Previously paid.
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 -- AUGUST 17, 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
[INSIDE COVER PAGE]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Forward-Looking Statements............ 12
Use of Proceeds....................... 13
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.............................. 28
Management............................ 40
Certain Transactions.................. 50
Principal and Selling Stockholders.... 55
Description of Capital Stock.......... 58
Shares Eligible for Future Sale....... 61
Underwriting.......................... 63
Legal Matters......................... 66
Experts............................... 66
Additional Information................ 66
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.
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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 reincorporated in
Delaware in August 1999. Our principal executive office is located at 1001
Marina Village Parkway, Alameda, California 94501 and our telephone number is
(510) 337-2950.
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THE OFFERING
Common stock offered by:
Wink........................... 4,000,000 shares
Selling stockholders........... 200,000 shares
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Total..................... 4,200,000 shares
Common stock to be outstanding after
this offering....................... 28,475,646 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
- 863,200 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 was completed
in August 1999; and
- assumes no exercise of the underwriters' over-allotment option.
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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.
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<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 $79,111 $134,061
Working capital........................................... 55,432 78,307 133,257
Total assets.............................................. 76,717 82,372 137,322
Convertible promissory note -- related party.............. 15,120 -- --
Long-term obligations, less current portion............... 140 140 140
Total stockholders' equity................................ 57,392 78,307 133,257
</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 2, 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
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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
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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.
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<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 31.6% 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 30.9%. 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 28,475,646 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 83,750 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 24,191,896 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, 17,993,805 of those
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.
12
<PAGE> 17
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.
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 863,200 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 effected after June 30, 1999.
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 $ 79,111 $134,061
======== ======== ========
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, 24,475,646 pro forma, 28,475,646 as adjusted... 11 25 29
Additional paid-in capital................................ 109,918 130,691 185,637
Stockholder notes receivable.............................. (2,801) (2,801) (2,801)
Unearned compensation..................................... (9,288) (9,288) (9,288)
Accumulated deficit....................................... (40,460) (40,460) (40,460)
-------- -------- --------
Total stockholders' equity............................. 57,392 78,167 133,117
-------- -------- --------
Total capitalization.............................. $ 57,532 $ 78,307 $133,257
======== ======== ========
</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 $78,167,000
or $3.19 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 $133,117,000 or $4.67 per share. This represents an immediate increase
in the pro forma net tangible book value of $1.48 per share to existing
stockholders and an immediate dilution of $10.33 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............................................... $3.19
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.48
-----
Adjusted pro forma net tangible book value per share after
the offering.............................................. 4.67
------
Dilution per share to new investors......................... $10.33
======
</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........ 24,475,646 86.0% $116,771,000 66.1% $ 4.77
New investors................ 4,000,000 14.0 60,000,000 33.9 15.00
---------- ----- ------------ -----
Total.............. 28,475,646 100.0% $176,771,000 100.0%
========== ===== ============ =====
</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 863,200
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
24,275,646 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(a):
Cost of services -- related
parties......................... -- 98 323 162 -- -- 142
Cost of services -- third
parties......................... -- -- 235 376 513 133 63
Research and development.......... 4 851 2,595 4,384 6,549 2,739 4,160
Sales and marketing............... 10 899 2,263 3,510 5,578 2,576 5,082
General and administrative........ 11 472 1,068 1,843 2,572 935 1,913
------ ------- ------- ------- -------- ------- --------
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) Costs and 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 period from October 7, 1994 (Inception)
through December 31, 1994, 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 2, 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, non-cash charges for stock compensation, 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,
non-cash charges for stock compensation and warrant amortization, 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, non-cash charges for stock
compensation, 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.
19
<PAGE> 24
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 non-cash charges for
stock compensation and warrant amortization 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 56% to
$4.2 million for the six months ended June 30, 1999 from $2.7 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 96% to $5.1
million for the six months ended June 30, 1999 from $2.6 million for the six
months ended June 30, 1998. The increase was primarily due to non-cash charges
for stock compensation and warrant amortization totaling $2.7 million. Increased
personnel costs in 1999 also contributed to the overall increase.
General and Administrative. General and administrative expense increased
105% to $1.9 million for the six months ended June 30, 1999 from $935,000 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,
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<PAGE> 25
which will be amortized in future periods over the vesting periods of certain
restricted stock and stock options.
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
and to promote the development of Wink-enhanced programming. The fair value of
these warrants on the measurement date totaled $1,980,000 and was recognized as
a sales and marketing 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 component of stockholders'
equity and will be amortized as a sales and marketing expense over the estimated
period of benefit of ten 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 sales and
marketing expense, as the shares were fully-vested on the date of grant.
In July 1999, we granted a fully exercisable warrant to purchase 75,000
shares of common stock at $12.00 per share, subject to adjustment, as incentive
for signing a definitive software licensing agreement and to promote the
development of Wink-enabled programming. The fair value of this warrant on the
measurement date totaled $734,000 and was recognized as a consisting sales and
marketing expense during the three months ended September 30, 1999, as there was
no remaining performance obligation on behalf of the holder and no significant
license revenues are expected to be derived from the agreement.
Costs and expenses include non-cash charges for stock compensation and
warrant amortization as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
----------------------
1998 1999
-------- ----------
<S> <C> <C>
Research and development............................. $ 95,000 $ 100,000
Sales and marketing.................................. 422,000 2,747,000
General and administrative........................... 105,000 105,000
-------- ----------
$622,000 $2,952,000
======== ==========
</TABLE>
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
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<PAGE> 26
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-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,
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<PAGE> 27
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 $6.5
million, $4.4 million and $2.6 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 due primarily to additional
engineering and operations personnel costs incurred to support increased product
deployment activities. The increase of 69% 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.
Sales and Marketing. Sales and marketing expenses were $5.6 million, $3.5
million and $2.3 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The increase of 60% from the year ended December 31, 1997 to the
year ended December 31, 1998 was primarily due to resources expended to support
the initial deployment of Wink Enhanced Broadcasting and increases in non-cash
charges for stock compensation and warrant amortization in 1998. The increase of
52% from the year ended December 31, 1996 to the year ended December 31, 1997
was primarily a result of increased personnel, travel-related costs and non-cash
charges for stock compensation and warrant amortization.
General and Administrative. General and administrative expense was $2.6
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 44% 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 non-cash charges for stock compensation and warrant
amortization 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.
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<PAGE> 28
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
recognized as a sales and marketing expense. 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 sales and marketing 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 sales and marketing expense 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 sales and marketing
expense 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 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 sales and marketing
expense.
Costs and expenses include non-cash charges for stock compensation and
warrant amortization as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
------ -------- ----------
<S> <C> <C> <C>
Research and development.................................... $ -- $ 71,000 $ 204,000
Sales and marketing......................................... -- 312,000 846,000
General and administrative.................................. 4,000 72,000 206,000
------ -------- ----------
$4,000 $455,000 $1,256,000
====== ======== ==========
</TABLE>
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<PAGE> 29
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.
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
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<PAGE> 30
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 television industry participants who
support Wink-enhanced programming to share with these entities a portion of
revenues, if any, we generate from viewer responses to Wink Enhanced
Broadcasting. These revenue sharing commitments are based upon the level of the
commitment the particular participant has made to support Wink Enhanced
Broadcasting. To date, no transaction fee revenue has been recognized. To the
extent that future transaction fee revenue is generated, we will record the
revenue sharing as a charge to cost of revenues in the period the revenue is
recognized.
For Microsoft and certain cable and direct broadcast satellite system
operators, we have also 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.
Such revenue guarantees will be recognized in the period incurred. 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 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.
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<PAGE> 31
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.
27
<PAGE> 32
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,
Matsushita, Thomson 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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<PAGE> 33
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 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
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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.
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
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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 purchased a substantial equity stake in
Wink and agreed 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.
From time to time, we receive 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 may incur significant costs and diversion of resources with
respect to the defense of any claims brought, which could materially adversely
affect our business. In
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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> 44
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> 45
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
July 1999, Mr. Coats has served as a Founder and Managing Director of the T. H.
Lee, Putnam Internet Fund. From April 1996 to July 1999, Mr. Coats 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,
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<PAGE> 46
Mr. Coats served as President of Maverick Capital Equity Partners, LLC, and from
May 1993 to January 1994, Mr. Coats 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 Chapter 11 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. 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
Chairman 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, New Business Development, 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> 47
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> 48
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> 49
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 reviewing 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> 50
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 51,563 140,625 309,375
</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> 51
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> 52
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> 53
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> 54
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. (affiliated with
F. Philip Handy)........................... -- 625,000 -- 125,000
General Electric Capital Corporation
(formerly affiliated with Jeffrey Coats)... -- 906,250 -- 550,000
NBC Multimedia, Inc. (formerly affiliated
with 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;
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<PAGE> 55
- the shares of Series B preferred stock listed opposite Toshiba
Corporation were purchased by Mr. Yamamoto personally; and
- 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 New Business Development of Toshiba's Information and Industrial
Systems Company.
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.
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
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<PAGE> 56
Information Services $328,000 under this agreement. In addition, in August 1998,
we issued to 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. 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> 57
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> 58
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> 59
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 24,475,646 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 28,475,646 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 17.4% 100,000 4,149,500 14.6%
Microsoft Corporation(b)............. 3,000,000 12.0 -- 3,000,000 10.4
One Microsoft Way
Redmond, WA 98052
Entities associated with General
Electric Capital Corporation(c).... 1,856,250 7.3 -- 1,856,250 6.3
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> 60
<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 4.5%
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
Allan C. Thygesen(g)................. 125,208 * -- 125,208 *
Timothy V. Travaille(h).............. 85,625 * -- 85,625 *
Katherine Sullivan(i)................ 42,188 * -- 42,188 *
Paritosh K. Choksi................... 92,708 * -- 92,708 *
Jeffrey H. Coats(j).................. 10,000 * -- 10,000 *
Michael Fuchs(j)..................... 347,500 1.4% -- 347,500 1.2%
F. Philip Handy(k)................... 119,254 * -- 119,254 *
William Schleyer(j).................. 79,500 * -- 79,500 *
All directors and executive officers
as a group (12 persons)(l)......... 9,273,983 37.5% 200,000 9,073,983 31.6%
----------
</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 550,000 shares subject to currently exercisable warrants held by
General Electric Capital Corporation, and 375,000 shares subject to a
currently exercisable warrant held by NBC Multimedia, Inc.
(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's Information
and Industrial Systems Company 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 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
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<PAGE> 61
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) Includes 116,458 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(h) Includes 78,125 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(i) Includes 35,938 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(j) Includes 10,000 shares subject to stock options exercisable within 60 days
of June 30, 1999.
(k) Includes 109,254 shares that represent Mr. Handy's pro rata share of shares
held by EGI-Wink Investors, L.L.C. and SZ Investments, L.L.C., in which, in
each case, Mr. Handy has no voting or dispositive power. Also 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 500,000 shares subject to
warrants held by entities affiliated with directors of Wink. All of these
warrants are expected to be exercised prior to the closing of this
offering.
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<PAGE> 62
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 are expected to be 24,475,646
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 are expected to be 28,475,646 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> 63
- 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 15,831,833 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> 64
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 1,063,200 shares of common stock, at a weighted average
exercise price of $7.58 per share. All of those warrants expire on the
completion of this offering. Warrants to purchase 863,200 shares are expected to
be exercised prior to that time. Such warrants may be exercised on a "net"
basis. The remaining warrant to purchase 200,000 shares is expected to expire
unexercised.
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> 65
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 expect to have outstanding an
aggregate of 28,475,646 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
24,275,646 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>
83,750 , 1999 to , 1999 (on the date of this
prospectus or within the 180 days after the date of this
prospectus)
17,993,805 , 1999 (180 days after the date of this prospectus)
6,198,091 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> 66
approximately 285,000 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> 67
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated August , 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> 68
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> 69
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. Under the National Association of
Securities Dealers Conduct Rules, 34,756 of these shares are deemed to be
underwriting compensation and, as such, may not be sold or transferred for a
period of one year after the date of this prospectus.
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> 70
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> 71
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> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Wink Communications, Inc. and its Subsidiary
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, except for Note 9
which is as of August 13, 1999
F-2
<PAGE> 73
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; 5,000 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; 100,000 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 51,890 109,918 109,918
Stockholder notes receivable...................... (984) (1,046) (2,801) (2,801)
Unearned compensation............................. (494) (479) (9,288) (9,288)
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> 74
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 4,384 6,549 2,739 4,160
Sales and marketing........................... 2,263 3,510 5,578 2,576 5,082
General and administrative.................... 1,068 1,843 2,572 935 1,913
------- ------- -------- ------- --------
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> 75
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).............................. -- -- -- -- 1,979 -- --
Issuance of warrant for services
(unaudited).............................. -- -- -- -- 4,050 -- (4,050)
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).............................. -- -- -- -- -- -- 373
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 $109,918 $(2,801) $(9,288)
====== === ====== === ======== ======= =======
<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).............................. -- 1,979
Issuance of warrant for services
(unaudited).............................. -- --
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).............................. -- 373
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> 76
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> 77
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 reincorporated in Delaware on August 12, 1999. The Company
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> 78
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.
REVENUE SHARING AND GUARANTEES
The Company's business model allows other television industry participants
supporting Wink-enhanced 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
F-8
<PAGE> 79
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
viewer responses to Wink Enhanced Broadcasting. To date, no transaction fee
revenue has been recognized from the Wink Response Network. Any amounts payable
to third parties in future periods resulting from revenue sharing will be
included in cost of revenues in the period revenue is recognized.
The Company has also provided minimum revenue guarantees that become
effective once the relevant participant begins deployment or achieves specified
deployment levels of Wink Enhanced Broadcasting. For contracts that do not
require minimum deployment levels, the revenue guarantee will be recognized as
incurred as cost of revenues over the contract term as Wink-enabled devices are
deployed. For contracts that do require minimum deployment levels, the revenue
guarantee will be recognized as incurred over the contract term beginning in the
period the minimum deployment level is achieved.
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.
F-9
<PAGE> 80
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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
F-10
<PAGE> 81
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Costs and expenses include non-cash charges for stock compensation and
warrant amortization as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ----------------
1996 1997 1998 1998 1999
---- ---- ------ ---- ------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Research and development............... $ -- $ 71 $ 204 $ 95 $ 100
Sales and marketing.................... -- 312 846 422 2,747
General and administrative............. 4 72 206 105 105
---- ---- ------ ---- ------
$ 4 $455 $1,256 $622 $2,952
==== ==== ====== ==== ======
</TABLE>
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.
F-11
<PAGE> 82
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-12
<PAGE> 83
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-13
<PAGE> 84
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
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>
F-14
<PAGE> 85
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-15
<PAGE> 86
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, GUARANTEES 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. To date,
no transaction fee revenue has been recognized from the Wink Response Network.
For certain cable and DBS operators, the Company has also 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.
If no amounts are earned by the operators and the minimum deployment levels are
achieved, the aggregate three year revenue guarantee based on contracts in place
on December 31, 1998 and June 30, 1999 (unaudited) totaled $8,375,000.
In addition, the Company has provided a minimum revenue guarantee to one
industry participant totaling $2.50 over 18 months for each deployment of a
Wink-enabled device. The arrangement does not provide for a minimum level of
deployment, and accordingly, the Company is unable to reasonably estimate the
amounts, if any, that could become payable under this arrangement.
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
F-16
<PAGE> 87
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-17
<PAGE> 88
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-18
<PAGE> 89
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 sales
and marketing expense. 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 sales and marketing expense 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 sales and marketing expense 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 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 sales and marketing expense.
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
F-19
<PAGE> 90
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
sales and marketing expense.
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 six months ended June 30,
1998 and 1999, respectively, and has been allocated to operating costs and
expenses based upon the primary activity of the applicable employees. See Note
9 -- Subsequent Events.
F-20
<PAGE> 91
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
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>
F-21
<PAGE> 92
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
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.
F-22
<PAGE> 93
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
\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. The reincorporation was completed in
August 1999. As a result of the reincorporation, the Company is 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 sales and marketing expense 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 sales and marketing expense 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) which has
been included in unearned compensation in the accompanying statement of
stockholders equity. During the six months ended June 30, 1999, amortization
recognized as sales and marketing expense totaled $68,000 and the remaining
$3,982,000 will be recognized as sales and marketing expense ratably over the
remainder of the ten year term of the agreement.
F-23
<PAGE> 94
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Due to the possibility of rapid technological change and the high level of
competition in the Company's industry, there is a possibility that the estimated
period of benefit from this arrangement may ultimately be less than the
contractual term of ten years. In the event that future events or transactions
reduce or eliminate the period of future benefit, the then unamortized value of
the warrant will be recognized as a charge to sales and marketing expense either
over the remaining period of benefit or immediately at the time of such change,
as applicable.
In July 1999, the Company granted a fully exercisable warrant to purchase
Common Stock to a broadcasting company as an incentive for signing a definitive
software licensing agreement and to promote the development of Wink-enhanced
programming. The warrant enables the holder to purchase 75,000 shares of Common
Stock at $12.00 per share, subject to adjustment, and expires in July 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 $734,000 (unaudited) and was recognized as sales and
marketing expense during the three months ended September 30, 1999, 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.
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 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
F-24
<PAGE> 95
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-25
<PAGE> 96
WINK COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 sales
and marketing expense as there were no remaining performance obligations on
behalf of the holders.
F-26
<PAGE> 97
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> 98
[LOGO]
<PAGE> 99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 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> 100
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> 101
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> 102
- 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> 103
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> 104
<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> 105
<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.
10.46 Warrant issued to Fox Broadcasting Company dated July 26,
1999.
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.
+ 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> 106
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 16th day of August 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 August 16,
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> 107
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> 108
<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.
10.46 Warrant issued to Fox Broadcasting Company dated
, 1999.
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.
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
+ 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
4,200,000 Shares
WINK COMMUNICATIONS, INC.
Common Stock
UNDERWRITING AGREEMENT
August __, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE BANK SECURITIES INC.
BEAR, STEARNS & CO. INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Wink Communications, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several underwriters named in Schedule I
hereto (the "UNDERWRITERS"), and certain stockholders of the Company named in
Schedule II hereto (the "SELLING STOCKHOLDERS") severally propose to sell to the
several Underwriters, an aggregate of 4,200,000 shares of the common stock, par
value $.001 per share, of the Company (the "FIRM SHARES"), of which 4,000,000
shares are to be issued and sold by the Company and 200,000 shares are to be
sold by the Selling Stockholders, each Selling Stockholder selling the amount
set forth opposite such Selling Stockholder's name in Schedule II hereto. The
Company also proposes to issue and sell to the several Underwriters not more
than an additional 630,000 shares (the "ADDITIONAL SHARES") of its common stock,
par value $.001 per share, if requested by the Underwriters as provided in
Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter
referred to collectively as the "SHARES". The shares of common stock of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "COMMON
1
<PAGE> 2
STOCK". The Company and the Selling Stockholders are hereinafter sometimes
referred to collectively as the "SELLERS".
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "REGISTRATION STATEMENT";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"RULE 462(b) REGISTRATION STATEMENT"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Company agrees to issue and sell
4,000,000 Firm Shares, (ii) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II hereto and (iii) each Underwriter agrees,
severally and not jointly, to purchase from each Seller at a price per Share of
$______ (the "PURCHASE PRICE") the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to 630,000 Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
2
<PAGE> 3
Each Seller hereby agrees not to (i) 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
(ii) 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
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan, (ii) the Company may issue
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof, (iii) the Company may
issue shares of Common Stock pursuant to the Company's Employee Stock Purchase
Plan, (iv) the Company may issue shares for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
or (v) the Company may issue shares in connection with strategic transactions
involving the Company and other entities, including (A) joint ventures,
manufacturing, marketing or distribution arrangements or (B) technology transfer
or development arrangements; so long as the holder of the shares pursuant to
clauses (iv) and (v) agrees in writing with Donaldson, Lufkin & Jenrette
Securities Corporation to refrain from selling, making any short sale of,
granting any option for the purchase of, or otherwise transferring or disposing
of, any of such shares for a period of 180 days after the date of the Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The Company also agrees not to file any registration statement
(other than registration statements on Form S-8) with respect to any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock for a period of 180 days after the date of the Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, each Selling Stockholder agrees that, for a period of
180 days after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, it will not 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 or exchangeable
for Common Stock. The Company shall, prior to or concurrently with the execution
of this Agreement, deliver an agreement executed by (i) each Selling
Stockholder, (ii) each of the directors and officers of the Company who is not a
Selling Stockholder and (iii) holders of at least 98% of the Company's
outstanding capital stock to the effect that such person will not, during the
period commencing on the date such person signs such agreement and ending 180
days after the date of the Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in any of the
transactions described in the first sentence of this paragraph or (B) 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 or
exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as
3
<PAGE> 4
soon after the execution and delivery of this Agreement as in your judgment is
advisable and (ii) initially to offer the Shares upon the terms set forth in the
Prospectus.
Of the Shares to be offered by the Underwriters, 210,000 Shares have
been reserved (the "RESERVED SHARES") for sale to certain individuals, including
employees, officers and directors of the Company and other parties associated
with the Company and members of their families. The number of shares available
to the general public will be reduced to the extent those persons purchase, or
confirm the purchase (either orally or in writing) of, Reserved Shares. Any
Reserved Shares not so purchased or confirmed for purchase will be offered in
the Offering.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Shares shall be delivered by or on behalf of the Sellers, with any transfer
taxes thereon duly paid by the respective Sellers, to Donaldson, Lufkin &
Jenrette Securities Corporation through the facilities of The Depository Trust
Company ("DTC"), for the respective accounts of the several Underwriters,
against payment to the Sellers of the Purchase Price therefore by wire transfer
of Federal or other funds immediately available in New York City. The
certificates representing the Shares shall be made available for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be, at the office of DTC or its designated custodian (the "DESIGNATED
OFFICE"). The time and date of delivery and payment for the Firm Shares shall be
9:00 A.M., New York City time, on August __, 1999 or such other time on the same
or such other date as Donaldson, Lufkin & Jenrette Securities Corporation and
the Company shall agree in writing. The time and date of delivery and payment
for the Firm Shares are hereinafter referred to as the "CLOSING DATE". The time
and date of delivery and payment for any Additional Shares to be purchased by
the Underwriters shall be 9:00 A.M., New York City time, on the date specified
in the applicable exercise notice given by you pursuant to Section 2 or such
other time on the same or such other date as Donaldson, Lufkin & Jenrette
Securities Corporation and the Company shall agree in writing. The time and date
of delivery and payment for any Additional Shares are hereinafter referred to as
the "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 9 of this Agreement
shall be delivered at the offices of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050,
and the Shares shall be delivered at the Designated Office, all on the Closing
Date or such Option Closing Date, as the case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
4
<PAGE> 5
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters and the Company, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters and the
Company, it is necessary to amend or supplement the Prospectus to comply with
applicable law, to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with
5
<PAGE> 6
applicable law, and to furnish to each Underwriter and to any dealer as many
copies thereof as such Underwriter or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
September 30, 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel, the Company's accountants and any Selling Stockholder's counsel (in
addition to the Company's counsel) in connection with the registration and
delivery of the Shares under the Act and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and reasonable fees
and reasonable disbursements of counsel for the Underwriters in connection with
such registration or qualification and memoranda relating
6
<PAGE> 7
thereto), (v) the filing fees and reasonable disbursements of counsel for the
Underwriters in connection with the review and clearance of the offering of the
Shares by the National Association of Securities Dealers, Inc., (vi) all fees
and expenses in connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and expenses
incident to the listing of the Shares on the Nasdaq National Market, (vii) the
cost of printing certificates representing the Shares, (viii) the costs and
charges of any transfer agent, registrar and/or depositary, and (ix) all other
costs and expenses incident to the performance of the obligations of the Company
and the Selling Stockholders hereunder for which provision is not otherwise made
in this Section. The provisions of this Section shall not supersede or otherwise
affect any agreement that the Company and the Selling Stockholders may otherwise
have for allocation of such expenses among themselves.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and, to the
Company's knowledge, no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all
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material respects with the Act, (iii) if the Company is required to file a Rule
462(b) Registration Statement after the effectiveness of this Agreement, such
Rule 462(b) Registration Statement and any amendments thereto, when they become
effective (A) will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (B) will comply in all material respects
with the Act and (iv) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in the Registration Statement
or the Prospectus based upon information relating to any Underwriter furnished
to the Company in writing by such Underwriter through you expressly for use
therein.
(c) Each of (i) the preliminary prospectus dated July 29, 1999 filed as
part of Amendment No. 1 to the Registration Statement, (ii) each subsequently
dated preliminary prospectus filed as part of the Registration Statement, and
(iii) the Prospectus filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Act, and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in any preliminary prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter expressly for use therein.
(d) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to carry on its business as described
in the Prospectus and to own, lease and operate its properties, and is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
(a "MATERIAL ADVERSE EFFECT"). The Company has no significant subsidiaries (as
such term is defined in Rule 1-02 of Regulation S-X).
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company relating to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of the Company, except as otherwise
disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been duly
authorized and validly issued and are fully paid, non-assessable and not subject
to any preemptive or similar rights; and the Shares to be issued and sold by the
Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will be
validly issued,
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<PAGE> 9
fully paid and non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable,
and are owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the section entitled
"Description of Capital Stock" in the Prospectus.
(i) The Company is not (i) in violation of its charter or by-laws or
(ii) in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company, to which the Company is
a party or by which the Company or its property is bound, except for such
default that would not have a Material Adverse Effect.
(j) The Company has good and marketable title to all personal property
owned by it which is material to the business of the Company, free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not materially interfere with the use
made and proposed to be made of such property and buildings by the Company,
except as described in the Prospectus.
(k) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; and the Company (i)
has not received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will have to be
made in order to continue such insurance or (ii) has no reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers at a cost
that would not have a Material Adverse Effect.
(l) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the Company
to which the Company is a party or by which the Company or its property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company or its property or (iv) result in
the suspension, termination or
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<PAGE> 10
revocation of any Authorization (as defined below) of the Company, the loss of
which would have a Material Adverse Effect, or any other impairment of the
rights of the holder of any such Authorization.
(m) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company is or reasonably expects to
be a party or to which any of its property is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described; nor are there any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
(n) Other than violations which, singly or in the aggregate, would not
have a Material Adverse Effect, the Company has not violated (i) any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or (iii) any
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder.
(o) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "AUTHORIZATION") of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. Each such Authorization is valid
and in full force and effect and the Company is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization,
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(p) The Company owns or possesses, or can acquire on reasonable terms,
all patents, patent rights, licenses, inventions, copyrights, trademarks,
service marks and trade names ("INTELLECTUAL PROPERTY") currently employed by it
in connection with the business now operated by it except where the failure to
own or possess or otherwise be able to acquire such Intellectual Property would
not, singly or in the aggregate, have a Material Adverse Effect; and, except as
described in the Prospectus, the Company has not received any notice of
infringement of or conflict with asserted rights of others with respect to any
of such Intellectual Property which,
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<PAGE> 11
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(q) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required by the Act to be
described in the Registration Statement or the Prospectus which is not so
described.
(r) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company
before the National Labor Relations Board or any state or local labor relations
board, (ii) strike, labor dispute, slowdown or stoppage pending or threatened
against the Company or (iii) union representation question existing with respect
to the employees of the Company, except for such actions specified in clause
(i), (ii) or (iii) above, which, singly or in the aggregate, would not have a
Material Adverse Effect. To the best of the Company's knowledge, no collective
bargaining organizing activities are taking place with respect to the Company.
(s) This Agreement has been duly authorized, executed and delivered by
the Company.
(t) PricewaterhouseCoopers LLP are independent public accountants with
respect to the Company as required by the Act.
(u) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
on the basis stated therein at the respective dates or for the respective
periods to which they apply; such statements and related schedules and notes
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in accordance with generally accepted accounting
principles the information required to be stated therein; and the other
financial and statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) are, in
all material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
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(w) All material tax returns required to be filed by the Company in any
jurisdiction have been filed, other than those filings being contested in good
faith, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided.
(x) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(y) There are no contracts, agreements or understandings between the
Company and any person granting such person the right (i) except as described in
the Prospectus, to require the Company to file a registration statement under
the Act with respect to any securities of the Company or (ii) to require the
Company to include such securities with the Shares registered pursuant to the
Registration Statement, unless such right has been waived.
(z) Since the respective dates as of which information is given in the
Prospectus and other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company, (ii) there
has not been any material adverse change or any development involving a
prospective material adverse change in the capital stock or in the long-term
debt of the Company, and (iii) the Company has not incurred any material
liability or obligation, direct or contingent.
(aa) Each certificate signed by any authorized officer of the Company
and delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
(bb) The Company has tested its internally developed information
technology and non-information technology systems. The Company has also
initially tested the software and hardware developed by third parties both for
its customers and its internal information systems. As a result of such tests,
the Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect. As used herein, the "YEAR 2000
PROBLEM" means any material failure of computer hardware or software to function
as effectively with dates or time periods occurring after December 31, 1999 as
with dates or time periods occurring prior to January 1, 2000, whether used in
the receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind.
SECTION 7. Representations and Warranties of the Selling Stockholder.
Each Selling Stockholder represents and warrants to each Underwriter that:
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<PAGE> 13
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority, and all approval required by law, to
enter into this Agreement, the Custody Agreement signed by such Selling
Stockholder and ______________________, as Custodian, relating to the deposit of
the Shares to be sold by such Selling Stockholder (the "CUSTODY AGREEMENT") and
the Power of Attorney of such Selling Stockholder appointing certain individuals
as such Selling Stockholder's attorneys-in-fact (the "ATTORNEYS") to the extent
set forth therein, relating to the transactions contemplated hereby and by the
Registration Statement and the Custody Agreement (the "POWER OF ATTORNEY") and
to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder in the manner provided herein and therein.
(c) This Agreement has been duly executed and delivered by or on behalf
of such Selling Stockholder.
(d) The Custody Agreement of such Selling Stockholder has been duly
executed and delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms.
(e) The Power of Attorney of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding instrument of such Selling Stockholder, enforceable in accordance
with its terms, and, pursuant to such Power of Attorney, such Selling
Stockholder has, among other things, authorized the Attorneys, or any one of
them, to execute and deliver on such Selling Stockholder's behalf this Agreement
and any other document that they, or any one of them, may deem necessary or
desirable in connection with the transactions contemplated hereby and thereby
and to deliver the Shares to be sold by such Selling Stockholder pursuant to
this Agreement.
(f) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever.
(g) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Stockholder by or on
behalf of such Selling Stockholder, the compliance by such Selling Stockholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states and except such consent, approval,
authorization or other order of, or qualification which if not obtained would
not materially impair the performance by such Selling Stockholder of its
obligations under this Agreement or the transfer of good and clear title to the
Shares to the Underwriters), (ii) conflict with or constitute a breach of any of
the terms or
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<PAGE> 14
provisions of, or a default under any indenture, loan agreement, mortgage, lease
or other agreement or instrument to which such Selling Stockholder is a party or
by which such Selling Stockholder or any property of such Selling Stockholder is
bound, except such conflict, breach, or default which would not materially
impair the performance by such Selling Stockholder of its obligations under this
Agreement or the transfer of good and clear title to the Shares to the
Underwriters or (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over such Selling Stockholder or any property of such
Selling Stockholder.
(h) The information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to such Selling
Stockholder does not, and will not on the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(i) At any time during the period described in Section 5(d), if there is
any change in the information referred to in Section 7(h), such Selling
Stockholder will immediately notify you of such change.
(j) Each certificate signed by or on behalf of such Selling Stockholder
and delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to the
Underwriters as to the matters covered thereby.
SECTION 8. Indemnification. (a) The Sellers, jointly and severally,
agree to indemnify and hold harmless each Underwriter, its directors, its
officers and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus, or caused by 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, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter who failed to deliver a
Prospectus (as then amended or supplemented, provided by the Company to the
several Underwriters in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages and liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
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<PAGE> 15
make the statements therein not misleading, if such material misstatement or
omission or alleged material misstatement or omission was cured in such
Prospectus and such Prospectus was required by law to be delivered at or prior
to the written confirmation of sale to such person. Notwithstanding the
foregoing, the aggregate liability of any Selling Stockholder pursuant to this
Section 8(a) shall be limited to an amount equal to the total proceeds (after
deducting underwriting discounts and commissions and expenses) received by such
Selling Stockholder from the Underwriters for the sale of the Shares sold by
such Selling Stockholder hereunder. In addition to the foregoing, in connection
with the offer and sale of the Reserved Shares, the Company agrees, promptly
upon a request in writing, to indemnify and hold harmless the Underwriters from
and against any and all losses, liabilities, claims, damages and expenses
incurred by them as a result of the failure of purchasers of the Reserved Shares
(including eligible directors, officers, employees and persons having business
relationships with the Company) to pay for and accept delivery of the Reserved
Shares which, by the end of the first business day following the date of this
Agreement, were subject to a properly confirmed application to purchase.
In making a claim for indemnification or for contribution under this
Section 8 by the Company or the Selling Stockholders, and subject to the further
provisions of this paragraph, the indemnified parties may proceed against either
(i) both the Company and the Selling Stockholders jointly or (ii) the Company
only, but may not proceed solely against either or both Selling Stockholders. In
the event that the indemnified parties are entitled to seek indemnity or
contribution hereunder against any loss, liability, claim, damage and expense
incurred as contemplated by this Section 8, including, without limitation, a
final judgment from a trial court, then, as a precondition to any indemnified
party obtaining indemnification or contribution from a Selling Stockholder, the
indemnified parties shall first obtain a final judgment from a trial court that
such indemnified parties are entitled to indemnity or contribution under this
Agreement with respect to such loss, liability, claim, damage or expense (the
"Final Judgment") from the Company and either or both Selling Stockholders and
shall seek to satisfy such Final Judgment in full from the Company by making a
written demand upon the Company for such satisfaction. Only in the event such
Final Judgment shall remain unsatisfied in whole or in part 30 days following
the date of receipt by the Company of such demand shall any party entitled to
indemnification hereunder have the right to take action to satisfy such Final
Judgment by making demand directly on a Selling Stockholder (but only if and to
the extent the Company has not already satisfied such Final Judgment, whether by
settlement, release or otherwise). The indemnified parties shall, however, be
relieved of their obligation to first obtain a Final Judgment, to seek to obtain
payment from the Company with respect to such Final Judgment or, having sought
such payment, to wait such 30 days after failure by the Company to immediately
satisfy any such Final Judgment if (i) the Company files a petition for relief
under the United States Bankruptcy Code (the "Bankruptcy Code") and such order
remains unstayed and in effect for 60 days, (ii) an order for relief is entered
against the Company in an involuntary case under the Bankruptcy Code and such
order remains unstayed and in effect for 60 days, (iii) the Company makes an
assignment for the benefit of its creditors, or (iv) any court orders or
approves the appointment of a receiver or custodian for the Company or a
substantial portion of its assets and such order remains unstayed and in effect
for 60 days.
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(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, who controls such Selling Stockholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Sellers to such Underwriter
but only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter expressly for use in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for (i) the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all Underwriters, their officers and
directors and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (ii)
the fees and expenses of more than one separate firm of attorneys (in addition
to any local counsel) for the Company, its directors, its officers who sign the
Registration Statement and all persons, if any, who control the Company within
the meaning of either such Section and (iii) the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
Selling Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section, and all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters, their officers and directors and such
control persons of any Underwriters, such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation. In the case of any such
separate firm for
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<PAGE> 17
the Company and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any such
separate firm for the Selling Stockholders and such control persons of any
Selling Stockholders, such firm shall be designated in writing by the Attorneys.
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written consent
or (ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a written request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at the expense
of the indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement request.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers, on the one hand, and the Underwriters, on the other hand, from the
offering of the Shares or (ii) if the allocation provided by clause 8(d)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Sellers, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Sellers, on the one hand, and the Underwriters, on the other
hand, shall be deemed to be in the same proportion as the total net proceeds
from the offering (after deducting underwriting discounts and commissions, but
before deducting expenses) received by the Sellers, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Sellers, on the one hand, and
the Underwriters, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Selling Stockholders, on the one
hand, or the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
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The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) Each Selling Stockholder hereby designates Wink Communications,
Inc., 1001 Marina Village Parkway, Alameda, California 94501, as its authorized
agent, upon which process may be served in any action which may be instituted in
any state or federal court in the State of New York by any Underwriter, any
director or officer of any Underwriter or any person controlling any Underwriter
asserting a claim for indemnification or contribution under or pursuant to this
Section 8, and each Selling Stockholder will accept the jurisdiction of such
court in such action, and waives, to the fullest extent permitted by applicable
law, any defense based upon lack of personal jurisdiction or venue. A copy of
any such process shall be sent or given to such Selling Stockholder at the
address for notices specified in Section 12 hereof.
SECTION 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
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proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Mary Agnes Wilderotter and Howard L. Schrott, in their
capacities as Chief Executive Officer, and Senior Vice President, Chief
Financial Officer and Secretary of the Company, respectively, confirming the
matters set forth in Sections 6(z), 9(a) and 9(b) and that the Company has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company on or
prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company, (ii) there shall not have
been any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company, and (iii) the Company shall not
have incurred any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in
your judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you shall
have received on the Closing Date a certificate dated the Closing Date from each
Selling Stockholder to such effect and to the effect that such Selling
Stockholder has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
such Selling Stockholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation ("WSGR"), counsel for the
Company and the Selling Stockholders, and based in part on certain
representations made by the Company and Selling Stockholders to WSGR, to the
effect that:
(i) the Company is duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its
business as described in the Prospectus and to own, lease and operate
its properties;
(ii) the Company is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect;
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(iii) all the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) (A) have
been duly authorized and validly issued and, to our knowledge, are fully
paid and non-assessable and (B) are not subject to any preemptive or
similar rights pursuant to any statute, the Company's charter or bylaws
or any contract known to WSGR;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or
similar rights;
(v) this Agreement has been duly authorized, executed and
delivered by the Company and by or on behalf of each Selling
Stockholder;
(vi) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(vii) to such counsel's knowledge, (A) the Registration
Statement has become effective under the Act, (B) no stop order
suspending its effectiveness has been issued and (C) no proceedings for
that purpose are pending before or contemplated by the Commission;
(viii) the statements under the captions "Risk Factors-If
advertisers and merchants do not create and use Wink-enhanced
advertising, we will not generate revenues sufficient to conduct our
business," "-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 broadcast and cable networks do not air Wink-enhanced
advertisements, we will not generate revenues from advertisers and
merchants," "-If set-top box and television manufacturers do not
incorporate our software into their products, we will be unable to
disseminate Wink-enchanced programming and advertising to consumers'
homes," "-We will incur substantial liability if Wink Enhanced
Broadcasting fails to generate sufficient revenue to meet our revenue
guarantees and other obligations," and "-Antitakeover provisions of our
charter documents may affect our stock price and inhibit a change of
control desired by some stockholders;" "Business-Overview," and
"-Strategic Relationships;" "Description of Capital Stock," and
"Underwriting" (to the extent it describes this Agreement) in the
Prospectus and Items 14 and 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings;
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(ix) the Company is not in violation of its charter or by-laws;
(x) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby will
not (A) require any consent, approval, authorization or other order of,
or qualification with, any court or governmental body or agency (except
such as may be required under the securities or Blue Sky laws of the
various states), (B) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of
the Company or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and to which the
Company is a party or by which the Company or its property is bound,
that is filed as an exhibit to the Registration Statement or otherwise
known by such counsel, or (C) violate or conflict with any applicable
law or any rule or regulation, or, to such counsel's knowledge, any
judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company or its property;
(xi) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company is or could be a
party or to which any of its property is or could be subject that are
required to be described in the Registration Statement or the Prospectus
and are not so described, or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required;
(xii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended;
(xiii) to such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right (A) except as described in the Prospectus, to
require the Company to file a registration statement under the Act with
respect to any securities of the Company or (B) to require the Company
to include such securities with the Shares registered pursuant to the
Registration Statement, unless such right has been waived;
(xiv) each Selling Stockholder is the record holder of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement;
(xv) the Custody Agreement of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms;
(xvi) the Power of Attorney of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding instrument of such Selling Stockholder,
enforceable in accordance with its terms, and,
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pursuant to such Power of Attorney, such Selling Stockholder has, among
other things, authorized the Attorneys, or any one of them, to execute
and deliver on such Selling Stockholder's behalf this Agreement and any
other document they, or any one of them, may deem necessary or desirable
in connection with the transactions contemplated hereby and thereby and
to deliver the Shares to be sold by such Selling Stockholder pursuant to
this Agreement;
(xvii) assuming the Underwriters purchase the Shares to be sold
by each Selling Stockholder for value, in good faith and without notice
of any adverse claim within the meaning of Article VIII of the Uniform
Commercial Code, upon delivery of and payment for the Shares to be sold
by each Selling Stockholder pursuant to this Agreement, good and clear
title to such Shares will pass to the Underwriters, free of all
restrictions on transfer, liens, encumbrances, security interests,
equities and claims whatsoever; and
(xviii) the execution, delivery and performance of this Agreement
and the Custody Agreement and Power of Attorney of each Selling
Stockholder by such Selling Stockholder, the compliance by such Selling
Stockholder with all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will
not (A) require any consent, approval, authorization or other order of,
or qualification with, any court or governmental body or agency (except
such as may be required under the securities or Blue Sky laws of the
various states), (B) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, any indenture, loan
agreement, mortgage, lease or other agreement or instrument known to
such counsel to which such Selling Stockholder is a party or by which
any property of such Selling Stockholder is bound or (C) violate or
conflict with any applicable law or any rule, regulation, or, to such
counsel's knowledge, violate or conflict with any judgment, order or
decree of any court or any governmental body or agency having
jurisdiction over such Selling Stockholder or any property of such
Selling Stockholder.
In addition, such counsel shall state that in addition to rendering
legal service and assistance to the Company in the course of the preparation of
the Registration Statement and the Prospectus, involving, among other things,
discussions and inquiries concerning various legal matters and the review of
certain corporate records, documents and proceedings (in addition to those
described in paragraphs (i) through (xix) above), such counsel also participated
in conferences with certain officers and other representatives of the Company,
including its independent certified public accountants and with the Underwriters
and their counsel, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed; provided, such counsel may state
that they have not independently verified the accuracy, completeness or fairness
of the information contained in the Registration Statement and Prospectus.
Such counsel shall also state that based upon its participation as
described in the preceding paragraph, it confirms that it has no reason to
believe that (except for financial statements and schedules and other financial
data as to which it expresses no belief) (i) the Registration Statement, as of
its effective date, contained any untrue statement of a material fact
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or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (ii) the Prospectus, on the
date the Registration Statement becomes effective and such date or dates as such
opinion is delivered, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation described in Section 9(f) above shall be rendered to you at the
request of the Company and the Selling Stockholders and shall so state therein.
(g) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Fenwick &
West, patent counsel for the Company, to the effect that:
(i) The Company owns or possesses, or can acquire on reasonable
terms, all Intellectual Property currently employed by it in connection
with the business now operated by it except where the failure to own or
possess or otherwise be able to acquire such Intellectual Property would
not, singly or in the aggregate, have a Material Adverse Effect; and, to
the best of such counsel's knowledge after due inquiry, the Company has
not received any notice of infringement of or conflict with asserted
rights of others with respect to any of such Intellectual Property
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
(ii) The Company is listed on the records of the United States
Patent and Trademark Office as the sole holder of record of each of the
patents listed under the heading "Patents Held by the Company" on
Schedule III attached hereto (the "PATENTS") and each of the patent
applications listed under the heading "Patent Applications Submitted by
the Company" on Schedule IV attached hereto (the "APPLICATIONS"). Except
as disclosed in the Prospectus, such counsel knows of no claims of third
parties to any ownership interest or lien with respect to any of the
Patents or Applications.
(iii) Such counsel has reviewed the statements under the
Registration Statement/Prospectuses captions "Risk Factors--We May be
Exposed to Intellectual Property Related Risks," "Business--Components
of Wink Enhanced Broadcasting," "Business--Wink Studio and Wink Server
Studio," "Business--Wink Broadcast Server," "Business--Wink Engine,"
"Business--Wink Response Server," ""Business--Wink Response Network,"
"Business--Emerging Standards," and "Business--Intellectual Property"
(collectively, the "INTELLECTUAL PROPERTY PORTION") of the Registration
Statement and the Prospectus. Insofar as such statements constitute a
summary of the Company's Patents and Applications and the rights derived
therefrom, and matters related thereto, such counsel believes them to
fairly, accurately and completely summarize the legal matters, documents
and proceedings relating to such Patents and Applications described
therein. Nothing has come to the attention of such counsel which causes
it to believe that the information in the Intellectual Property Portion
contains any untrue
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statement of a material fact or omits to state a material fact which is
required to be stated therein or necessary to make the statements
therein not misleading.
(iv) Such counsel has no knowledge of any facts that (i) would
preclude the Company from having clear, exclusive rights to the Patents
and Applications; (ii) would lead such counsel to conclude that any of
the Patents are invalid or unenforceable; or (iii) that any patent that
may ultimately issue from one or more of the Applications would be
invalid or unenforceable. Such counsel has no knowledge of any facts
that cause it to believe that the Company lacks any rights to use all
intellectual property necessary to conduct its business as now or
proposed to be conducted or as described in the Registration Statement
and the Prospectus. Such counsel has no knowledge of any facts that
would preclude the Company from using the Patents against third parties
to prevent such third parties from engaging in infringing conduct.
(v) To the best of such counsel's knowledge, the Company has
complied with the United States Patent and Trademark Office duty of
candor and disclosure during the prosecution leading to the issuance of
each of the Patents.
(vi) Except as disclosed in the Prospectus, such counsel knows of
no pending or threatened action, suit, proceeding or claim by
governmental authorities or others that the Company is infringing or
otherwise violating any patents or trade secrets.
(vii) Except as disclosed in the Prospectus, such counsel is not
aware of any pending or threatened actions, suits, proceedings or claim
by governmental authorities or others challenging the validity or scope
of the Patents.
(viii) Except as disclosed in the Prospectus, such counsel is not
aware of any infringement on the part of any third party of any patent
or trade secret in violation of rights held by the Company.
The opinion of Fenwick & West described in Section 9(g) above shall be
rendered to you at the request of the Company and shall so state therein.
(h) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Latham & Watkins, counsel for the Underwriters, as to such
matters as you may request.
In giving such opinions with respect to the matters covered by the two
paragraphs immediately following Section 9(f)(xix), Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation, and Latham & Watkins may state that their
opinions and beliefs are based upon their participation in the preparation of
the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
(i) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from PricewaterhouseCoopers LLP,
independent public accountants, containing the
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information and statements of the type ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus.
(j) The Company shall have delivered to you the agreements specified in
Section 2 hereof, which agreements shall be in full force and effect on the
Closing Date.
(k) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(l) The Company and the Selling Stockholders shall not have failed on or
prior to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or the
Selling Stockholders, as the case may be on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the
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aggregate number of Firm Shares or Additional Shares, as the case may be, which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the total number of Firm Shares or
Additional Shares, as the case may be, to be purchased on such date by all
Underwriters, each non-defaulting Underwriter shall be obligated severally, in
the proportion which the number of Firm Shares set forth opposite its name in
Schedule I bears to the total number of Firm Shares which all the non-defaulting
Underwriters have agreed to purchase, or in such other proportion as you may
specify, to purchase the Firm Shares or Additional Shares, as the case may be,
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase on such date; provided that in no event shall the number of Firm
Shares or Additional Shares, as the case may be, which any Underwriter has
agreed to purchase pursuant to Section 2 hereof be increased pursuant to this
Section 10 by an amount in excess of one-ninth of such number of Firm Shares or
Additional Shares, as the case may be, without the written consent of such
Underwriter. If on the Closing Date any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased by all Underwriters and arrangements
satisfactory to you, the Company and the Selling Stockholders for purchase of
such Firm Shares are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter,
the Company or the Selling Stockholders. In any such case which does not result
in termination of this Agreement, either you or the Sellers shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. If, on an
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase such Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
SECTION 11. Agreements of the Selling Stockholders. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and performed by such
Selling Stockholder under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares to be sold by
such Selling Stockholder pursuant to this Agreement.
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SECTION 12. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company or the
Selling Stockholders, Wink Communications, Inc., 1001 Marina Village Parkway,
Alameda, California 94501, Attention: Chief Executive Officer, with a copy to
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, California 64304, Attention: Herb Fockler, and (ii) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, with a copy to Latham & Watkins, 650 Town Center Drive, 20th Floor,
Costa Mesa, California 92626, Attention: Cary K. Hyden, or in any case to such
other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the officers or
directors of any Underwriter, any person controlling any Underwriter, the
Company, the officers or directors of the Company, any person controlling the
Company, any Selling Stockholder or any person controlling such Selling
Stockholder, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel) incurred by them in connection
with enforcing their rights hereunder (including, without limitation, pursuant
to Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
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This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
WINK COMMUNICATIONS, INC.
By:_____________________________________
Mary Agnes Wilderotter
Chief Executive Officer
THE SELLING STOCKHOLDERS
NAMED IN SCHEDULE II
HERETO, ACTING
SEVERALLY
By______________________________________
Attorney-in-fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE BANK SECURITIES INC.
BEAR, STEARNS & CO. INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By______________________________________
29
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares to
Underwriters be Purchased
- ------------------------------------------------------ ---------------------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation
Deutsche Bank Securities Inc.
Bear, Stearns & Co. Inc.
Total
</TABLE>
<PAGE> 31
SCHEDULE II
Selling Stockholders
<TABLE>
<CAPTION>
Number of Firm Shares
Name Being Sold
- ------------------------------------------------- -------------------------
<S> <C>
Mary Agnes Wilderotter 100,000
Brian P. Dougherty 100,000
Total 200,000
</TABLE>
<PAGE> 32
SCHEDULE III
Patents Held by the Company
<PAGE> 33
SCHEDULE IV
Patent Applications Submitted by the Company
<PAGE> 1
EXHIBIT 10.6
CHARTER PROGRAMMER AFFILIATION AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1999 ("Effective Date"),
by and between Wink Communications, Inc., a California corporation ("Wink"),
whose address is 1001 Marina Village Parkway, Alameda, CA 94501, and ABC, Inc.,
a NY corporation ("Programmer"), whose address is 77 West 66th Street, New York,
NY 10023.
1. GRANT OF LICENSE
1.1 Wink hereby grants to Programmer the non-exclusive license to use
Wink ITV Studio, Server Studio, Wink ITV Broadcast Server, and Wink
provided Server Modules version 2.0 and 2.x updates (hereinafter
collectively referred to as "Wink Software") to deliver interactive
program(s) which utilize the vertical blanking interval ("'VBI") or
an MPEG private data stream provided concurrently with the
corresponding video signal and are compliant with the Wink
interactive communications application protocol ("Interactive Wink
Programs") to all Programmer viewers in the continental United
States, Alaska, Hawaii, the US territories and possessions, including
Puerto Rico, and Canada and on U.S. registered aircraft and vessels
(the "Licensed Territory"). Programmer shall have the further right
to use the Wink Software to distribute Interactive Wink Programs to
viewers located outside the Licensed Territory upon monetary terms to
be negotiated in good faith, which shall not be higher than Wink's
prevailing rates for most favored 'customers in the applicable
markets. Unauthorized reception and viewing of Programmer's
Interactive Wink Programs outside the Licensed Territory shall not be
deemed a distribution outside the Licensed Territory.
1.2. "Updates" shall mean updates containing error corrections or minor
enhancements to the Wink Software created by or for Wink, and
designated by a change in version number to the right of the decimal
point. Updates do not include major enhancements to the Wink Software
designated by changes in the version number to the left of the
decimal point, unless such major enhancements occur prior to the
First Air Date (as defined below). Wink shall provide a license to
all Updates (and major enhancements created prior to the First Air
Date) at no charge to Programmer during the term of this Master
Agreement and Programmer, in its sole discretion, shall have the
option to utilize such Updates in providing Interactive Wink Programs
to Programmer subscribers. "New Release" shall mean a major release
of the Wink Software which occurs subsequent to the First Air Date,
which contains significant new functionality and/or major
enhancements, and which is designated by a change in the digit or
digits to the left of the decimal point in the version number. Wink
shall offer to Programmer a license to all New Releases created by
Wink during the Term on terms that are as favorable or more favorable
than the terms of any agreement Wink has entered into with other
broadcast and cable networks in the Licensed Territory, for the
CONFIDENTIAL - PAGE 1
<PAGE> 2
provision of the New Releases, provided, however, that in no event
shall Programmer's decision not to license any New Release have any
impact whatsoever on the functionality of the current Wink Software
or Programmer's ability to provide Interactive Wink Programs to
Programmer viewers throughout the Term, and provided that Programmer
shall be under no obligation to license or launch such New Releases.
If a New Release has not been made available to other parties, Wink
agrees to offer to Programmer a license to such New Release at a
one-time fee equal to Wink's costs (on a Time and Materials basis) in
developing and testing the New Release, which estimate shall be made
by .Wink in it's sole and reasonable discretion, and documented in
writing to Programmer. Notwithstanding the foregoing, if Programmer
elects not to license any New Releases on the terms offered by Wink,
Programmer shall nevertheless have the right at its election to
license such New Releases at the applicable price specified in
Exhibit C for existing Wink Software (i.e. at no cost beyond what
would have been paid for the existing Wink Software) through the next
Termination Option Date (as defined below). If such New Release is
created after the last Termination Option Date, then the foregoing
usage rights will apply through the end of the Term. Upon reaching
such Termination Option Date, Programmer shall discontinue use of the
New Releases unless agreement has been reached with Wink for
continued use (Programmer shall not, however, be required to
discontinue use of any earlier versions of Wink Software).
1.3. This License is not transferable, nor may any rights hereunder be
transferred, assigned or sub-licensed in whole or in part by either
party without the prior written consent of the other party, except to
an entity in control of, controlled by or in common control with
either party.
1.4 Programmer can only use the Wink software to provide Interactive Wink
Programs with the video programming services described in Exhibit A.
Programmer must notify Wink in writing at least 30 days prior to
commencing transmission of Interactive Wink Programs with a video
programming service and with such notice will also provide the
Technical Information specified in Exhibit A for such service.
Programmer further agrees to provide Wink with 30 days notice of any
changes in such Technical Information Exhibit A. Programmer will
provide the Contact Information set forth in Exhibit A for the first
Programming Service within a reasonable time after the Effective
Date.
2. TERM
2.1 The term of this Agreement (the "Term") shall commence on the date of
execution of this Agreement and terminate eight years after the first
airing of Programmer's Interactive Wink Programs on the programming
service listed as the First Programming Service in Exhibit A ("First
Air Date"). The parties agree that the First Air Date shall be the
first day that Programmer airs Interactive Wink Programs on the First
Programming Service (as defined in Exhibit A), and
CONFIDENTIAL - PAGE 2
<PAGE> 3
\
commercial cable subscriber households (not employees of System
Operators, as defined below) are able to receive such Interactive
Wink Programs. Broadcasts of Interactive Wink Programs to test
transmission and reception reliability shall not qualify as the First
Air Date.
2.2 The parties agree that Programmer may unilaterally terminate this
Agreement on any of the following dates: twelve (12) months after the
Effective Date, three years after the Effective Date, and five years
after the Effective Date (each referred to as a "Termination Option
Date"). Programmer must provide Wink with notice of Programmer's
decision to terminate at least 30 days prior to the each Termination
Option Date. If such notice is not provided in writing by this date,
the applicable termination option shall have lapsed.
3. INTEGRATION AND PROGRAMMING
3.1 Programmer agrees to ensure that Programmer's Interactive Wink
Programs are passed through to viewers unchanged by Programmer's
owned stations ("Programmer Owned Stations "), to the extent that
they clear the ABC Network programs carrying the Interactive Wink
Programs and Interactive Wink Programs can be carried without signal
degradation, and to use its reasonable commercial efforts to ensure
such passage by local affiliates with whom Programmer has an
affiliate agreement and which are not owned by Programmer ("Other
Programmer Affiliates").
3.2 Programmer and Wink agree to collaborate to enable the installation
and integration of the Wink Software into Programmer's facilities,
and to ensure the reliable transmission of the Interactive Wink
Programs. Wink is responsible for providing all equipment (including
taxes and freight) necessary to run the Wink Software and to enable
insertion of Interactive Wink Programs into the primary East and West
video signal feeds for the First Programming Service and for the
Second Programming Service (if Programmer's chooses to exercise it's
option to add the Disney Channel as the Second Programming Service),
including but not limited to the equipment listed on Exhibit E
hereto. At whatever point this agreement terminates for any reason,
Wink will have the right to regain custody and ownership of all such
equipment.
3.3 Programmer agrees to have at least two staff members trained in the
usage of Wink Software to develop and schedule Interactive Wink
Programs within sixty (60) days of execution of this Agreement. Wink
agrees to provide such training at no charge to Programmer as defined
in Exhibit C.
3.4 Programmer agrees to use its reasonable efforts to commence
transmission of Interactive Wink Programs on the First Programming
Service on the later of May 31, 1999 and ninety (90) days after the
Effective Date (the "Target Date"). Wink understands and accepts that
this Target Date is contingent upon a successful installation of the
Wink Software and associated hardware, and
CONFIDENTIAL - PAGE 3
<PAGE> 4
upon completion of training of Programmer staff. If Wink fails to
accomplish the milestones within ninety (90) days of the Target Date,
Programmer may in its sole discretion terminate this Agreement upon
written notice
3.5 Programmer agrees to cooperate with Wink in the development and
deployment of a Wink Server Module which would enable the automatic
suspension of non-advertising related Interactive Wink Programs
during advertising breaks and the automatic triggering of the
insertion of Interactive Wink Programs related to ads on the First
Programming Service ("Automation Server Module" or "ASM") The parties
agree that Wink is solely responsible for the development of the
Automation Server Module, and that Programmer's obligations under
this Agreement are solely to make technical staff and documentation
readily available to Wink for the specification, development and
integration of such module into Programmer's operations. The parties
further agree that Wink's inability to deliver an Automation Server
Module shall not be considered a material breach under this
Agreement.
3.6 Wink agrees to provide software to enable Programmer to parse
Programmer's existing HTML content for use in Wink applications. The
software used to author such parsing routines is referred to as "Wink
Server Studio", and the software used to execute such parsing
routines on the Wink Broadcast Server is referred to as the "Wink
Server Module" throughout this Agreement.
3.7 For the first twelve months following the First Air Date, Wink agrees
to provide Programmer daily standard reports on all Interactive Wink
Programs featuring Wink polls that are originated by Programmer. The
fees for such poll reports will be subject to a weekly maximum of
$500, regardless of the number of responses generated by Programmer's
polls or the number of different polls aired. Poll reports will be
provided by ZIP or by cable system, at Programmer's option. The
parties agree to review the number of responses, the number of polls
and Wink's costs in preparing poll reports for Programmer on a
quarterly basis, and Programmer agrees that Wink may impose certain
restrictions on the number of polls aired by Programmer, if the
operational implications of supporting such polls in Wink's good
faith judgment becomes commercially infeasible.
3.8 For purposes of this Agreement, the following definitions shall
apply:
(a) A "Wink-enabled Viewer" is any television viewer which is
able to receive and interact with Interactive Wink
Programs.
(b) A "Wink Response" is any response data generated by a
Wink-enabled Viewer when using an Interactive Wink Program
and collected electronically by Wink.
(c) A "Wink Revenue Response" is a Wink Response in which the
Wink-enabled Viewer requests products or services through
the Interactive
CONFIDENTIAL - PAGE 4
<PAGE> 5
Wink Program, whether such products and services are
either provided at no charge to the Wink-enabled Viewer or
require payment by the Wink-enabled Viewer, and where the
fulfillment of that request requires the release of
Wink-enabled Viewer specific information, such as name and
address.
Commencing on the First Air Date and throughout the remainder of the
Term, Wink shall, no later than Wednesday of each week, provide to
Programmer standard weekly reporting, at no charge to Programmer, of
all Wink Responses generated by Interactive Wink Programs aired on
Programmer's networks or affiliates during the previous week.
Programmer accepts Wink's terms for all other reporting regarding
Wink Responses, as defined in Exhibit B, and as amended in section
4.7 below. Wink warrants and represents that such terms are as
favorable or more favorable than the terms of any agreement Wink has
entered into with other United States programmer, for the provision
of the same or similar services. Wink further agrees to promptly
notify Programmer in writing, should Wink decide to enter into new
agreements or amend existing agreements with any United States
programmer to include more favorable terms for services similar to
those defined in Exhibit B and to immediately offer such terms to
Programmer. Wink agrees to provide all reports described above in
hard copy or electronic form, per Programmer's instructions. In
addition, Wink agrees that it shall provide Programmer with any
improvements or additions to the amount and type of data that Wink
generally provides to any other programmer with respect to Wink
Responses or Wink Revenue Responses. All Wink Responses and Wink
Revenue Responses shall be undertaken by Wink or its agents in
accordance with applicable law, including, without limitation, truth
in advertising and customer privacy laws.
3.9 During the Term of this Master Agreement, Wink shall pay to
Programmer, on a monthly basis, [ * ] percent of the fees on each
Wink Response or Wink Revenue Response (including fees which have
been paid by Programmers and its related entities) that is generated
by Interactive Wink Programs airing on the First Programming Service.
Such payments will be made with 30 days of the end of each calendar
quarter, and will be accompanied by a detailed report showing Wink
Revenue Responses by Interactive Wink Program, and the revenues
generated by Wink's Data Center from each Interactive Wink Program.
Past due payments shall bear interest at a rate equal to the lesser
of (i) one and one-half percent (1 1/2%) per month or (ii) the
maximum legal rate permitted under law, and Wink shall be liable for
all reasonable costs and expenses (including, without limitation,
reasonable court costs and attorneys' fees) incurred by Programmer in
collecting any past due payments. Programmer agrees that no interest
shall be due if the parties have a bona fide dispute over payments.
In the event Wink offers a revenue sharing arrangement to any other
programmer relating to distribution of Interactive Wink Programs on
platforms other than an over-the-air broadcast network,
- -------------
* 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.
CONFIDENTIAL - PAGE 5
<PAGE> 6
Wink will offer such arrangement to Programmer for any Programming
Service hereunder distributed on similar platforms.
3.10. Beginning on the First Air Date, Programmer agrees to distribute
Interactive Wink Programs at least [ * ] hours a week on the First
Programming Service, and agrees to increase such programming to [ * ]
hours a week within 90 days of the First Air Date. For the purposes
of this Agreement, references to the number of hours in this context
shall mean that an Interactive Wink Program is inserted at least once
every thirty (30) minutes during such hours of programming and that
the Interactive Wink Program is offered to distribution media that
reach in the aggregate at least 70% of the television households in
the United States (i.e., provided Programmer has offered these
programs to this percentage of distribution media and has otherwise
adhered to its obligations in Paragraph 3.1. Programmer will have
fulfilled the distribution obligation even if the programs are not
actually broadcast by these media). Programmer will solely determine
which shows include Interactive Wink Programs. Programmer will have
complete editorial control and approval of the form, nature and scope
of the Interactive Wink Programs and may suspend any individual
Interactive Wink Program at any time and for any reason. In addition,
Wink shall provide Programmer with the ability to control whether
third party advertisements and commercials are broadcast with related
Interactive Wink Programs through the Wink Broadcast Server.
Interactive Wink Programs for cable programming services must be
related to the content, nature and intended audience of the video
programming with which they are broadcast. Wink's sole remedy in the
event Programmer does not offer the foregoing minimum number of hours
of Interactive Wink Programs will be to terminate this Agreement.
Such notice of termination must be given in writing 30 days before
the effective date of termination and within the 30 day notice
period, Programmer will have the opportunity to cure by distributing
enough additional Interactive Wink Programs to reach the minimum
requirement. In the event of such "cure", the termination notice will
be deemed rescinded.
3.11. Programmer is responsible for payment to third party rights holders,
including but not limited to studios, acting, on-air and other
talent, news and sports data providers, professional and college
sports leagues or teams, and all other entities necessary to enable
the creation or transmission of Interactive Wink Programs.
3.12. The parties agree that the Interactive Wink Programs will require
bandwidth equivalent to one dedicated line of VBI on each programming
service. Notwithstanding the above, Programmer may utilize this VBI
line for other purposes, provided that such usage does not in any way
interfere with the transmission of Interactive Wink Programs, or
reduce Programmer's ability to transmit Interactive Wink Programs
related to Programmer's video programming and advertising. Programmer
may elect to use additional VBI lines in its sole discretion.
Programmer has the right to terminate this
- -------------
* 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.
CONFIDENTIAL - PAGE 6
<PAGE> 7
Agreement if Programmer's Interactive Wink Programs cause any
degradation in Programmer's video signal quality or ability to
distribute its signal.
3.13. Wink agrees that any Interactive Wink Programs created by or for
Programmer will be the sole property of Programmer and Programmer
shall own the copyright and all other interests therein. To the
extent Wink staff members assist in the creation of the Interactive
Wink Programs, their contributions will be deemed "works for hire"
prepared for audiovisual works and such contributions will be deemed
the intellectual property of Programmer. Programmer may use and
exploit the Interactive Wink Programs in any and all media throughout
the world in perpetuity as it elects. In particular, Wink agrees that
Programmer may license the Interactive Wink Programs (or derivatives
thereof) that Programmer creates, with or without the help of Wink,
to third parties on any terms that the Programmer and the third party
can mutually agree upon. Programmer cannot sub-license Wink Software,
or act as an agent for Wink.
3.14. Subject to Programmer's prior written request, Wink agrees to
collaborate with Programmer in the development of specifications for
a full screen graphics and text channel based on electronic content
provided by Programmer or other entities affiliated with the Wait
Disney Company ("Programmer Virtual Channel") for distribution by
System Operators (as defined below). Upon mutual agreement on the
specification of the Programmer Virtual Channel, Wink-agrees to
create and deliver in final electronic form, at its sole cost and
expense, the Programmer Virtual Channel.
4. RATES, DEPLOYMENT AND OTHER PROGRAMMING SERVICES
4.1. Programmer agrees to remit the license fees and other payments as
described in Exhibit C on a timely basis. The parties agree that it
is optional for Programmer to license the Automation Server Module.
4.2. Programmer agrees to provide the Interactive Wink Programs to any
multi-channel video operator in the United States or Canada with whom
Programmer then has an agreement for carriage or re-transmission of
Programmer's video programming ("System Operators"), pursuant to the
terms of such agreement. In the case of Interactive Wink Programs
associated with cable or other non-broadcast programming, Programmer
will provide the Interactive Wink Programs to System Operators under
the terms described in Exhibit D, if such terms are not already
contained in its carriage agreement with the System Operator. The
terms in this section will not apply to the First Programming Service
(the ABC Network) or to Interactive Wink Programs broadcast by any
Programmer Owned Station or Other Programmer Affiliate unless the
terms duplicate such entities' re-transmission agreements with the
System Operators or required by law. With respect only to Interactive
Wink Programs contained in
CONFIDENTIAL - PAGE 7
<PAGE> 8
non-broadcast services, Wink may also supply System Operators with a
copy of Exhibit D as evidence of Programmer's agreement to supply the
Interactive Wink Programs under such terms.
4.3 Programmer may choose to utilize other products and services of Wink
not quoted elsewhere in this Agreement from time to time. These
services will be extended by Wink to Programmer at the lower of the
then prevailing retail rate or the lowest rate offered any programmer
for the same products and services.
4.4 Programmer can elect to add additional programming services which are
(a) wholly-owned or partially owned by Programmer or the Walt Disney
Company (minimum 20% equity stake) or (b) Other Programmer Affiliates
during the term of this Agreement. Such additional programming
services are eligible for pricing as follows:
The Disney Channel - Exhibit C
Programmer O&O Affiliates - Exhibit F
Other Programmer Affiliates, cable network partially owned by
Programmer or the Walt Disney Company - Exhibit G
4.5 Programmer understands and accepts that any network or affiliate
(other than the ABC Network) wishing to take advantage of the
applicable pricing in section 4.4 must commit to providing
Interactive Wink Programs for at least 10 hours of programming per
week. Notwithstanding the foregoing, Wink agrees that such networks
would only be required to provide Interactive Wink Programs for at
least 5 hours of programming per week for the first ninety (90) days
following those networks' First Air Date.
4.6 Programmer also understands and accepts that Wink is not obligated
under this Agreement to:
(a) provide equipment to any other programming service other
than the First Programming Service, the Second Programming
Service, the Programmer Owned Stations and Other
Programmer Affiliates at the prices (or free of charge) as
provided in the applicable Exhibits herein.
(b) provide the transaction revenue share offered to
Programmer in section 3.9 to any programming service other
than the First Programming Service, except as provided in
such section.
(c) provide Wink poll reporting under terms other than those
defined in Exhibit B (The parties agree that the weekly
maximum on poll charges defined in section 3.7 and
referenced in Exhibit B are not applicable to other
programming services).
CONFIDENTIAL - PAGE 8
<PAGE> 9
4.7 Notwithstanding anything to the contrary herein, Wink shall provide
Programmer and entities in which the Walt Disney Company has at least
a 50% interest and, in addition, the Arts and Entertainment, History,
and E! channel with preferred pricing for Purchase Responses (as
defined in Exhibit B) that is the lower of the following:
(a) a [ * ] discount on the pricing quoted in Exhibit B
(b) [ * ]/response, regardless of volume
(c) the most favorable pricing extended for Purchase Responses
to any other broadcast or cable network, or to any third
party advertiser which has contracted with Wink for the
capturing and routing of Purchase Responses. This most
favorable pricing protection shall also extend to the "RFI
Responses" described in Exhibit B.
The preferred pricing described in sections (a) through (c) above
shall be extended for any Purchase Response (and, in the case of (c),
RFI Responses) generated by Interactive Wink Programs aired on the
First Programming Service or the Second Programming Service, provided
such Purchase Responses are in responses to offers for merchandise or
services sold by or on behalf of entities wholly owned by the Walt
Disney Company.
4.8 Wink may provide System Operators with a listing of VBI lines used
for transmission of Interactive Wink Programs by Programmer,
Programmer Owned Stations and Other Programmer Affiliates
5. PAYMENT TERMS
5.1 On or before the thirtieth (30th) day following each month throughout
the term of this Agreement, Programmer shall remit to Wink all fees
owed for licenses provided and services rendered in the previous
month, according to the price schedules provided in Exhibit C.
5.2 Wink will send invoices for all payments due hereunder, 30 days in
advance of the due date. Wink's failure, for any reason, to send an
invoice for a particular monthly payment due in years two through
eight of the Term for the Broadcast Server, Server Module Engine,
Automation Server Module or Tech Support shall not relieve Programmer
of its obligation to make these payments in a timely manner
consistent with the terms of this Agreement. Past due payments shall
bear interest at a rate equal to the lesser of (i) one and one-half
percent (1 1/2%) per month or (ii) the maximum legal rate permitted
under law, and Programmer shall be liable for all reasonable costs
and expenses incurred by Wink in collecting any past due payments.
Wink agrees that no interest shall be due if the parties have a bona
fide dispute over payments.
- -------------
* 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.
CONFIDENTIAL - PAGE 9
<PAGE> 10
6. PROMOTION AND RESEARCH
6.1 Programmer acknowledges Wink's intent to issue a press release
announcing this Agreement within 30 days of the Effective Date. This
press release shall be subject to Programmer's prior written
approval. Programmer agrees to use reasonable efforts to provide
quotes from an executive of Programmer or The Walt Disney Company for
such press release.
6.2 Wink agrees to provide Programmer with notice within 30 days of new
System Operators having enabled their subscribers to receive
Programmer's Interactive Wink Programs. Wink further agrees to
immediately notify Programmer as to the first day subscribers in
Wink's first five (5) cable systems are able to receive Programmer's
Interactive Wink Programs.
6.3 Wink agrees to, if requested and approved by Programmer, promote and
feature Programmer's Interactive Wink Programs as prominently as any
other programming service in Wink's marketing literature, during
meetings with cable operators and the press, and during industry
trade shows. Wink will also use reasonable efforts to assist
Programmer in achieving its marketing objectives in materials
prepared by third parties, such as equipment manufacturers, retailers
and cable operators. Programmer agrees to advise Programmer Owned
Stations and Other Programmer Affiliates of its use of the Wink
Software and the availability to them of preferred terms for
licensing Wink Software within sixty (60) days of the Effective Date.
6.4 Wink, equipment manufacturers, retailers and System Operators may
prepare marketing materials relating to the Interactive Wink Programs
and may use Programmer's name, logo and screen shots (collectively,
"Programmer's Marks") from the Interactive Wink Programs. Programmer,
the Programming Services, Programmer Owned Stations and Other
Programmer Affiliates may use and authorize the use of Wink's name,
logo and related elements (collectively "Wink's Marks") in the
production and distribution of Interactive Wink Programs and in
advertising and publicity therefor. Each party must submit materials
containing the other's Marks to the other party for review and
written approval prior to distribution. The other party agrees to use
reasonable efforts to respond promptly to such requests for approval,
and retains sole discretion over such approvals, if any. Wink hereby
acknowledges that Programmer is the sole owner of all right, title
and interest in and to the Programmer's Marks and any marks, notices
or designations utilized by Programmer in connection with
Programmer's business, and that no rights or ownership are intended
to be or shall be transferred to Wink. All uses of the Programmer's
Marks shall inure to the benefit of Programmer. Upon any expiration
or termination of this Agreement, Wink shall delete and discontinue
all use of the Programmer's Marks. At no time during or after the
term of this Agreement shall Wink challenge or assist others to
challenge the
CONFIDENTIAL - PAGE 10
<PAGE> 11
Programmer's Marks or the registration thereof or attempt to assist
another in the attempt to register any trademarks, marks or similar
rights for marks the same as or confusingly similar to the
Programmer's Marks. Likewise, Programmer hereby acknowledges that
Wink is the sole owner of all right, title and interest in and to the
Wink's Marks and any marks, notices or designations utilized by Wink
in connection with Wink's business, and that no rights or ownership
are intended to be or shall be transferred to Programmer. All uses of
the Wink's Marks shall inure to the benefit of Wink. Upon any
expiration or termination of this Agreement, Programmer shall delete
and discontinue all use of the Wink's Marks. At no time during or
after the term of this Agreement shall Programmer challenge or assist
others to challenge the Wink's Marks or the registration thereof or
attempt to assist another in the attempt to register any trademarks,
marks or similar rights for marks the same as or confusingly similar
to the Wink's Marks.
6.5 Wink may, from time to time, undertake marketing tests and surveys,
rating polls and other research in collaboration with Programmer.
Programmer shall provide Wink with reasonable assistance, provided
Programmer is permitted to do so under applicable agreements with
research services and can do so at no cost, in conducting such
research with respect to Programmer's viewers. Programmer agrees that
Wink may use all such research regarding the deployment, launch, and
usage of Wink service by Programmer viewers, subject to applicable
consumer privacy laws, only for internal purposes unless Wink has
received prior written-approval from Programmer. Wink agrees to
provide copies of final reports from such research activity to
Programmer.
6.6 Programmer understands and accepts that Wink will be providing
reports on Wink Responses to the Interactive Wink Programs to System
Operator(s) for Wink Responses that originate from System Operator's
subscribers, to equipment manufacturers for Wink Responses that
originate from Wink-enabled equipment sold by such manufacturers, and
to advertisers and other parties, authorized by Programmer, for Wink
Responses that originate from Interactive Wink Programs paid for or
sponsored by such parties (collectively, the "Recipients"). Such
reports to Recipients shall be restricted to aggregate reports about
Wink Responses , and detailed reports on individual Wink Revenue
Responses, which shall only be forwarded to the Recipient fulfilling
such viewer requests, or such party's designated agent. Wink agrees
that reports providing specific data regarding viewer responses to,
usage of, and/or exposure to Programmer's Interactive Wink Programs,
including data on Wink viewer responses to advertising on Programmer
owned or affiliated programming services, will not be made available,
except in aggregated form that does not identify Programmer or
specific Programmer viewer data, to any third party except Recipients
pursuant to this paragraph. Wink acknowledges and agrees that any
reports provided to Recipients or other third parties must adhere to
applicable consumer privacy laws. Information regarding the nature
CONFIDENTIAL - PAGE 11
<PAGE> 12
of Winks Responses or the Wink Viewers shall not be used for any
other purpose without the express consent of Programmer.
6.7 Programmer may require that Wink bill Programmer or an entity wholly
owned by Programmer or the Walt Disney Company for Wink Revenue
Responses generated by Interactive Wink Programs aired by third party
advertisers on the First Programming Service or other programming
services owned and operated by Programmer ("Private Label
Responses"). The Private Label Response requirement shall be made by
Programmer in writing on or before the First Air Date, or at any time
with thirty (30) days prior written notice by an authorized official
of Programmer. Once such notice has been given, Programmer shall
provide thirty (30) days notice of intent to terminate such private
label response routing. Wink agrees to notify Programmer if Wink has
agreements with specific third party advertisers for the routing and
reporting of Wink Revenue Responses, in which case Wink must receive
written approval from the advertiser to change the billing
instructions for Wink Revenue Responses. Wink will forward Private
Label Responses directly to the advertiser or their designated third
party fulfilling the requests, and will provide weekly summary
reports of such Wink Revenue Responses to Programmer. Programmer
shall be solely responsible for billing the advertiser for Private
Label Responses.
If Programmer has required that Wink provide Private Label Responses,
then [*] and shall notify prospective advertisers requesting Wink's
services for capturing and routing of Wink Responses from Interactive
Wink Programs of Programmer's right to Private Label Response
treatment (if applicable). Wink also agrees to refer advertisers who
are receiving Private Label Responses (or who Programmer wishes to
receive Private Label Responses) [*] except to the extent necessary
to fulfill responses as noted above. The parties agree that the
pricing for Private Label Responses shall be lower of:
(a) The pricing available to such advertiser based on that
advertisers total transaction volume with Wink, according to
Wink's then current pricing schedule, and
(b) The best pricing available to any third party advertiser
(excluding the Walt Disney Company and other entitles covered
by section 4.7) generating an equal to or lesser transaction
volume with Wink.
The parties agree to use commercially reasonable efforts to resolve
any operational issues that would prevent Programmer from controlling
the billing of third party advertisers for Private Label Responses,
and to identify a point person at each company for regular
communication between the parties regarding any potential advertiser
account management issues. The parties also agree that Wink shall pay
revenue share as defined in section 3.9 to Programmer for Private
Label Responses airing on the First Programming Service.
- -------------
* 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.
CONFIDENTIAL - PAGE 12
<PAGE> 13
7. WARRANTY
7.1 Wink hereby represents and warrants to Programmer that the Wink
Software (and subsequent revisions and upgrades to same provided by
Wink to Programmer) will operate and perform in accordance with all
published specifications with respect thereto (e.g. Wink's published
specifications for the Interactive Communications Application
Protocol, as updated by Wink, and Wink's then current documentation
and manuals), in accordance with the criteria defined in Exhibit H
and as demonstrated to Programmer prior to this Agreement. Wink also
represents and warrants that as of this signing of this Agreement,
Wink is not aware of any claims against Wink's patents, copyrights or
other intellectual property, except for the "Berman" claim. Wink
further represents that the Wink Software (and subsequent revisions
and upgrades to same provided by Wink to Programmer) is Year 2000
compliant.
7.2 Wink hereby warrants and represents that the terms contained herein
for licensing of Wink software, provision of Wink services, sharing
of Wink's revenues from routing of Wink Revenue Responses and
Programmer's commitment for Interactive Wink Programs are, as a
whole, as favorable as any other similar agreement Wink has entered
into or will enter into with other broadcast and cable programming
entities.
7.3 Wink warrants and represents that the terms and conditions in Exhibit
D are as favorable to Programmer as any agreement Wink has caused or
allowed other programmers to enter into with System Operators. If
Wink causes or allows any. other broadcast or cable programmer to
enter into an agreement with any System Operator on terms and
conditions more favorable to the programmer than those enumerated in
Exhibit D, Wink will notify Programmer to that effect and Programmer
then will have the right during the next 60 days after its receipt of
said notice to assume such more favorable terms and amend Exhibit D
accordingly.
7.4 Wink hereby warrants and represents that the terms contained herein
for licensing of Wink software, provision of Wink services, and the
Programmer Owned Stations' commitment for Interactive Wink Programs
are, as a whole, as favorable as any other similar agreement Wink has
entered into or will enter into with other broadcast programming
entities for their owned affiliate stations.
- -------------
* 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.
CONFIDENTIAL- PAGE 13
<PAGE> 14
8. INDEMNIFICATION
8.1 Wink will indemnify and hold harmless Programmer, its parent and
subsidiary companies and their respective employees, directors,
agents, other representatives against any and all claims, causes of
action, damages and all other related expenses arising out of the
breach or alleged breach of any of Wink's representations and
warranties or any of Wink's other material obligations stated herein
or the use of any technology or equipment provided by Wink to
Programmer hereunder. Notwithstanding the above, the parties agree
that Wink is specifically not liable or obligated to indemnify
Programmer or other parties for:
(a) any and all expenses arising out of claims or causes of
action related to the content, nature or form of the
Interactive Wink Programs.
(b) any and all expenses arising out of claims or causes of
action in which it is alleged that the Interactive Wink
Programs created a malfunction or other technical problem
on a Wink-enabled television set or multi-channel set top
receiver, and in which Programmer has been negligent in
testing such Interactive Wink Programs or otherwise have
failed (unless through the fault of Wink) to adhere to
Wink's standard Criteria for Compliant Interactive-Wink
Programs, as defined in Exhibit D, Attachment 1.
8.2 Programmer will indemnify and hold harmless Wink, its parent and
subsidiary companies and their respective employees, directors,
agents, other representatives against any and all claims, causes of
action, damages and all other related expenses arising out of the
breach or alleged breach of any of its representations and warranties
or any of its other material obligations stated herein.
8.3 In any case in which indemnification is sought hereunder, the party
seeking indemnification shall promptly notify the other in writing of
any claim or litigation to which the indemnification relates and the
party seeking indemnification shall afford the other the opportunity
to participate in and, at the other party's option, fully control any
compromise, settlement, litigation or other resolution or disposition
of such claim or litigation.
9. NOTICES
All notices, statements, and other communications given hereunder
shall be in writing and shall be delivered by facsimile transmission,
personal delivery, certified mail, return receipt requested, or by
next day express delivery,
CONFIDENTIAL - PAGE 14
<PAGE> 15
addressed, to the addresses provided in the first paragraph of this
Agreement, and to the attention of:
If to Wink:
Allan C. Thygesen
Senior Vice President, Programming and Advertising
If to Programmer:
Saul Shapiro
ABC, Inc.
46 West 66th Street
New York, NY 10023
With a copy to:
Charles Stanford
Vice President, Cable and New Media
Legal Department
ABC, Inc.
77 West 66th Street
New York, NY 10023
and to:
Kevin Mayer
Senior Vice President, Strategic Planning
The Walt Disney Company
The date of such facsimile transmission, telegraphing or personal
delivery or the next day if by express delivery, or the date three
(3) days after mailing, shall be deemed the date on which such notice
is given and effective.
10 WINK SOFTWARE
All rights, title and interest in and to the Wink Software or other
rights, of whatever nature, related thereto shall remain the property
of Wink.
11 REPRESENTATION
11.1 Wink represents and warrants to Programmer that (i) it is a
corporation duly organized and validly existing under the laws of the
State of California; (ii) Wink has the corporate power and authority
to enter into this Agreement and to fully perform its obligations
hereunder (iii) Wink is under no contractual or other
CONFIDENTIAL - PAGE 15
<PAGE> 16
legal obligation which in any way interferes with its ability to
fully, promptly and completely perform hereunder.
11.2 Programmer represents and warrants to Wink that (i) Programmer is a
corporation duly organized and validly existing under the laws of the
State of NY; (ii) Programmer has the requisite power and authority to
enter in this Agreement and to fully perform its obligations
hereunder; and (iii) Programmer is under no contractual or other
legal obligation which in any way interferes with its ability to
fully, promptly and completely perform hereunder.
12. CONFIDENTIALITY
Each party agrees that it will not use, except in the performance of
its obligations under this Agreement, and will not disclose or give
to others, any of the other party's Confidential Information (as
defined below). Without limiting the generality of the foregoing,
each party will (i) restrict the disclosure of the other party's
Confidential Information to those of its employees who require such
information for purposes of performing its obligations hereunder,
(ii) inform each such employee of the confidential nature of the
information disclosed, (iii) prevent the use or disclosure by its
employees of such Confidential Information, except as provided
herein, and (iv) promptly notify the other party of any use or
disclosure of the Confidential Information, whether intentional or
not, which violates the provisions of this Paragraph 12. For purposes
of this Agreement, the term "Confidential Information" means all
technical, business and other information disclosed by one party to
the other and specifically identified in writing as "Confidential"
that derives economic value, actual or potential, from not being
generally known to other persons, including, without limitation,
technical and non-technical data, devices, methods, techniques,
drawings, processes, computer programs, algorithms, methods of
operation, financial data, financial plans, product plans, and lists
of actual or potential customers or suppliers. "Confidential
Information" does not include information which does not constitute a
trade secret under applicable law after the second anniversary date
of the expiration of this Agreement. Also, "Confidential
Information" shall not include information which, (a) is or becomes
publicly known through no act or failure to act on the part of the
recipient, (b) was rightfully in the recipient's possession prior to
disclosure by the disclosing party, (c) becomes rightfully known to
the recipient from a third party not subject to any independent
confidential or proprietary restriction, (d) is approved by the
disclosing party for disclosure without restriction, in a written
document that is signed by a duly authorized officer of that party,
(e) is disclosed after the termination of the recipient's duty of
confidentiality as specified herein or (f) is or was developed
independently by the recipient without use of or reference to any of
the Confidential Information and without violation of any
confidentiality restriction. The parties agree to keep the terms of
this Agreement confidential, but acknowledge that certain disclosures
may be required by law.
CONFIDENTIAL - PAGE 16
<PAGE> 17
13. TERMINATION
13.1 Except as otherwise provided herein, neither Programmer nor Wink may
terminate this Agreement except upon thirty (30) days prior written
notice and then only if the other has made a misrepresentation herein
or breaches any of its material obligations hereunder and such
misrepresentation or breach (which shall be specified in such notice)
is not or cannot be cured within thirty (30) days of such notice. The
parties agree that Wink's failure to perform materially any services
or provide any technology or equipment in accordance to this
Agreement shall be considered a material breach. The parties also
agree that failure by Programmer to make timely payments of license
fees and other fees due Wink under this Agreement, and failure by
Wink to make timely payments of Programmer's share of Wink's gross
revenues, net of returns, refunds and credits, from Wink Revenue
Responses shall be considered material breaches, and that the
terminating party's termination of this Agreement shall be without
prejudice to any other remedies the terminating party may have,
including, without limitation, all remedies with respect to the
unperformed balance of this Agreement.
13.2 Upon expiration of the term (including any extensions thereof) of
this Agreement or upon the termination of this Agreement or of any
license granted hereunder for any reason, all rights of Programmer to
use the Wink Software will cease and Programmer will immediately and
on reasonable terms (i) grant to Wink access to its business premises
and the Wink Software and allow Wink to remove the Wink Software and
any equipment provided or financed by Wink (which removal shall be
done with as little disturbance as possible to Programmer's business
operations), (ii) purge all copies of all Wink Software from all
computer processors or storage media on which Programmer has
installed or permitted others to install such Wink Software, and
(iii) when requested by Wink, certify to Wink in writing, signed by
an officer of Programmer, that all copies of the Wink Software have
been returned to Wink or destroyed and that no copy of any Wink
Software remains in Programmer's possession or under its control.
14. GENERAL
(a) This Agreement may not be assigned without prior written
mutual consent of Programmer and Wink. Consent shall not
be required for assignment to a corporate affiliate,
assuming that the programming services providing
Interactive Wink Programs remain as defined in Exhibit A.
(b) This Agreement may be amended only by an instrument in
writing, executed by Programmer and Wink.
CONFIDENTIAL - PAGE 17
<PAGE> 18
(c) This Agreement will be governed in all respects by the laws
of the State of California.
(d) This Agreement represents the entire agreement between the
parties and supersedes and replaces all prior oral and
written proposals, communications and agreements with
regard to the subject matter hereof between Programmer and
Wink.
IN WITNESS WHEREOF, the parties by their duly authorized
representatives have entered into this Agreement as of the Effective Date.
WINK COMMUNICATIONS, INC. ABC INC.
By: By:
Name: Maggie Wilderotter Name: Charles Stanford
Title: President/CEO Title: Vice President
CONFIDENTIAL - PAGE 18
<PAGE> 19
EXHIBIT A: PROGRAMMING SERVICES
Description of Each Programming Service
FIRST PROGRAMMING SERVICE
ABC Television Network (all analogue feeds)
SECOND PROGRAMMING SERVICE *
The Disney Channel
OTHER PROGRAMMING SERVICES *
ABC Owned Stations
Other Programming Affiliates as described in Paragraph 4.4
*Programmer is under no obligation to include programming services other than
ABC in this Agreement
TECHNICAL INFORMATION TO BE PROVIDED FOR EACH PROGRAMMING SERVICE**
1. Commencement Date for Wink Programming
2. VBI line Location
3. Virtual Channel
4. Insertion Point
CONTACT INFORMATION**
1. Nature of Issue (Operation, Programming or Marketing)
2. Address
3. Contact Person(s)
4. Phone
5. Fax/Email
ADDITIONAL INFORMATION
Operations (site visits, VBI/MPEG insertion, etc.)
TBD**
Programming (development and scheduling of Interactive Wink Programs, reports,
etc.)
TBD**
Marketing (affiliate marketing, approvals of promotional materials)
TBD**
**All to be determined by Programmer, in its sole discretion
CONFIDENTIAL- PAGE 19
<PAGE> 20
EXHIBIT B: WINK RESPONSE CENTER SERVICES
All products and services are billed Net/45. A Purchase Response shall be
defined as any Wink Revenue Response which constitutes an agreement to purchase
a product or service, regardless of the method of payment. An RFI Response shall
be defined as any other Wink Revenue Response. A Poll Response shall be defined
as a Wink Response generated by a Wink "vote/poll" script. Programmer shall have
no liability for payment for Reports, Polls, Wink Responses or Wink Purchase
Responses commissioned by third parties such as advertisers on the Programming
Services hereunder. These will be subject to separate agreement between the
third parties and Wink.
<TABLE>
<CAPTION>
PRICE/WINK TRANSACTION
WINK TRANSACTIONS/MO. $[*] min./mo. per Interactive Wink Program
PURCHASE RESPONSES creating Purchase Responses
<S> <C>
1-5,000 [*]
5,001 - 25,000 [*]
25,001 - 100,000 [*]
100,001 - 250,000 [*]
250,001 - 500,000 [*]
500,001 + [*]
</TABLE>
<TABLE>
<CAPTION>
$[*] min./mo. per Interactive Wink Program
RFI RESPONSES creating RFI Responses
<S> <C>
1-5,000 [*]
5,001 -25,000 [*]
25,001 - 100,000 [*]
100,001 - 250,000 [*]
250,001 - 500,000 [*]
500,001 + [*]
</TABLE>
<TABLE>
<CAPTION>
Polls -report only $[*] min./mo. per Interactive Wink Program
creating Poll Responses
<S> <C>
1-250,000 Wink Responses [*]
250,001 + [*]
</TABLE>
1. Minimum monthly charges per application include UIC (Universal ICAP code)
registration.
2. All volume price breaks are based on Programmer's monthly transaction
volume by response category. The price breaks are based on the "average"
for the month. That is, the lowest price applies to all transactions for
the month.
3. For purposes of minimum charges, if an Interactive Wink Program is part of
a program "Series", the minimum shall be deemed to apply to the Series, not
each episode in the Series.
PURCHASE AND REQUEST RESPONSE FEES INCLUDE;
1. Daily name & address lists delivered by fax, e-mail, or electronic FTP or
mailbox.
2. UIC and application registration.
3. Standard report showing number of Wink Responses per day per Interactive
Wink Program per city.
CONFIDENTIAL - PAGE 20
- -------------
* 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> 21
POLLS
The fixed charge includes UIC and application registration, and a standard
reporting that summarizes all Poll responses by type by city. If the application
asks the viewer for telephone prefix or zip code, the summary includes those
totals.
CUSTOM USAGE REPORTS OR OTHER CUSTOM REPORTING Custom reports are quoted by the
Wink Response Center.
CONFIDENTIAL - PAGE 21
<PAGE> 22
EXHIBIT C: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE
This pricing is available to the ABC TV Network and the Disney Channel, and is
subject to the terms of the Agreement. On-going annual fees are paid one twelfth
each month, and are due the first of the month.
<TABLE>
<CAPTION>
On-going First Yrs 2-8
or one- year Price/
time costs Price Network
<S> <C> <C> <C>
Broadcast Server On-going Free $48,000
Server Module Engine On-going Free $12,000
Automation Server Module (3) On-going Free $24,000
Tech Support On-going Free $ 6,000
SUBTOTAL ON-GOING $0 $90,000
Server hardware (4) One-time Free N/A
Data Insert. Unit (4) One-time Free N/A
Set-top box, misc. (4) One-time Free N/A
SUB-TOTAL ONE-TIME $0 N/A
Installation and integration (2) One-time Free N/A
Studio site license (5 seats) One-time Free N/A
Svr Studio license (5 seats) One-time Free N/A
Training (3x2days) (1) (2) One-time Free N/A
SUBTOTAL ONE-TIME $0 N/A
TOTAL BOTH $0 $90,000
</TABLE>
(1) This base training package provides training on the Broadcast Server, Wink
Studio and Server Studio, and will enable Programmer's staff to create, schedule
and air Interactive Wink Programs as contemplated by this Agreement. Wink will
also provide reasonable additional training to those same staff as may be
required and agreed upon between the parties.
(2) Travel expenses are billed separately at cost
(3) Optional after the first year
(4) Provided free by Wink, per Exhibit E.
Wink reserves the right to increase license fees annually after the first 24
months of the contract period by the percentage increase in the consumer price
index (CPI) for goods and services for the prior 12 months. The above pricing
does not cover detailed integration with Programmer's ad insertion system.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 22
<PAGE> 23
EXHIBIT D: PROGRAMMER'S TERMS FOR CARRIAGE OF INTERACTIVE WINK PROGRAMS
OTHER THAN RETRANSMISSION OF OVER-THE-AIR BROADCASTS
Programmer:
Programming Services:
This agreement (the "IWP Carriage Agreement") sets forth the terms and
conditions for the national distribution of Wink ITV applications ("Interactive
Wink Programs") to any multi-channel video operator in the United States or
Canada with whom Programmer already has an agreement for carriage of
Programmer's video programming ("System Operator").
1. BACKGROUND
Programmer has created one or more Interactive Wink Programs which are compliant
with the Wink Communications, Inc. ("Wink") interactive communications
application protocol. The Interactive Wink Programs are transmitted by
Programmer using either the vertical blanking interval ("VBI") of the
corresponding video signal, or using MPEG private data streams provided
concurrently with the corresponding video signal(s).
System Operator distributes one or more of Programmer's signals through one or
more of the following: cable, satellite and MMDS (wireless cable).
2. EFFECTIVE DATE AND TERM
The term of this IWP Carriage Agreement shall commence on the date of
Programmer's execution of this IWP Carriage Agreement. The parties acknowledge
that Programmer has an agreement with Wink for distribution of Interactive Wink
Programs (the "Charter Programmer Affiliation Agreement") for eight years after
the first transmission of Interactive Wink Programs by Programmer. The terms and
conditions of this IWP Carriage Agreement shall govern during the entire term of
the Charter Programmer Affiliation Agreement, unless Programmer and Wink
terminate' their Charter Programmer Affiliation Agreement earlier in accordance
with the terms of that agreement.
3. INTEGRITY OF INTERACTIVE WINK PROGRAMS
Programmer will use its best efforts to ensure that the Interactive Wink
Programs meet Wink's criteria for compliant Interactive Wink Programs (See
Attachment 1). Programmer agrees that each Interactive Wink Program shall have
been either successfully tested by Programmer or certified as compliant by Wink
prior to the Delivery to System Operator for distribution, and shall bear any
associated costs of such testing. Programmer is not responsible for any
malfunction of the Interactive Wink Programs that can not be detected by
adhering to the criteria in Attachment 1.
CONFIDENTIAL - PAGE 23
<PAGE> 24
Programmer understands that failure to meet the above criteria could result in
System Operator suspending the distribution of one or more Interactive Wink
Programs until such time as all Interactive Wink Programs are certified by Wink
to be in compliance.
4. DISTRIBUTION
Programmer hereby grants System Operator a non-exclusive license to distribute
the Interactive Wink Programs delivered in the VBI or MPEG of Programmer's video
signal.
Programmer agrees not to charge-System Operator fees associated with Interactive
Wink Programs for the term of this Agreement. Likewise, System Operator agrees
that no fees or charges will be due from carriage or retransmission of the
Interactive Wink Programs as provided for hereunder.
Programmer will provide Wink written notice at least 30 days prior to
discontinuing national transmission of all Interactive Wink Programs. Wink has
agreed to provide such notices to System Operator, but System Operator agrees
that Programmer has no liability or other obligations to System Operator, should
Wink fail to do so.
It is a condition of System Operator's right to carry the Interactive Wink
Programs that System Operator shall distribute Programmer's Interactive Wink
Programs without modification, and that System Operator may not modify or
enhance any VBI lines described in Exhibit A of the Charter. Programmer
Affiliation Agreement between Programmer and Wink and amendments to same, as
provided to System Operator. Programmer agrees that System Operator may copy the
Interactive Wink Programs for simultaneous transmission in different encoding
formats other than what Programmer currently uses including but not limited to,
other VBI formats, out of band channels, and MPEG2 private data streams;
provided such Interactive Wink Programs are presented together with the original
corresponding video to System Operator's subscribers, and that such copying is
done to enable System Operator's subscribers to properly receive and display the
Interactive Wink Programs on their set top box or television set.
5. RESPONSE NETWORK
Programmer agrees to utilize the Wink Response Network for two-way Interactive
Wink Programs. Programmer also agrees to use Wink Communication's standard
scripts and guidelines to generates viewer responses to two-way Interactive Wink
Programs.
6. MARKETING MATERIALS
System Operator may prepare marketing materials relating to the Interactive Wink
Programs and may use Programmer's name, logo, and screen shots from the
Interactive Wink Programs in such marketing materials, provided that such
materials
CONFIDENTIAL - PAGE 24
<PAGE> 25
are submitted to Programmer for review and written approval prior to
distribution. Programmer agrees to use reasonable efforts to respond to such
requests for approval in a timely fashion.
7. SCOPE
This Agreement does not interfere with or negate other Agreements between
Programmer and System Operator. This Agreement represents all of the terms and
conditions for Programmer providing Interactive Wink Programs. If Programmer
fails to adhere to its' obligations in sections 3 and 5 of this Agreement,
System Operator sole remedy shall be to decline carriage or retransmission of
the Interactive Wink Programs. This Agreement may be updated from time to time
only by express written consent of Programmer.
PROGRAMMER
By:
Name:
Title:
Date:
CONFIDENTIAL - PAGE 25
<PAGE> 26
EXHIBIT D, ATTACHMENT 1: CRITERIA FOR COMPLIANT INTERACTIVE WINK PROGRAMS
- - All Interactive Wink Programs must be registered and contain a unique
universal ICAP code (UIC) prior to being broadcast.
- - Registered Interactive Wink Programs have passed a standard set of tests
which validate:
- that the Interactive Wink Programs can be delivered through the VBI,
will arrive as appropriate, and can be decoded in the Wink engine.
- that the Interactive Wink Programs does not generate error messages.
- that the Interactive Wink Programs receives scheduled updates, if
applicable.
- that the Interactive Wink Programs passes minimum acceptable latency
standards.
- that the Interactive Wink Programs does not cause System Operator
technical or operational problems.
- that the Interactive Wink Programs, if two-way, generates the
appropriate routing address and usage data.
CONFIDENTIAL - PAGE 26
<PAGE> 27
EXHIBIT E: EQUIPMENT TO BE PROVIDED BY WINK
- - Sun Ultra server hardware, configured to support Wink Broadcast Server 2.x,
two Ethernet LAN cards, dial-up modem for remote diagnostic use
- - 3 Norpak TES-3 data insertion units with software module for 1 VBI line,
one each for the main East Coast and West Coast feeds and one for in-house
testing
- - 2 GI CFT-2200 advanced analog cable set tops for development and test
ABC will provide cabling and Pentium PC running Windows 95 or Windows NT for the
Broadcast Server User Interface, Wink Studio and Wink Server Studio. These
applications may reside on one or several PCs, none of which need to be
dedicated to the Wink software. Each PC must be connected to the Broadcast
Server via an Ethernet LAN interface.
CONFIDENTIAL - PAGE 27
<PAGE> 28
EXHIBIT F: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 2
Subject to the other terms and conditions of this agreement, this pricing is
available to Programmer Owned Stations.
On-going annual fees are paid one twelfth each month, and are due the first of
the month.
<TABLE>
<CAPTION>
ON-GOING FIRST YEARS 2-8
OR ONE- YEAR PRICE/
TIME COSTS PRICE NETWORK
---------- -------- --------
<S> <C> <C> <C>
Broadcast Server On-going $ 48,000 $ 48,000
Server Module On-going Free $ 12,000
Tech Support On-going Free $ 6,000
SUBTOTAL ON-GOING $ 48,000 $ 66,000
Server hardware One-time $ 9,500 N/A
Data Insert. Unit (1) One-time $ 5,600 N/A
Set-top box, misc One-time $ 700 N/A
SUB-TOTAL ONE-TIME $ 15,800 N/A
Installation and One-time $ 15,000 N/A
integration (2)
Studio site license (5 One-time Free N/A
seats)
Server Studio site One-time Free N/A
license (5 seats)
Studio/Server training One-time Free N/A
(3x2days) (2)
SUBTOTAL ONE-TIME $ 15,000 N/A
TOTAL BOTH $ 78,800 $ 66,000
</TABLE>
(1) One required per network. More than one VBI line per network requires an
additional license from Norpak in the amount of $1,500/VBI line.
(2) Travel expenses are billed separately at cost.
Wink reserves the right to increase license fees annually after the first 12
months of the contract period by the percentage increase in the consumer price
index (CPI) for goods and services for the prior 12 months. The above pricing
for installation and integration covers all work necessary to enable scheduling
and transmission of program enhancements based on Wink Studio templates.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Automation Server Module $24,000 annual license
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 28
<PAGE> 29
EXHIBIT G: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 3
This pricing is subject to the terms of the Agreement, and is available to all
Other Programmer Affiliates, and to programming Services in which Programmer or
the Walt Disney Corporation owns at least a 20% stake. On-going annual fees are
paid one twelfth each month, and are due the first of the month.
<TABLE>
<CAPTION>
ON-GOING FIRST YEARS 2-8
OR ONE- YEAR PRICE/
TIME COSTS PRICE NETWORK
---------- -------- --------
<S> <C> <C> <C>
Broadcast Server On-going $ 62,000 $ 62,000
Server Module On-going $ 12,000 $ 12,000
Tech Support On-going $ 6,000 $ 6,000
SUBTOTAL ON-GOING $ 80,000 $ 80,000
Server hardware One-time $ 9,500 N/A
Data Insert. Unit (1) One-time $ 5,600 N/A
Set top, misc One-time $ 700 N/A
SUB-TOTAL ONE-TIME $ 15,800 N/A
Installation and One-time $ 20,000 N/A
integration (2)
Studio site license (5 One-time $ 3,000 N/A
seats)
Server Studio site One-time $ 5,000 N/A
license (5 seats)
Studio/Srvr training One-time $ 6,000 N/A
(3x2days) (2)
Subtotal One-time $ 39,000 N/A
TOTAL BOTH $134,800 $ 80,000
</TABLE>
(1) One required per network. More than one VBI line per network requires an
additional license from Norpak in the amount of $1,500NBI line.
(2) Travel expenses are billed separately at cost.
Wink reserves the right to increase license fees annually after the first 12
months of the contract period by the percentage increase in the consumer price
index (CPI) for goods and services for the prior 12 months. The above pricing
for installation and integration covers all work necessary to enable scheduling
and transmission of program enhancements based on Wink Studio templates.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Automation Server Module $36,000 annual license
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 29
<PAGE> 30
EXHIBIT H: PERFORMANCE STANDARDS FOR WINK SOFTWARE AND SERVICES
The parties agree that Wink Software and Services must meet the following
standards:
1) Programmer can create Interactive Wink Programs that adhere to Exhibit D,
Attachment 1: "Criteria for Compliant Interactive Wink Programs" using
Wink Studio and Wink Server Studio.
2) Programmer can schedule Interactive Wink Programs to be inserted into
Programmer's analog video programming using the Wink Broadcast Server and
the associated PC-based user interface programs provided by Wink.
3) Programmer can insert Interactive Wink Programs into Programmer's analog
video programming using the Wink Broadcast Server, VBI data insertion
units and other software hardware and services provided by Wink. Such
insertion shall have no effect on the visible portion of the Programmer's
video signal.
4) Programmer can parse Programmer's existing standard HTML content for use
in Interactive Wink Programs using Wink Server Studio and standard LAN
connections between the Wink Broadcast Server and the Programmer's web
servers.
5) Programmer can create, schedule and insert Interactive Wink Programs that
are capable of generating Wink Revenue Responses.
Subject to availability of a live connection to either two-way cable plant or
other return path, and to System Operator's reasonable support and operational
readiness, Wink can:
6) collect Wink Revenue Responses from viewer homes,
7) prepare aggregate reports of subscriber usage of the Interactive Wink
Programs
8) forward Wink Revenue Responses to the party having registered the
Interactive Wink Program with Wink's Response Center (subject to billing
system interface or other means of capturing subscriber address and
payment information).
CONFIDENTIAL - PAGE 30
<PAGE> 1
EXHIBIT 10.7
CHARTER PROGRAMMER AFFILIATION AGREEMENT
THIS AGREEMENT is made as of the 23rd day of March 1999, (the "Effective Date")
by and between Wink Communications, Inc., a California corporation ("Wink"),
whose address is 1001 Marina Village Parkway, Alameda, CA 94501, and CBS
Corporation, a Pennsylvania corporation ("Programmer"), whose principal business
address is 51 West 52nd Street, New York, NY 10019.
1. THIS SECTION INTENTIONALLY LEFT BLANK
2. GRANT OF LICENSE
2.1 Wink hereby grants to Programmer the non-exclusive license to use Wink
Studio, Server Studio, Wink Broadcast Server, Automation Server Module
and Wink provided Server Modules version 2.0 and 2.x updates
(hereinafter collectively referred to as "Wink Software") and to use any
other Wink software necessary to create and deliver interactive
program(s) (as demonstrated to Programmer prior to entering into this
Agreement) which utilize the vertical blanking interval ('VBI") or an
MPEG private data stream provided concurrently with the corresponding
video signal and are compliant with the Wink interactive communications
application protocol ("Interactive Wink Programs") to all Programmer
viewers in the continental United States, Alaska, Hawaii, the US
territories and possessions, including Puerto Rico, Canada, Bermuda, and
on U.S. registered aircraft and vessels. Wink agrees to provide
Programmer with a copy of the current specification for the interactive
communications application protocol within one week of the Effective
Date. Such specification shall be considered Confidential Information
under this Agreement (as defined in section 13 below).
2.2 "Updates" shall mean updates containing error corrections or minor
enhancements to the Wink Software created by or for Wink, and designated
by a change in version number to the right of the decimal point. Updates
do not include major enhancements to the Wink Software designated by
changes in the version number to the left of the decimal point. Wink
shall provide a license to all Updates at no charge to Programmer during
the term of this Master Agreement and Programmer, in its sole
discretion, shall have the option to utilize such Updates in providing
Interactive Wink Programs to Programmer subscribers. "New Release" shall
mean a major release of the Wink Software which occurs subsequent to the
Effective Date, which contains significant new functionality and/or
major enhancements, and which is designated by a change in the digit or
digits to the left of the decimal point in the version number. Wink
shall offer to Programmer a license to all New Releases created by Wink
during the Term on terms that are as favorable or more favorable than
the terms of any agreement Wink has entered into with other United
States broadcast and cable networks, for the provision of the New
Releases; provided, however, that in no event shall Programmer's
decision not to license any New Release have
CONFIDENTIAL - PAGE 1
<PAGE> 2
any impact whatsoever on the functionality of the current Wink Software
or Programmer's ability to provide Interactive Wink Programs to
Programmer viewers throughout the Term, and provided that Programmer
shall be under no obligation to license or launch such New Releases. If
a New Release has not been made available to other parties, Wink agrees
to offer to Programmer a license to such New Release at a one-time fee
equal to Wink's costs (on a Time and Materials basis) in developing and
testing the New Release, which estimate shall be made by Wink and
documented in writing to Programmer. In the event that actual costs of
developing and testing any such New Release are lower than said
estimated costs, Wink agrees to so notify Programmer and adjust the cost
of such license accordingly. Wink warrants and represents that the
definition of "New Releases" is at least as favorable to Programmer as
that provided to any other broadcaster or cable programmer and that Wink
did not include in any license of the Wink Software to any other
broadcaster or cable programmer a license of any New Releases as part of
the initial license consideration. Wink further agrees promptly to
notify Programmer in writing should Wink agree in any future agreements
or amendments to any more favorable terms and to immediately offer such
terms to Programmer.
2.3 This License is not transferable, nor may any rights hereunder be
transferred, assigned or sub-licensed in whole or in part by either
party without the prior written consent of the other party, provided,
however, that Programmer shall have the right to freely assign this
Agreement to any entity acquiring all or substantially all of
Programmer's assets. Wink agrees that Programmer shall have the right to
assign this Agreement to any subsidiary or affiliated entity, provided
that Programmer shall remain liable for the performance of all of its
obligations hereunder. Wink agrees to provide notice to Programmer of
any change of control of Wink in which any broadcast network gains a
controlling interest in Wink. In such event, Programmer shall have the
immediate right to terminate this Agreement without further obligation
hereunder and Wink agrees to refund a pro-rated portion of any license
fees or other charges paid by Programmer.
2.4 Programmer can only use the Wink software to provide Interactive Wink
Programs with the video programming services listed in Exhibit A.
Programmer must notify Wink in writing at least 30 days prior to
commencing transmission of Interactive Wink Programs with a video
programming service. Programmer agrees to provide notice to Wink of the
technical information required by Exhibit A. Exhibit A, including the
programming services enabled to insert Interactive Wink Programs in
their video signal, may be amended from time to time by Programmer.
2.5 Wink hereby acknowledges that this Agreement is non-exclusive and in no
way prohibits Programmer from entering into any agreement with third
party providers for the same or similar services ("Other Providers") at
any time during the Term hereof, including, without limitation,
providers of software and/or
CONFIDENTIAL - PAGE 2
<PAGE> 3
hardware enabling the creation and/or delivery of interactive
enhancements to commercial cable subscriber households or other
Programmer viewers. Wink represents and warrants that the installation
and integration of the Wink Hardware and Wink Software into Programmer's
facilities contemplated hereunder shall in no way prevent or inhibit
Other Providers from using Programmer's facilities to create and deliver
interactive enhancement programs.
3. TERM
3.1 The Term of this Agreement (the "Term") shall commence on the date of
execution of this Agreement and terminate eight years after the first
airing of Programmer's Interactive Wink Programs on the programming
service listed as the First Programming Service in Exhibit A ("First Air
Date"). The parties agree that the First Air Date shall be the first day
that Programmer includes an Interactive Wink Program on a program airing
the First Programming Service (as defined in Exhibit A), and transmits
the signal on feeds intended to reach at least 70% of the television
household in the United States, Broadcasts of Interactive Wink Programs
to test transmission and reception reliability shall not qualify as the
First Air Date.
3.2 The parties agree that Wink shall provide notice to Programmer that it
has "enabled the system" as defined in paragraph 4.4 below. If Wink
fails to "enable the system" within one hundred twenty (120) days of the
Effective Date then subject to a sixty (60) day cure period, Programmer
shall have the right to terminate this agreement without any further
obligations (whether payment or otherwise) hereunder. In such event Wink
shall refund any and all fees paid by Programmer.
3.2 The parties agree that Programmer may unilaterally terminate this
Agreement on any of the following dates: eighteen (18) months from the
earlier of First Air Date or 30 days from the Effective Date, forty two
(42) months from the earlier of the First Air Date or 30 days from the
Effective Date, and sixty six (66) months from the earlier of First Air
Date or 30 days from the Effective Date (each referred to as a
"Termination Option Date"). Programmer must provide Wink with notice of
Programmer's decision to terminate at least 30 days prior to the each
Termination Option Date. If such notice is not provided in writing by
this date, the applicable termination option shall have lapsed. Wink
warrants and represents that no broadcast or cable programmer has a
license agreement with Wink for Wink Software with a longer term or with
more Termination Option Dates.
4. INTEGRATION AND PROGRAMMING; REVENUE PARTICIPATION; ADVERTISER
AGREEMENTS
CONFIDENTIAL - PAGE 3
<PAGE> 4
4.1 Programmer agrees to ensure, except in the event of force majeure, or
other customary program suspension or interruption, that the First
Programming Service's Interactive Wink Programs are passed through to
viewers unchanged by Programmer's owned stations ("Programmer Owned
Stations "), to the extent (i) that Programmer Owned Stations clear the
CBS Network programs carrying the Interactive Wink Programs; (ii) that
such Owned Stations receive a network feed which includes the
Interactive Wink Programs; (iii) that Interactive Wink Programs can be
carried without signal degradation and without causing any other
technical or operational incompatibility, interference or impairment;
and (iv) that carriage is not inconsistent with any obligations or
rights of such Programmer Owned Stations under contract, law or
otherwise or will otherwise cause an adverse financial impact on
Programmer. Programmer agrees to use its reasonable commercial efforts
(which Wink hereby acknowledges does not include, in any event, the
obligation to incur any costs, make any payments or to provide any other
form of compensation) to encourage such passage by local affiliates with
whom Programmer has an affiliation agreement and which are not owned by
Programmer ("Other Programmer Affiliates"). Wink's sole remedy in the
event Programmer does not fulfill its obligations hereunder will be to
terminate this Agreement. Such notice of termination must be given in
Writing 30 days before the effective date of termination and within the
30 days period Programmer shall have the opportunity to cure. In the
event of such "cure" the notice will be deemed rescinded.
4.2 Wink agrees to; (i) "enable the system", (ii) ensure the reliable
transmission of the Interactive Wink Programs, (iii) maintain all Wink
Software and Wink Hardware (as defined below) and (iv) complete the
tailoring and deployment of the Automation Server Module (as defined in
section 4.5 below); all at the sole cost and expense of Wink. Programmer
agrees to cooperate with Wink in connection with Wink's installation and
maintenance responsibilities set forth above. Wink is responsible for
providing all equipment (including taxes and freight) necessary to run
the Wink Software and to enable insertion of Interactive Wink Programs
into the primary East and West video signal feeds for the First
Programming Service (as defined in Exhibit A), including but not limited
to the equipment listed as "Wink Hardware" on Exhibit E ("Wink
Hardware"), and with the exception that standard Microsoft Windows based
PCs are to be provided by Programmer, as described in Exhibit E.
Programmer agrees to pay Wink $27,000 upon delivery and acceptance of
the equipment, and $25,000 upon acceptance of the installation of the
Wink Software and having Wink "enabled the system". The parties agree
that Wink shall be solely responsible for any additional software,
hardware (including installation and integration) equipment and
equipment related expense that exceeds this payment by Programmer (and
other payments set forth in the attached Exhibits) and is required to
meet Wink's obligations under this Agreement.
4.3 Programmer agrees to make at least two of its personnel available to
complete Wink's basic training in the usage of Wink Software to develop
and schedule
CONFIDENTIAL - PAGE 4
<PAGE> 5
Interactive Wink Programs within sixty (60) days of the Effective Date
of this Agreement. In addition, Wink agrees to provide an additional
training day for such personnel within sixty (60) days prior to the
schedule First Air Date. Wink agrees to provide such training at no
charge to Programmer as defined in Exhibit C. Programmer agrees to
assign a project coordinator who has completed the training referenced
in this section to serve as a contact point for Wink, and to assign
resources equivalent to a full time staff member to work exclusively on
creating and scheduling Interactive Wink Programs within forty-five (45)
days of the last party's execution of this Agreement.
4.4 Programmer agrees to use its reasonable efforts to commence transmission
of Interactive Wink Programs on the First Programming Service on the
later of one hundred twenty (120) days after the Effective Date and
forty-five (45) days after Wink has "enabled the system". Wink shall
have "enabled the system" upon the last to occur of the following: (i)
successful installation and integration at Programmer's facility of all
Wink Software and Wink Hardware necessary to produce and deliver
Interactive Wink Programs to commercial cable subscriber households,
without signal degradation and without causing any other technical or
operational incompatibility, interference, or impairment, (ii)
satisfactory completion of testing of all Wink Software and Wink
Hardware, to be performed by Wink subsequent to installation and
integration of Wink Software and Wink Hardware into Programmer
facilities, (iii) training of Programmer personnel in the use and
operation of Wink Software and Wink Hardware, and (iv) reception
capacity by commercial cable subscriber households. Programmer agrees to
use reasonable efforts to identify video programming for which
Interactive Wink Programs can be developed and broadcast and to
facilitate demonstrations and presentations by Wink staff to appropriate
executives selected by Programmer from its major programming
departments.
4.5 Programmer agrees to cooperate with Wink in tailoring and deployment of
a Wink Server Module specific to Wink's Programmer which would enable
the automatic suspension of program enhancements during advertising
breaks and the automatic triggering of the insertion of Interactive Wink
Programs related to ads on the First Programming Service ("Automation
Server Module" or "ASM"). The parties agree that Wink is solely
responsible for the tailoring of the Automation Server Module, and that
Programmer's obligations under this agreement are solely to make
technical staff and documentation readily available to Wink for the
specification, development and integration of such module into
Programmer's operations. Once Wink has delivered a functional Automation
Server Module, Programmer agrees to use reasonable efforts (at no cost
to Programmer) to test the airing of Interactive Wink Programs related
to advertisements bought by third party advertisers.
4.6 Wink agrees to provide software to enable Programmer to parse
Programmer's existing HTML content for use in Wink applications. The
software used to author such parsing routines is referred to as "Wink
Server Studio", and the
CONFIDENTIAL - PAGE 5
<PAGE> 6
software used to execute such parsing routines on the Wink Broadcast
Server is referred to as the "Wink Server Module" throughout this
Agreement.
4.7 For purposes of this Agreement, the following definitions shall apply:
(a) A "Wink-enabled Viewer" is any television viewer which is able
to receive and interact with Interactive Wink Programs.
(b) A "Wink Response" is any response data generated by a
Wink-enabled Viewer when using an Interactive Wink Program and collected
electronically by Wink.
(c) A "Wink Revenue Response" is a Wink Response in which the Wink-
enabled Viewer request products or services through the Interactive Wink
Program, whether such products and services are provided at no charge to
the Wink-enabled Viewer or require payment by the Wink-enabled Viewer,
and where the fulfillment of that request requires the release of
Wink-enabled Viewer specific information, such as name and address.
Commencing on the First Air Date and throughout the remainder of the
Term, Wink shall, no later than Wednesday of each week, provide to
Programmer standard weekly reporting, at no charge to Programmer, of all
Wink Responses generated by Interactive Wink Programs aired on
Programmer's networks or affiliates during the previous week. Programmer
accepts Wink's terms for all other reporting regarding Wink Responses,
as defined in Exhibit B. Wink warrants and represents that Exhibit B and
each and all of its terms are as favorable or more favorable than the
terms of any agreement relating to the licensing of Wink software Wink
has entered into with other United States programmer. Wink further
agrees to promptly notify Programmer in writing, should Wink decide to
enter into new agreements or amend existing agreements with any United
States programmer to include one or more more favorable terms than those
defined in Exhibit B and to immediately offer such terms to Programmer.
Wink agrees to provide all reports described above in hard copy or
electronic form, per Programmer's instructions. All Wink Revenue
Responses and Wink Responses shall be undertaken by Wink or its agents
in accordance with applicable law, including, without limitation, truth
in advertising and customer privacy laws. In addition, Wink agrees that
it will correctly route all Wink Revenue Responses and all attendant
information on a timely basis in accordance with the instructions of the
entity sponsoring the enhancement and agrees to indemnify and hold
Programmer harmless from and against any claims arising out of any
breach or alleged breach of that obligation.
Upon no less than two (2) weeks notice to Wink, Programmer shall have
the right to appoint a third party auditor, who shall be permitted,
during regular business hours, to inspect all of Wink's books and
records, whether electronic or otherwise, relating to Wink Responses,
Wink Revenue Responses, and all other revenues generated by Wink's Data
Center from Interactive Wink Programs sourced to Programmer under this
Agreement. Programmer shall
CONFIDENTIAL - PAGE 6
<PAGE> 7
also have the right to audit all "most favored nations provisions"
hereunder, provided that Programmer shall require that its auditors
shall not disclose any terms of Wink's agreements with other broadcast
and cable programmers to Programmer, except when directly related to the
most favored nations clauses in this Agreement and then only in a form
that does not identify by name the holder of such more favorable term.
4.8 During the Term of this Master Agreement, Wink shall pay to Programmer,
on a monthly basis, [ * ] percent of Attributable Revenue. Attributable
Revenue shall be defined as the gross fees earned by Wink directly
sourced to Interactive Wink Programs airing on the First Programming
Service, including, without limitation, Wink Revenue Responses and Wink
Response fees and fees from third party reports (less only amounts
refunded or credited for return), regardless of whether such Interactive
Wink Programs are paid for or sponsored by a third party or Programmer.
Wink warrants and represents that the definition of Attributable Revenue
(i.e. the revenue base) is as beneficial to Programmer as any definition
which Wink has provided to any other entity for purposes of calculating
revenue share for such entity. Wink further warrants and represents that
if it enters into any agreements or amendments offering a more favorable
revenue base definition, it will notify Programmer and Programmer shall
have the right to substitute that definition for the definition
hereunder. Such payments will be made within thirty (30) days of the end
of each month, and will be accompanied by a detailed report showing Wink
Revenue Responses by Interactive Wink Programs, and all revenues
generated by Wink's Data Center from all Wink Revenue Responses
generated by Interactive Wink Program aired on the First Programming
Service (and any other revenues for which Wink is obligated to share
revenue with Programmer according to this Agreement) . Past due payments
shall bear interest at a rate equal to the lesser of (i) one and
one-half percent (11/2%) per month or (ii) the maximum legal rate
permitted under law, and Wink shall be liable for all reasonable costs
and expenses (including, without limitation, reasonable court costs and
attorneys' fees) incurred by Programmer in collecting any past due
payments. Programmer agrees that no interest shall be due if the parties
have a bona fide dispute over payments. In the event Wink offers a
revenue sharing arrangement to any other programmer relating to
distribution of Interactive Wink Programs on platforms other than an
over-the-air broadcast network, Wink will offer such arrangement to
Programmer for any Programming Service hereunder distributed on similar
platforms.
4.9 Beginning within 14 days on the First Air Date, Programmer agrees to use
reasonable efforts to enhance at least ten (10) hours a week of
programming broadcast by the First Programming Service with Interactive
Wink Programs and to offer the "Enhanced Programming" to distribution
outlets that reach in the aggregate at least 70% of the television
households in the United States
- -------------
* 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.
CONFIDENTIAL - PAGE 7
<PAGE> 8
(the "Programming Commitment"). "Enhanced Programming" shall be defined
as programming which includes Interactive Wink Program(s) in the First
Programming Service's VBI or an MPEG private data stream concurrently
with the corresponding signal for the programming. Enhanced Programming
shall count toward fulfillment of the Programming Commitment based on
the broadcast time of the "Enhanced Programming". Wink hereby
acknowledges that the Programming Commitment is subject to the
following: (i) Any Programmer agreements affected by or otherwise
limiting Programmer's opportunities and/or ability to fulfill the
Programming Commitment including, without limitation, agreements with
advertisers, licensors, affiliates, cable system operators and/or other
transmitters or re-transmitters of Programmer's signal (ii) all
collective bargaining agreements to which Programmer is a party and
(iii) all laws and/or regulations pertaining to any performance of the
obligations contemplated under this Agreement (subsections (i) - (iii)
above are collectively referred to herein as the "Restrictive
Obligations")In the event that the Restrictive Obligations render
fulfillment of the Programming Commitment unreasonable or impracticable
(e.g. the available hours of programming in which to deliver the
Interactive Wink Programs are substantially reduced), the Programming
Commitment shall be reduced accordingly to the number of hours per week
that is reasonable ("Revised Programming Commitment") and Programmer
shall be obligated to use reasonable efforts to broadcast Interactive
Wink Programs on the First Programming Service according to the Revised
Programming Commitment. Programmer has the sole right to select, in its
sole discretion, the programs to be enhanced toward fulfillment of the
Programming Commitment. Fulfillment of the Programming Commitment shall
be measured by determining at the end of each calendar month the average
weekly broadcast time of Enhanced Programming over the previous eight
(8) weeks. It is understood and agreed that if Programmer has offered
the Enhanced Programming as set forth herein and has otherwise adhered
to its obligations in Paragraph 4.1, Programmer will have fulfilled its
obligations hereunder even if the Interactive Wink Programs are not
actually broadcast (or transmitted) by these media outlets or
distributors. Programmer has the sole and absolute control and approval
of the Interactive Wink Programs, including, without limitation, the
content, nature, form, scope and placement of the Interactive Wink
Programs, and may suspend any individual Interactive Wink Program at any
time and for any reason. Interactive Wink Programs for cable programming
services must be related to the content, nature and intended audience of
the video programming with which they are broadcast. Wink's sole remedy
in the event Programmer does not meet the foregoing Programming
Commitment Will be to terminate this Agreement. Such notice of
termination must be given in writing 30 days before the effective date
of termination and within the 30 day notice period, Programmer will have
the opportunity to cure by distributing sufficient Enhanced Programming
to reach the minimum requirement. In the event of such "cure", the
termination notice will be deemed rescinded.
CONFIDENTIAL - PAGE 8
<PAGE> 9
4.10 Programmer is responsible for payment of third party fees and royalties
arising out of the content of the Interactive Wink Programs aired by
Programmer, including but not limited to fees and royalties owed to
studios, on-air and other talent, news and sports data providers and
professional and college sports leagues or teams. Wink shall be
responsible for all third party fees and royalties arising out of
Programmer's use of the Wink Hardware and/or Software, excluding such
fees and royalties owed by Programmer hereunder.
4.11 The parties agree that the Interactive Wink Programs will require
bandwidth equivalent to both fields of one dedicated line of VBI on each
programming service. Programmer may elect to use additional VBI lines in
its sole discretion. Programmer has the right, without limiting its
rights or remedies, immediately to suspend its obligations (including
without limitation payment obligations and the Programming Commitment)
and to terminate this Agreement if Programmer's Interactive Wink
Programs cause any degradation in Programmer's (or any transmitter's or
retransmitter's) video signal quality, or cause any other technical or
operational incompatibility, impairment or interference. Programmer
agrees that such termination shall be subject to the thirty (30) day
cure period defined in section 14.1 below.
4.12. Wink agrees that Programmer shall own all rights (including copyright)
in any Interactive Wink Programs created by Programmer, with or without
the assistance of Wink staff members. Wink agrees that Programmer may
license Interactive Wink Programs (or derivatives thereof) that
Programmer creates to third parties on any terms that the Programmer and
the third party can mutually agree upon. Programmer can not sub-license
Wink Software, or act as an agent for Wink.
4.13. Wink acknowledges and agrees [*] for purposes of airing Interactive Wink
Programs with such advertiser's video advertising on the First
Programming Service or any other Programmer owned programming service
opting to exercise its rights hereunder to license Wink Software ("Other
Licensors"). The parties agree that Wink shall provide Programmer and
Other Licensors with a standard agreement for collection, aggregation
and reporting of Wink Responses to advertiser's Interactive Wink
Programs for use in representing Wink's terms to advertiser's, and that
the terms of such agreement shall be as favorable to Programmer's and
Other Licensor's advertiser as those provided to any other advertiser or
broadcast and cable network representing Wink terms for collection,
aggregation and reporting of Wink Responses to their advertisers. Wink
has provided a copy of the current standard advertiser agreement,
attached hereto as Exhibit I. Wink further agrees to promptly notify
Programmer in writing, should Wink decide to enter into new agreements
or amend existing agreements with any United States advertiser to
include more favorable terms, and to immediately offer Programmer's
advertisers such more favorable terms.
Without limiting the foregoing, Wink acknowledges and agrees that it has
not and will not during the Term of this Agreement enter into any
agreements with any advertiser containing any provision which (i)
establishes any pricing structure for any Interactive Wink Programs that
adjusts pricing based on identity or performance (demographic or
otherwise) of broadcaster, telecaster, or on anticipated or actual
performance (demographic or otherwise) of any programming containing
Wink enhanced commercials; (ii) establishes any pricing discounts or
adjustments for any enhanced advertisements, which discounts/adjustments
are applicable only to enhancements being telecast on a particular
video programming service (e.g. establishes one price for Wink
Transactions on First Programming Service based on advertiser's
transaction volume on the First Programming Service and another price
for Wink Transactions on another broadcaster/telecaster); and/or (iii)
prohibits (or otherwise impairs or hinders) advertiser from enhancing,
or otherwise adding any interactive elements to, its commercials through
use of any third party software, hardware, or equipment.
With respect to any enhanced commercials aired by Programmer and paid
for by advertisers who have entered into agreements with Wink which
provide for any [*] pricing (i.e. any Wink transaction fees other than
those set forth in Exhibit A to Exhibit I), Wink agrees that for each
such enhanced commercial it will nevertheless impute to the Attributable
Revenue (from which Programmer receives its [*] share) an amount equal
[*]. Wink further agrees that for any "Special Programming" (as defined
hereinbelow), provided Programmer has furnished to Wink at least [*]
days notice, Programmer shall have the right to contract exclusively and
directly with an advertiser regarding transaction fees for commercial
enhancements in such Special Programming. In such event, Wink will
assign a unique identifier to enhancements in the Special Programming.
In such event, Programmer will bill advertiser for and collect all
transaction fees at the agreed upon rate between advertiser and First
Programming Service and will remit to Wink the applicable Wink
transaction fees otherwise owed by such advertiser (but in no event more
than the then current uniformly applied standard advertiser price
structure, the current version of which is set forth in Exhibit A to
Exhibit I). In such event, Wink will furnish to Programmer all necessary
information regarding the advertiser transaction volume sourced to such
Special Programming. "Special Programming" shall be defined as any
programming being broadcast by First Programming Service which First
Programming Service determines to be appropriate for enhanced or premium
transaction fee pricing, based on the anticipated performance of the
programming, the unique nature of the programming and/or any unique
value created for one or more advertiser(s) in such programming (e.g.
event programming). If Programmer exercises its Special Programming
option above, it will reimburse Wink (on a time and materials basis
only) for Wink's verifiable direct, out-of-pocket incremental costs
incurred to separately invoice and aggregate data to enable such direct
billing between Programmer and advertiser.
- -------------
* 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.
CONFIDENTIAL - PAGE 9
<PAGE> 10
[*]
- -------------
* 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.
CONFIDENTIAL - PAGE 10
<PAGE> 11
5. RATES, DEPLOYMENT AND OTHER PROGRAMMING SERVICES
5.1 Programmer and Wink each agree to remit the license fees and other
payments under this Agreement on a timely basis, on or before the 30th
day following each month of the Term.
5.2 Programmer agrees to provide the Interactive Wink Programs to any
multi-channel video operator in the United States or Canada with whom
Programmer then has an agreement for carriage or re-transmission of the
First Programming Service's video programming as carried by Programmer's
Owned Stations ("System Operators"), to the extent that the terms of
such carriage or retransmission are not inconsistent with this
Agreement, but only if, in so doing, Programmer is not subject to any
additional obligations under any such agreements. Programmer shall not
be required to contest in any legal proceeding or otherwise a
determination by a System Operator that it is not required to pass
through to its subscribers Wink Interactive Programs carried by any
Programmer Owned Stations.
5.3 Programmer may choose to utilize other products and services of Wink not
quoted elsewhere in this Agreement from time to time. These services
will be extended by Wink to Programmer at the lower of the then
prevailing retail rate and the lowest rate offered any programmer for
the same products and services.
5.4 Wink agrees to extend the following license rights to programming
entities which are owned by Programmer or affiliated with the First
Programming Service:
(a) Programmer can elect to license the Wink Software for Programmer
Owned Stations at any time during the Term, subject to the license and
other fees in Exhibit F, and acknowledging that such license terms are
subject to a 10-hour "Programming Commitment" per week (as defined in
4.9 above) for Interactive Wink Programs. Programmer acknowledges and
agrees that the equipment, installation and integration charges will be
invoiced to Programmer on a time and material basis for Wink's
verifiable, direct, out-of-pocket costs, not to exceed the amount set
forth in Exhibit F. Notwithstanding the foregoing, if Programmer elects
instead to provide any equipment or to use its appropriately trained
personnel to install and integrate the applicable Wink system, then the
one-time equipment, installation and integration charges will be reduced
accordingly.
CONFIDENTIAL - PAGE 11
<PAGE> 12
(b) Programmer can elect to license the Wink Software for its cable
programming services at any time during the Term, subject to the license
and other fees in Exhibit G, and acknowledging that such license terms
are subject to a 10-hour "Programming Commitment" per week (as defined
in 4.9 above) for Interactive Wink Programs and to the execution of
Exhibit D. Notwithstanding the foregoing, Wink has agreed that, with
respect to Country Music Television, if it elects to become Wink
enhanced and provided Wink's agreement with the The Nashville Network is
still in effect, Wink will (a) provide all licenses of software free of
charge for a one-year period; and (b) will install and integrate the
system on a time and materials basis for Wink's verifiable, direct,
out-of-pocket costs not to exceed $16,000.
(c) [*]
(d) Wink agrees to offer a license of Wink Software to any Other
Programmer Affiliate at prices no less favorable then those contained in
Exhibit H1, provided however that such license terms shall be subject to
a commitment to air Interactive Wink Programs for at least 10 'hours of
programming per week. Wink acknowledges that Programmer has no authority
to and does not hereby make any commitments on behalf of Other
Programmer Affiliates. At Programmer's request, Wink agrees to train
Programmer's personnel to enable Programmer to install and integrate
Wink Software and Hardware and thereby reduce otherwise applicable
installation and integration fees. Programmer also understands and
accepts that Wink is not obligated under this Agreement to provide the
transaction revenue share offered to Programmer in section 4.8 to any
programming service other than the First Programming Service.
- -------------
* 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.
CONFIDENTIAL - PAGE 12
<PAGE> 13
Except as noted above, if Programmer elects to exercise its right to
license Wink Software and Hardware for any of its Owned Stations or its
cable programming services all terms and conditions of this Agreement
which are applicable to a programming service of such nature shall
apply.
6. PAYMENT TERMS
6.1 Wink will send invoices for all payments due hereunder, 30 days in
advance of the due date. Wink's failure, for any reason, to send an
invoice for a particular monthly payment due in years two through eight
of the Term for the Broadcast Server, Server Module Engine, Automation
Server Module or Tech Support shall not relieve Programmer of its
obligation to make these payments in a timely manner consistent with the
terms of this Agreement. Failure by Programmer to make such payments in
the absence of an invoice shall not be considered a material breach
under this Agreement. Past due payments shall bear interest at a rate
equal to the lesser of (i) one and one-half percent (1 1/2%) per month
or (ii) the maximum legal rate permitted under law, and Programmer shall
be liable for all reasonable costs and expenses (including, without
limitation, reasonable court costs and attorneys' fees) incurred by Wink
in collecting any past due payments. Wink agrees that no interest shall
be due if the parties have a bona fide dispute over payments.
7. PROMOTION AND RESEARCH
7.1 The parties agree to use good faith efforts to issue a joint press
release after execution of this agreement subject to written approval by
both parties announcing this Agreement within fourteen (14) days of the
Effective Date of this Agreement. Wink shall be solely responsible for
providing a draft for Programmer's review on a timely basis.
7.2 Wink agrees to provide Programmer with notice within 30 days of new
System Operators having enabled their subscribers to receive
Programmer's Interactive Wink Programs. Wink further agrees to
immediately notify Programmer as to the first day subscribers in Wink's
first five (5) cable systems are able to receive Programmer's
Interactive Wink Programs.
7.3 Subject to the approvals of 7.4: Wink agrees to promote and feature
Programmer's Interactive Wink Programs as prominently as any other
programming service in Wink's promotion, advertisements and/or marketing
materials (in any and all media), during meetings with cable operators
and the press, and during industry trade shows. Wink will also use
reasonable efforts to assist Programmer in achieving its marketing
objectives in materials prepared by third parties, such as equipment
manufacturers, retailers and cable operators. At its election,
Programmer shall have the right to promote its participation as a
charter Wink programmer to cable operators, and upon
CONFIDENTIAL - PAGE 13
<PAGE> 14
written approval to serve as a press reference for Wink during the
effective term of the agreement.
7.4 Wink, equipment manufacturers, retailers and System Operators may
prepare marketing materials relating to the Interactive Wink Programs
and may use Programmer's name, logo and screen shots (collectively,
"Programmer's Marks") from the Interactive Wink Programs. Programmer,
the Programming Services, Programmer Owned Stations and Other Programmer
Affiliates may use and authorize the use of Wink's name, logo and
related elements (collectively Wink's Marks") in the production and
distribution of Interactive Wink Programs and in advertising and
publicity therefor. Each party must submit materials containing the
other's Marks to the other party for review and written approval prior
to distribution. The other party agrees to use reasonable efforts to
respond promptly to such requests for approval, and retains sole
discretion over such approvals, if any. Wink hereby acknowledges that
Programmer is the sole owner of all right, title and interest in and to
the Programmer's Marks and any marks, notices or designations utilized
by Programmer in connection with Programmer's business, and that no
rights or ownership are intended to be or shall be transferred to Wink.
All uses of the Programmer's Marks shall inure to the benefit of
Programmer. Upon any expiration or termination of this Agreement, Wink
shall delete and discontinue all use of the Programmer's Marks. At no
time during or after the term of this Agreement shall Wink challenge or
assist others to challenge the Programmer's Marks or the registration
thereof or attempt to assist another in the attempt to register any
trademarks, marks or similar rights for marks the same as or confusingly
similar to the Programmer's Marks. Likewise, Programmer hereby
acknowledges that Wink is the sole owner of all right, title and
interest in and to the Wink's Marks and any marks, notices or
designations utilized by Wink in connection with Wink's business, and
that no rights or ownership are intended to be or shall be transferred
to Programmer. All uses of the Wink's Marks shall inure to the benefit
of Wink. Upon any expiration or termination of this Agreement,
Programmer shall delete and discontinue all use of the Wink's Marks. At
no time during or after the term of this Agreement shall Programmer
challenge or assist others to challenge the Wink's Marks or the
registration thereof or attempt to assist another in the attempt to
register any trademarks, marks or similar rights for marks the same as
or confusingly similar to the Wink's Marks.
7.5 Programmer understands and accepts that Wink will be providing reports
on Wink Responses to the Interactive Wink Programs to System Operator(s)
for Wink Responses that originate from System Operator's subscribers, to
equipment manufacturers for Wink Responses that originate from Wink-
enabled equipment sold by such manufacturers, and to advertisers and
other parties, authorized by Programmer, for Wink Responses that
originate from Interactive Wink Programs paid for or sponsored by such
parties (collectively, the "Recipients"). Such reports to Recipients
shall be restricted to aggregate
CONFIDENTIAL - PAGE 14
<PAGE> 15
reports about Wink Responses, and detailed reports on individual Wink
Revenue Responses, which shall only be forwarded to the Recipient
fulfilling such viewer requests, or such party's designated agent. Wink
agrees that reports providing specific data regarding viewer responses
to, usage of, and/or exposure to Programmer's Interactive Wink Programs,
including data on Wink viewer responses to advertising on Programmer
owned or affiliated programming services, will not be made available,
except in aggregated form that does not identify Programmer or specific
Programmer viewer data, to any third party except Recipients pursuant to
this paragraph. Wink acknowledges and agrees that any reports provided
to Recipients or other third parties must adhere to applicable consumer
privacy laws. Information regarding the nature of Winks Responses or the
Wink Viewers shall not be used for any other purpose without the express
consent of Programmer. Notwithstanding the foregoing, Wink agrees that
it shall not include in any of its standard and/or customized reports
any information other than raw data, including aggregate and accumulated
data, program ratings, demographic data, the number of applicable Wink
viewers and other similar "objective" data. [ * ]
8. WARRANTY
8.1 Wink hereby represents and warrants to Programmer that the Wink Software
and Wink Hardware (and subsequent revisions and upgrades to same
provided by Wink to Programmer) will operate and perform in accordance
with all published specifications with respect thereto (e.g. Wink's
published specifications for the Interactive Communications Application
Protocol, as updated by Wink, and Wink's then current documentation and
manuals), in accordance with the criteria defined in Exhibit H2 and as
demonstrated to Programmer prior to this Agreement. Wink also represents
and warrants that as of this signing of this Agreement, Wink is not
aware of any claims against Wink's patents, copyrights or other
intellectual property, except for the "Berman" claim. Wink further
represents that the Wink Software (and subsequent revisions and upgrades
to same provided by Wink to Programmer) is Year 2000 compliant.
8.2 Wink hereby warrants and represents that the terms contained herein for
licensing of Wink software, provision of Wink services (excluding
one-time deployment charges), sharing of Wink's revenues and for
Programmer's commitment for Interactive Wink Programs, including without
limitation the terms of Exhibits B and C, (collectively, the "Major
Provisions") are as favorable to Programmer as any other agreement Wink
has entered into with other broadcast and cable programming entities.
Wink further agrees to promptly notify Programmer in writing, should
Wink decide to enter into new agreements or amend existing agreements
with any United States programmer to include more favorable Major
Provisions. Programmer shall have the right during the
- -------------
* 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.
CONFIDENTIAL - PAGE 15
<PAGE> 16
next 60 days after its receipt of said notice to assume such new Major
Provisions in their entirety, effective as of the date such Major
Provisions were first agreed to with another Programmer, and amend this
Agreement accordingly. Wink acknowledges and agrees that to obtain the
benefits of such new Major Provisions, Programmer shall only be required
to meet those terms relating to comparable Programmer assets. If
Programmer has no comparable assets, Wink agrees to negotiate in good
faith to determine if other' Programmer assets could be substituted to
allow Programmer to benefit from the terms related to such un-comparable
assets.
8.3 Wink warrants and represents that the terms and conditions in Exhibit D
are as favorable to Programmer as any agreement Wink has caused or
allowed other cable programmers to enter into with System Operators. If
Wink causes or allows any other cable programmer to enter into an
agreement with any System Operator on terms and conditions more
favorable to the programmer than those enumerated in Exhibit D, Wink
will notify Programmer to that effect and Programmer then will have the
right during the next 60 days after its receipt of said notice to assume
such more favorable terms and amend Exhibit D accordingly.
8.4 Wink hereby warrants and represents that the terms contained herein for
licensing of Wink software, provision of Wink services and equipment,
and the Programmer Owned Stations' commitment for Interactive Wink
Programs, including without limitation the terms of Exhibit F,
(collectively, "Owned Stations' Major Provisions") are as favorable as
any other similar agreement Wink has entered into with other broadcast
programming entities for their owned and affiliated stations. Wink
further agrees to promptly notify Programmer in writing, should Wink
decide to enter into new agreements or amend existing agreements with
any United States broadcast network to include more favorable Owned
Stations' Major Provisions for such network's owned stations. Programmer
shall have the right during the next 60 days after its receipt of said
notice to assume such Owned Stations' Major Provisions in their
entirety, effective as of the date such Owned Stations' Major Provisions
were first agreed to with another broadcast programming entity, and
amend this Agreement accordingly.
8.5 [*]
- -------------
* 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.
CONFIDENTIAL - PAGE 16
<PAGE> 17
Section 13 - Confidentiality
Section 14 - Termination
[*]
9. INDEMNIFICATION
9.1 Wink will indemnify and hold harmless Programmer, its parent and
subsidiary companies and Programmer's affiliated television stations
carrying Interactive Wink Programs and each of their respective
employees, directors, agents, and other representatives against any and
all claims, causes of action, damages and all other related expenses
arising out of the breach or alleged breach of any of Wink's
representations and warranties or any of Wink's other obligations stated
herein or the use of any software, technology or equipment provided by
Wink to Programmer hereunder (including without limitation the Wink
Software and Hardware), or any of Wink's other business activities
directly related to Programmer or this Agreement. Notwithstanding the
above, the parties agree that Wink is specifically not liable or
obligated to indemnify Programmer or other parties for:
(a) any and all expenses arising out of claims or causes of action
related to the content, nature or form of the Interactive Wink Programs.
(b) any and all expenses arising out of claims or causes of action
in which it is alleged that the Interactive Wink Programs created a
malfunction or other technical problem on a Wink-enabled television set
or multi-channel set top receiver, but only to the extent that the
malfunction or problem is caused by Programmer's negligent testing of
such Interactive Wink Programs or other negligent failure to adhere to
Wink's standard Criteria for Compliant Interactive Wink Programs, as
defined in Exhibit D, Attachment 1.
9.2 Programmer will indemnify and hold harmless Wink, its parent and
subsidiary companies and their respective employees, directors, agents,
other representatives against any and all claims, causes of action,
damages and all other related expenses arising out of the breach or
alleged breach of any of its representations and warranties or any of
its other obligations stated herein, or any of Programmer's other
business activities directly related to Wink or this Agreement.
- -------------
* 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.
CONFIDENTIAL - PAGE 17
<PAGE> 18
9.3. In any case in which indemnification is sought hereunder, the party
seeking indemnification shall promptly notify the other in writing of
any claim or litigation to which the indemnification relates and the
party seeking indemnification shall afford the other party the
opportunity to participate in and, at the other party's option, fully
control any compromise, settlement, litigation or other resolution or
disposition of such claim or litigation. Notwithstanding the foregoing,
the indemnified party shall have the right, with respect to any claim or
litigation, to retain its own counsel (in addition to counsel retained
by the indemnifying party on the indemnified party's behalf), at its own
expense, and counsel for the indemnified party shall cooperate fully
with the counsel of the indemnified party. Nothing contained herein
shall give the indemnifying party any right, as part of any compromise
or settlement, to impose any obligations upon the indemnified party.
9.4. Wink shall, at its expense, use best efforts to obtain and maintain for
such length of time as is necessary to cover any and all claims arising
in connection with this Agreement, the following insurance policies
acceptable to Programmer: Comprehensive General Liability, including,
without limitation, contractual, product and completed operations
insurance, having a combined single limit (contractual and property
damage) of at least [ * ]; and Professional Liability Insurance,
specifically insuring against any claims, causes of action, damages and
all other related expenses arising pursuant to paragraph 9.1 of this
Agreement, having a combined single limit (contractual and property
damage) of at least [ * ]. Each of the policies required herein shall
include a provision requiring the insurance company to give Programmer
prompt notice, of at least 30 days, of any revision, modification or
cancellation thereof. No revision, modification or cancellation of such
policies which may affect Programmer's rights hereunder shall be made by
Wink without first obtaining the prior written approval of Programmer.
Promptly after securing such policies, Wink shall furnish Programmer
with copies of the certificates of insurance and, at Programmer's
request, copies of the insurance policies. CBS Corporation and CBS
Broadcasting Inc. shall be included as additional insureds in all
policies of insurance (except Workers' Compensation) obtained by Wink in
compliance with this paragraph and all such insurance shall be primary
and not contributing with any similar insurance in effect in the name of
and for the benefit of CBS Broadcasting Inc. or CBS Corporation. Wink
further agrees to maintain Workers' Compensation and Employer's
Liability Insurance according to the requirements of California State
Law.
10. NOTICES
All notices, statements, and other communications given hereunder shall
be in writing and shall be delivered by facsimile transmission, personal
delivery, certified mail, return receipt requested, or by next day
express delivery.
- -------------
* 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.
CONFIDENTIAL - PAGE 18
<PAGE> 19
addressed, to the addresses provided in the first paragraph of this
Agreement, and to the attention of:
if to Wink:
Senior Vice President, Programming
with a copy to:
Chief Financial Officer
If to Programmer: Chief Financial Officer
with a copy to: General Counsel
The date of such facsimile transmission, telegraphing or personal
delivery or the next day if by express delivery, or the date three (3)
days after mailing, shall be deemed the date on which such notice is
given and effective.
11. WINK SOFTWARE
All rights, title and interest in and to the Wink Software or other
rights, of whatever nature, related thereto shall remain the property of
Wink.
12. REPRESENTATION
12.1 Wink represents and warrants to Programmer that (i) it is a corporation
duly organized and validly existing under the laws of the State of
California; (ii) Wink has the corporate power and authority to enter
into this Agreement and to fully perform its obligations hereunder (iii)
Wink is under no contractual or other legal obligation which in any way
interferes with its ability to fully, promptly and completely perform
hereunder; (iv) it has all rights necessary to grant the licenses and
rights granted hereunder; and (v) Programmer's exercise of its license
and rights hereunder will not infringe upon the rights of any third
party entity(ies).
12.2 Programmer represents and warrants to Wink that (i) Programmer is a
corporation duly organized and validly existing under the laws of the
State of Pennsylvania; (ii) Programmer has the requisite power and
authority to enter in this Agreement and to fully perform its
obligations hereunder; and (iii) Programmer is under no contractual or
other legal obligation which in any way interferes with its ability to
fully, promptly and completely perform hereunder.
13. CONFIDENTIALITY
13.1 Each party agrees that it will not use, except in the performance of its
obligations under this Agreement, and will not disclose or give to
others, any of the other party's Confidential Information (as defined
below). Without limiting the generality of the foregoing, each party
will (i) restrict the disclosure of the
CONFIDENTIAL - PAGE 19
<PAGE> 20
other party's Confidential Information to those of its employees who
require such information for purposes of performing its obligations
hereunder, (ii) inform each such employee of the confidential nature of
the information disclosed, (iii) prevent the use or disclosure by its
employees of such Confidential Information, except as provided herein,
and (iv) promptly notify the other .party of any use or disclosure of
the Confidential Information, whether intentional or not, which violates
the provisions of this Paragraph 13. For purposes of this Agreement, the
term "Confidential Information" means all technical, business and other
information disclosed by one party to the other that derives economic
value, actual or potential, from not being generally known to other
persons, including, without limitation, technical and nontechnical data,
devices, methods, techniques, drawings, processes, computer programs,
algorithms, methods of operation, financial data, financial plans,
product plans, and lists of actual or potential customers or suppliers.
"Confidential Information" does not include information which does not
constitute a trade secret under applicable law after the second
anniversary date of the expiration of this Agreement. Also,
"Confidential Information" shall not include information which, (a) is
or becomes publicly known through no act or failure to act on the part
of the recipient, (b) was rightfully in the recipient's possession prior
to disclosure by the disclosing party, (c) becomes rightfully known to
the recipient from a third party not subject to any independent
confidential or proprietary restriction, (d) is approved by the
disclosing party for disclosure without restriction, in a written
document that is signed by a duly authorized officer of that party, (e)
is disclosed after the termination of the recipient's duty of
confidentiality as specified herein or (f) is or was developed
independently by the recipient without use of or reference to any of the
Confidential Information and without violation of any confidentiality
restriction. The parties agree to keep the terms of this Agreement
confidential, but acknowledge that certain disclosures may be required
by law. Programmer understands and acknowledges that Wink may provide
copies of Exhibits A and D to System Operators.
14. TERMINATION
14.1 Except as otherwise provided herein, neither Programmer nor Wink may
terminate this Agreement except upon thirty (30) days prior written
notice and then only if the other has made a misrepresentation herein or
breaches any of its material obligations hereunder and such
misrepresentation or breach (which shall be specified in such notice) is
not or cannot be cured within thirty (30) days of such notice. The
parties agree that Wink's failure to perform materially any services or
provide any technology or equipment in accordance with this Agreement
shall be considered a material breach. The parties also agree that
failure by Programmer to make timely payments of license fees and other
fees due Wink under this Agreement, and failure by Wink to make timely
payments of Programmer's share of Wink's Attributable Revenue shall be
considered material breaches, and that the terminating party's
termination of this
CONFIDENTIAL - PAGE 20
<PAGE> 21
Agreement shall be without prejudice to any other remedies the
terminating party may have, including, without limitation, all remedies
with respect to the unperformed balance of this Agreement.
14.2 Upon expiration of the term (including any extensions thereof) of this
Agreement or upon the termination of this Agreement or of any license
granted hereunder for any reason, all rights of Programmer to use the
Wink Software will cease and Programmer will immediately and on
reasonable terms (i) grant to Wink access to its business premises and
the Wink Software and allow Wink to remove the Wink Software and any
equipment provided or financed by Wink, excluding Wink Hardware (which
removal shall be done with as little disturbance as possible to
Programmer's business operations at Wink's sole expense), (ii) purge all
copies of all Wink Software from all computer processors or storage
media on which Programmer has installed or permitted others to install
such Wink Software, and (iii) when requested by Wink, certify to Wink in
writing, signed by an officer of Programmer, that all copies of the Wink
Software have been returned to Wink or destroyed and that no copy of any
Wink Software remains in Programmer's possession or under its control.
15. GENERAL
The parties agree that in the event it is necessary to employ attorneys
to enforce the terms of this Agreement, the prevailing party in any
lawsuit shall be entitled to an award of reasonable attorneys' fees and
court costs.
(a) Except pursuant to paragraph 2.3, this Agreement may not be
assigned without prior written mutual consent of Programmer and Wink.
Consent shall not be required for assignment to a corporate affiliate,
assuming that the programming services providing Interactive Wink
Programs remain as defined in Exhibit A.
(b) This Agreement may be amended only by an instrument in writing,
executed by Programmer and Wink.
(c) This Agreement will be governed in all respects by the laws of
the State of California.
CONFIDENTIAL - PAGE 21
<PAGE> 22
(d) This Agreement represents the entire agreement between the
parties and supersedes and replaces all prior oral and written
proposals, communications and agreements with regard to the subject
matter hereof between Programmer and Wink.
IN WITNESS WHEREOF, the parties by their duly authorized representatives
have entered into this Agreement as of the Effective Date. WINK
COMMUNICATIONS, INC. CBS CORPORATION
Name: Name:
Title: Title:
CONFIDENTIAL - PAGE 22
<PAGE> 23
Exhibit A: Programming Services
Description of Programming Services:
<TABLE>
<S> <C> <C> <C> <C> <C>
NAME Start of Wink Video VBI line Virtual Insertion
Programming (A/D) Location Ch? Point
First Programming Service
CBS First Air Date Analog TBD TBD New York
Television
Network
Other Programming Services *
CBS Owned
Stations TBD TBD TBD TBD TBD
* Programmer is under no obligation to include programming services other than
the CBS Television Network in this Agreement
Contact Information:
Issue Address Contact(s) Phone /Fax/E-mail
Operations (site visits, VBI insertion, etc.)
TBD
Programming (development and scheduling of Interactive Wink Programs, reports,
etc.)
TBD
Marketing (affiliate marketing, approvals of promotional materials)
TBD
</TABLE>
CONFIDENTIAL - PAGE 23
<PAGE> 24
EXHIBIT B: WINK RESPONSE CENTER. SERVICES
All products and services are billed Net/45. A Purchase Response shall be
defined as any Wink Revenue Response which constitutes an agreement to purchase
a product or service, regardless of the method of payment. An RFI Response shall
be defined as any other Wink Revenue Response. A Poll Response shall be defined
as a Wink Response generated by a Wink "vote/poll" script. Programmer shall have
no liability for payment for Reports, Polls, Wink Responses or Wink Purchase
Responses commissioned by third parties such as advertisers on the Programming
Services hereunder. These will be subject to separate agreement between the
third parties and Wink, unless Programmer exercises Its election to contract
directly with Wink on any such advertiser enhancement. All Wink Transaction Fees
will be charged net of credits, refunds and returns.
<TABLE>
<S> <C>
Wink Transactions/mo. Price/Wink Transaction
Purchase Responses $[*] min./mo. per Interactive Wink Program
creating Purchase Responses
1-5,000 [*]
5,001 - 25,000 [*]
25,001 - 100,000 [*]
100,001 - 250,000 [*]
250,001 - 500,000 [*]
500, 001 + [*]
RFI Responses $[*] min./mo. per Interactive Wink Program
creating RFI Responses
1-5,000 [*]
5,001 - 25,000 [*]
25,001 - 100,000 [*]
100,001 - 250,000 [*]
250,001 - 500,000 [*]
500, 001 + [*]
Polls - report only $[*] min./mo. per Interactive Wink Program creating Poll Responses
1-250,000 Wink Responses [*]
250,001 + [*]
</TABLE>
1. Minimum monthly charges per application include UIC (Universal ICAP
code) registration.
2. All volume price breaks are based on Programmer's monthly transaction
volume by response category. The price breaks are based on the "average"
for the month. That is, the lowest price applies to all transactions for
the month.
PURCHASE AND REQUEST RESPONSE FEES INCLUDE;
1. Daily name & address lists delivered by fax, e-mail, or electronic FTP
or mailbox.
2. UIC and application registration.
3. Standard report showing number of Wink Responses per day per Interactive
Wink Program per city.
POLLS
The fixed charge includes UIC and application registration, and a standard
reporting that summarizes all Poll responses by type by city. If the application
asks the viewer for telephone prefix or zip code, the summary includes those
totals.
Custom Usage Reports or other Custom Reporting
Custom reports are quoted by the Wink Response Center.
New Fee Structure
CONFIDENTIAL - PAGE 24
- -------------
* 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> 25
Wink agrees to provide a new Wink Transaction fee structure for Purchase and RFI
Responses within 60 days of the Effective Date of the Agreement. Programmer is
and will continue to be on a "most favored nations" basis with all broadcasters
and cable networks on all terms contained in this Exhibit B.
CONFIDENTIAL - PAGE 25
<PAGE> 26
EXHIBIT C: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 1
This pricing is available to the CBS TV Network and is subject to the terms of
the Agreement. On-going annual fees are paid one twelfth each month, and are due
the first of the month.
<TABLE>
<CAPTION>
On-going First Yrs 2-8
or one- year Price/
time costs Price network
<S> <C> <C> <C>
Broadcast Server On-going Free $48,000
Server Module Engine On-going Free $12,000
Automation Server Module On-going Free $24,000
Tech Support On-going Free $6,000
Subtotal On-going $0 $90,000
Server hardware One-time $9,500 N/A
Data Insert. Unit(2) One-time $16,800 N/A
Set-top boxes, misc. One-time $700 N/A
Sub-total One-time $27,000 N/A
Installation and integration One-time $25,000 N/A
Studio site license (5 seats) One-time Free N/A
Svr Studio license (5 seats) One-time Free N/A
Training (3days)(1) One-time Free N/A
Subtotal One-time $0 N/A
TOTAL (3) Both $52,000 $90,000
</TABLE>
(1) This base training package provides training on the Wink Software and
Hardware and will enable Programmer's staff to create, schedule and air
Interactive Wink Programs as contemplated by this Agreement. Wink will
also provide reasonable additional training to those same staff as may
be required and agreed upon between the parties.
(2) Three units and software modules for one VBI line each.
The above pricing for installation and integration covers all work necessary to
enable scheduling and transmission of program and/or commercial enhancements.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 26
<PAGE> 27
EXHIBIT D: PROGRAMMER'S TERMS FOR CARRIAGE OF INTERACTIVE WINK PROGRAMS
OTHER THAN RETRANSMISSION OF OVER-THE-AIR BROADCASTS
Programmer: CBS Corporation
Programming Services:
This agreement (the "IWP Carriage Agreement") sets forth the terms and
conditions for the national distribution of Wink ITV applications ("Interactive
Wink Programs") to any multi-channel video operator in the United States or
Canada with whom Programming Service already has an agreement for carriage of
Programming Service's video programming ("System Operator").
1. BACKGROUND
Programming Service's has created one or more Interactive Wink Programs which
are compliant with the Wink Communications, Inc. ("Wink") interactive
communications application protocol. The Interactive Wink Programs are
transmitted by Programming Services using either the vertical blanking interval
("VBI") of the corresponding video signal, or using MPEG private data streams
provided concurrently with the corresponding video signal(s).
System Operator distributes one or more of Programming Services' signals through
one or more of the following: cable, satellite and MMDS (wireless cable).
2. EFFECTIVE DATE AND TERM
The term of this IWP Carriage Agreement shall commence on the date of
Programming Services' execution of this IWP Carriage Agreement. The parties
acknowledge that Programming Services has an agreement with Wink for
distribution of Interactive Wink Programs (the "Charter Programmer Affiliation
Agreement") for eight years after the first transmission of Interactive Wink
Programs by Programming Services. The terms and conditions of this IWP Carriage
Agreement shall govern during the entire term of the Charter Programmer
Affiliation Agreement, unless Programming Services and Wink terminate their
Charter Programmer Affiliation Agreement earlier in accordance with the terms of
that agreement.
3. INTEGRITY OF INTERACTIVE WINK PROGRAMS
Programming Services will ensure that the Interactive Wink Programs meet Wink's
criteria for compliant Interactive Wink Programs (See Attachment 1). Programming
Services agrees that each Interactive Wink Program shall have been either
successfully tested by Programming Services or certified as compliant by Wink
prior to the Delivery to System Operator for distribution, and shall bear any
associated costs of such testing.
CONFIDENTIAL - PAGE 27
<PAGE> 28
Programming Services understands that failure to meet the above criteria could
result in System Operator suspending the distribution of one or more Interactive
Wink Programs until such time as all Interactive Wink Programs are certified by
Wink to be in compliance.
4. DISTRIBUTION
Programming Services hereby grants System Operator a non-exclusive license to
distribute the Interactive Wink Programs delivered in the VBI or MPEG of
Programming Services' video signal.
Programming Services agrees not to charge System Operator fees associated with
Interactive Wink Programs for the term of this Agreement. Likewise, System
Operator agrees that no fees or charges will be due as a result of carriage or
retransmission of the Interactive Wink Programs as provided for hereunder.
Programming Services will provide Wink written notice at least 30 days prior to
discontinuing national transmission of all Interactive Wink Programs. Wink has
agreed to provide such notices to System Operator, but System Operator agrees
that Programming Services has no liability or other obligations to System
Operator, should Wink fail to do so.
It is a condition of System Operator's right to carry the Interactive Wink
Programs that System Operator shall distribute Programming Services' Interactive
Wink Programs without modification, and that System Operator may not modify or
enhance any VBI lines described in Exhibit A of the Charter Programmer
Affiliation Agreement between Programmer and Wink and amendments to same, as
provided to System Operator. Programmer agrees that System Operator may copy the
Interactive Wink Programs for simultaneous transmission in different encoding
formats other than what Programmer currently uses including but not limited to,
other VBI formats, out of band channels, and MPEG2 private data streams;
provided such Interactive Wink Programs are presented together with the original
corresponding video to System Operator's subscribers, and that such copying is
done to enable System Operator's subscribers to properly receive and display the
Interactive Wink Programs on their set top box or television set.
5. RESPONSE NETWORK
Programming Services agrees to utilize the Wink Response Network for two-way
Interactive Wink Programs. Programming Services also agrees to use Wink
Communication's standard scripts and guidelines to generate viewer responses to
two-way Interactive Wink Programs.
6. MARKETING MATERIALS
CONFIDENTIAL - PAGE 28
<PAGE> 29
System Operator may prepare marketing materials relating to the Interactive Wink
Programs and may use Programming Services' name, logo, and screen shots from the
Interactive Wink Programs in such marketing materials, provided that such
materials are submitted to Programming Services for review and written approval
prior to distribution. Programming Services agrees to use reasonable .efforts to
respond to such requests for approval in a timely fashion, provided that such
approval shall be in Programming Services' sole discretion.
7. SCOPE
This Agreement does not supersede or affect other Agreements between Programming
Services and System Operator, This Agreement represents all of the terms and
conditions for Programming Services providing Interactive Wink Programs. This
Agreement may be updated from time to time only by express written consent of
Programming Services.
PROGRAMMER
By:
Name:
Title:
Date:
CONFIDENTIAL - PAGE 29
<PAGE> 30
EXHIBIT D, ATTACHMENT 1: CRITERIA FOR COMPLIANT INTERACTIVE WINK PROGRAMS
o All Interactive Wink Programs must be registered and contain a unique
universal ICAP code (UIC) prior to being broadcast.
o Registered Interactive Wink Programs have complied with the Wink testing
procedures established to validate:
that the Interactive Wink Programs can be delivered through the
VBI, will arrive as appropriate, and can be decoded in the Wink
engine.
that the Interactive Wink Programs does not generate error
messages.
that the Interactive Wink Programs receives scheduled updates,
if applicable.
that the Interactive Wink Programs passes minimum acceptable
latency standards.
that the Interactive Wink Programs do not cause System Operator
technical or operational problems.
that the I nteractive Wink Programs, if two-way, generates the
appropriate routing address and usage data.
CONFIDENTIAL - PAGE 30
<PAGE> 31
EXHIBIT E: EQUIPMENT TO BE PROVIDED BY WINK (PRELIMINARY)
1. WINK HARDWARE (PRELIMINARY)
o Sun Ultra server hardware, configured to support Wink Broadcast
Server 2.x, two Ethernet LAN cards, dial-up modem for remote
diagnostic use
o Norpak TES-3 data insertion units with software module for 1 VBI
line, one each for the main East Coast and West Coast feeds and
one for in-house testing
o 2 GI CFT-2200 advanced analog cable set tops for development and
test
2. Programmer Equipment:
Programmer will provide cabling and Pentium PC running Windows 95 or Windows NT
for the Broadcast Server User Interface, Wink Studio and Wink Server Studio.
These applications may reside on one or several PCs, none of which need to be
dedicated to the Wink software. Each PC must be connected to the Broadcast
Server via an Ethernet LAN interface.
CONFIDENTIAL - PAGE 31
<PAGE> 32
EXHIBIT F: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 2
Subject to the other terms and conditions of this agreement, this pricing is
available to Programmer Owned Stations. On-going annual fees are paid one
twelfth each month, and are due the first of the month.
<TABLE>
<CAPTION>
On-going or First year Price Years 2-8
one-time costs Price/
network
<S> <C> <C> <C>
Broadcast Server On-going [*] [*]
Automation Server Module(3) On-going [*] [*]
Server Module Engine On-going [*] [*]
Tech Support On-going [*] [*]
Subtotal On-going [*] [*]
Server hardware One-time [*] [*]
Data Insert. Unit(1) One-time [*] [*]
Set-top box, misc. One-time [*] [*]
Sub-total One-time [*] [*]
Installation and integration(2) One-time [*] [*]
Studio site license (5 seats) One-time [*] [*]
Server Studio site license (5 seats) One-time [*] [*]
seats)
Studio/Server training (3x2days)(2) One-time [*] [*]
Subtotal One-time [*] [*]
TOTAL Both [*] [*]
</TABLE>
(1) One required per network. More than one VBI line per network requires an
additional license from Norpak in the amount of $1,500/VBI line.
(2) $25,000 if including Automation Server Module.
(3) Optional
The above pricing for installation and integration covers all work necessary to
enable scheduling and transmission of program and/or commercial enhancements
based on Wink Studio templates.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</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.
CONFIDENTIAL - PAGE 32
<PAGE> 33
EXHIBIT G: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 3
Subject to the other terms and conditions of this agreement, this pricing is
available to Programmer's cable programming services. On-going annual fees are
paid one twelfth each month, and are due the first of the month.
<TABLE>
<CAPTION>
Years 2-8
On-going or First year Price/
one-time costs Price network
<S> <C> <C> <C>
Broadcast Server On-going $48,000 $48,000
Automation Server Module(3) On-going Free $24,000
Server Module Engine On-going Free $12,000
Tech Support On-going Free $6,000
Subtotal On-going $48,000 $90,000
Server hardware One-time $9,500 N/A
Data Insert. Unit(1) One-time $5,600 N/A
Set-top box, misc. One-time $700 N/A
Sub-total One-time $15,800 N/A
Installation and integration(2) One-time $15,000 N/A
Studio site license (5 seats) One-time Free N/A
Server Studio site license (5 seats) One-time Free N/A
Studio/Server training (3x2days)(2) One-time Free N/A
Subtotal One-time $15,000 N/A
TOTAL Both $78,800 $90,000
</TABLE>
(1) One required per network. More than one VBI line per network requires an
additional license from Norpak in the amount of $1,500/VBI line.
(2) $25,000 if including Automation Server Module.
(3) Optional
The above pricing for installation and integration covers all work necessary to
enable scheduling and transmission of program and/or commercial enhancements
based on Wink Studio templates.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 33
<PAGE> 34
EXHIBIT H1: WINK SOFTWARE AND SERVICES PRICING, SCHEDULE 4
This pricing is subject to the terms of the Agreement, and is available
to all Other Programmer Affiliates. On-going annual fees are paid one
twelfth each month, and are due the first of the month.
<TABLE>
<CAPTION>
On-going
or one- Years 2-8
time First year Price/
costs Price network
<S> <C> <C> <C>
Broadcast Server On-going $62,000 $62,000
Server Module On-going $12,000 $12,000
Engine
Tech Support On-going $6,000 $6,000
Subtotal On-going $80,000 $80,000
Server hardware One-time $9,500 N/A
Data Insert. Unit(1) One-time $5,600 N/A
Set top, misc. One-time $700 N/A
Sub-total One-time $15, 800 N/A
Installation and One-time $20,000 N/A
Integration(2)
Studio site license (5 seats) One-time $3,000 N/A
Server Studio site One-time $5,000 N/A
license (5 seats)
Studio/Srvr training One-time $6,000 N/A
(3x2days)(2)
Subtotal One-time $39,000 N/A
TOTAL Both $134,800 $80,000
</TABLE>
(1) One required per network. More than one VBI line per network requires an
additional license from Norpak in the amount of $1,500/VBI line.
The above pricing for installation and integration covers all work necessary to
enable scheduling and transmission of program and/or commercial enhancements
based on Wink Studio templates.
OPTIONAL SERVICES
<TABLE>
<S> <C>
Automation Server Module $36,000 annual license
Custom interface work (ad insertion and traffic systems, etc.) $1,000/day
Phone training and consulting beyond standard package $125/hr
Application development $2,500 min., $125/hr
</TABLE>
CONFIDENTIAL - PAGE 34
<PAGE> 35
EXHIBIT H2: PERFORMANCE STANDARDS FOR WINK SOFTWARE AND SERVICES
The parties agree that Wink Software and Services must meet the following
standards:
1) Programmer can create Interactive Wink Programs that adhere to Exhibit
D, Attachment 1: "Criteria for Compliant Interactive Wink Programs"
using Wink Studio and Wink Server Studio.
2) Programmer can schedule Interactive Wink Programs to be inserted into
Programmer's analog video programming using the Wink Broadcast Server
and the associated PC-based user interface programs provided by Wink.
3) Programmer can insert Interactive Wink Programs into Programmer's analog
video programming using the Wink Broadcast Server, VBI data insertion
units and other software hardware and services provided by Wink. Such
insertion shall have no effect on the visible portion of the
Programmer's video signal.
4) Programmer can parse Programmer's existing standard HTML content for use
in Interactive Wink Programs using Wink Server Studio and standard LAN
connections between the Wink Broadcast Server and the Programmer's web
servers.
5) Programmer can create, schedule and insert Interactive Wink Programs
that are capable of generating Wink Revenue Responses.
Subject to availability of a live connection to either two-way cable plant or
other return path, and to System Operator's reasonable support and operational
readiness, Wink will:
6) collect Wink Revenue Responses from viewer homes,
7) prepare aggregate reports of subscriber usage of the Interactive Wink
Programs
8) forward Wink Revenue Responses to the party having registered the
Interactive Wink Program with Wink's Response Center (subject to billing
system interface or other means of capturing subscriber address and
payment information).
CONFIDENTIAL - PAGE 35
<PAGE> 36
EXHIBIT I: CURRENT WINK ADVERTISER AGREEMENT
ADVERTISER AFFILIATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the day of , 1999 (the "Effective
Date"), by and between Wink Communications, Inc., a California corporation
("Wink"), whose address is 1001 Marina Village Parkway, Alameda, CA 94501, and
____________, ____________a ____________. corporation ("Advertiser"), whose
address is
1. DEFINITIONS
1.1 "Interactive Wink Program" or "IWP" shall mean an interactive
application that is transported via the vertical blanking interval ("VBI") or an
MPEG private data stream provided concurrently with a video signal in a format
that is compliant with the Wink interactive communications application protocol.
1.2 "Broadcaster" shall mean an entity which delivers television programming
and inserts third-party advertising into such programming, and shall include but
not be limited to: broadcast networks; broadcast network affiliates or other
broadcast stations; operators (both local operators and their parent companies,
if any) of multi-channel systems, including but not limited to cable systems and
direct broadcast satellite systems; and cable networks and other programmers
providing video programming to such operators of multi-channel systems.
1.3 "Wink Tools" shall mean the Wink Studio authoring tool, and other
authoring software or materials which Wink, in it's sole discretion, may provide
in conjunction with Wink Studio.
2. TERM
The term of this Agreement (the "Term") will begin on the Effective Date and
will end on twenty four months later (the "Termination Date").
3. CREATION AND DISTRIBUTION OF WINK-ENHANCED ADS
3.1 Advertiser may contract with any then current licensee of Wink's
authoring tools ("Wink Tools", as defined below) for the creation of IWPs.
Optionally, Advertiser may:
(a) Purchase from Wink a Wink Authoring Starter Kit for $[*], which
includes:
o a five-seat non-exclusive site license to use the Wink Tools
(and all applicable upgrades of same released by Wink during the Term)
at one site of Advertiser during the Term
o a two-day training session at Wink's facilities for up to two
employees (scheduled at Wink's discretion, with reasonable notice to
Advertiser)
o eight (8) hours of IWP phone support for training, consulting or
design assistance
(b) Purchase from Wink creative and consulting services for IWP development
at a rate of $125 per hour, with a $1,000 minimum.
3.2 Before distributing any IWP to a Broadcaster, Advertiser will ensure
that the Interactive Wink Programs follow the Guidelines for Fair Treatment of
Viewers Using Wink, and meet Wink's criteria for technical compliance with the
Wink system. Advertiser agrees that each Interactive Wink Program shall be
certified as technically compliant by Wink prior to the delivery of the IWP to
Broadcasters. It is expected that Wink will complete review of a IWP within one
week of submission by Advertiser. If the IWPs fails certification, Wink shall
provide Advertiser information so as to reasonably enable Advertiser to resolve
any problems preventing certification.
4. WINK RESPONSE NETWORK & OTHER WINK PRODUCTS & SERVICES
CONFIDENTIAL - PAGE 36
- -------------
* 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> 37
4.1 Advertiser agrees to exclusively use the data center that Wink has
established (the "Wink Response Network") to collect response data from
television viewers which are able to receive and interact with IWP
("Wink-enabled Viewers"). Wink agrees to make such data available for purchase
by Advertiser. Such data shall be prepared in two categories of reports: reports
that document aggregated usage of IWPs ("Usage Reports"), and reports that
provide individual response in which Wink Revenue Responses (as defined below)
from Advertiser's IWPs ("Transaction Reports"). A "Wink Revenue Response" is a
Wink Response in which the Wink-enabled Viewer request products or services
through the IWPs, whether such products and services are provided at no charge
to the Wink-enabled Viewer or require payment by the Wink-enabled Viewer, and
where the fulfillment of that request requires the release of Wink-enabled
Viewer specific information, such as name and address. Usage Reports and
Transaction Reports are subject to the pricing in Exhibit A, are available in
standard formats, and shall be delivered via electronic mail ("Email") or FTP
formats and protocols to an address specified by Advertiser. Custom-formatted
reports and other products and services shall be made available at prices to be
quoted by Wink upon request. In addition, if Advertiser wishes Wink to transfer
data, reports, or other information in a manner other than Wink's standard Email
or FTP formats and protocols, Wink and Advertiser shall agree on the terms of
such transfer, including but not limited to details and fees regarding EDI
service.
4.2 Advertiser understands and accepts that Wink may provide reports on
aggregated viewer responses to the IWPs to each Broadcaster whose viewers
responded to or are otherwise known to have viewed Advertiser's IWPs. Such
reports shall be noted as Confidential Information under Wink's agreements with
such Broadcasters.
5. PAYMENT TERMS
Advertiser shall pay Wink for each Wink Revenue Response (net of returns,
refunds and credits) triggered by Advertiser's IWPs according to Exhibit A. All
payments shall be made within 30 days of presentation of invoice by Wink. Wink
reserves the right to change the pricing in Exhibit A upon 30 days prior written
notice. In the event of such change, Advertiser shall have the right to maintain
the Purchase Response and Request Response pricing in effect prior to the
effective date of such change for all IWPs registered with Wink prior to the
effective date of the price change. Past due payments shall bear interest at a
rate equal to the lesser of (i) one and one-half percent (1 1/2%) per month or
(ii) the maximum legal rate permitted under law, and Advertiser shall be liable
for all reasonable costs and expenses (including, without limitation, reasonable
court costs and attorneys' fees) incurred by Wink in collecting any past due
payments. Wink agrees that no interest shall be due if the parties have a bona
fide dispute over payments.
6. INDEMNIFICATION
Wink will indemnify and hold harmless Advertiser, its parent and subsidiary
companies and their respective employees, directors, agents, and other
representatives against any and all claims, causes of action, damages and all
other related expenses arising out of the breach or alleged breach of any of
Wink's material obligations stated herein. Advertiser will indemnify and hold
harmless Wink, any parent and subsidiary companies and their respective
employees, directors, agents, and other representatives against any and all
claims, causes of action, damages and all other related expenses arising out of
the breach or alleged breach of any of Advertiser's r material obligations
stated herein. In any case in which indemnification is sought hereunder, the
party seeking indemnification shall promptly notify the other in writing of any
claim or litigation to which the indemnification relates and the party seeking
indemnification shall afford the other the opportunity to participate in and, at
the other party's option, fully control any compromise, settlement, litigation
or other resolution or disposition of such claim or litigation.
7. INTELLECTUAL PROPERTY RIGHTS
CONFIDENTIAL - PAGE 37
<PAGE> 38
7.1 All rights, title and interest in and to the Wink Tools or other rights,
of whatever nature, related thereto shall remain the property of Wink.
Advertiser acknowledges and agrees that all Wink's logos, marks, copyright
notices or designations utilized by Wink in connection with the service are the
sole and exclusive property of Wink, and no rights or ownership are intended to
be or shall be transferred to Advertiser.
7.2 For purposes of this Agreement, "Viewer Information" shall be defined as
viewer names, contact information (address, phone number, etc.), demographic or
psychographic information, and any responses provided by viewers through the
Wink system or otherwise provided to Wink. Advertiser is hereby granted a
license to use such Viewer Information, but only in a manner consistent with the
Guidelines for Fair Treatment of Viewers Using Wink. Advertiser acknowledges
that any breach of such license may cause irreparable harm and significant
injury to Wink and it's Broadcaster partners to an extent that may be extremely
difficult to ascertain. Accordingly, Advertiser agrees that Wink will have, in
addition to any other rights or remedies available to it at law or in equity,
the right to seek injunctive relief to enjoin any breach or violation of this
Section 9.2.
8. TERMINATION
8.1 Except as otherwise provided herein, neither Advertiser nor Wink may
terminate this Agreement except upon thirty (30) days prior written notice and
then only if the other has breaches any of its material obligations hereunder
and such breach (which shall be specified in such notice) is not or cannot be
cured within thirty (30) days of such notice.
8.2 Upon expiration of the term of this Agreement or upon the termination of
this Agreement or of any license granted hereunder for any reason, all rights of
Advertiser to use the Wink Tools will cease and Advertiser will immediately
purge all copies of all Wink Tools from all computer processors or storage media
on which Advertiser has installed or permitted others to install such Wink
Tools.
9. GENERAL
The parties agree that in the event it is necessary to employ attorneys to
enforce the terms of this Agreement, the prevailing party in any lawsuit shall
be entitled to an award of reasonable attorneys' fees and court costs.
a) This Agreement may not be assigned without prior written mutual consent
of Advertiser and Wink. Consent shall not be required for assignment to
a corporate affiliate, including but not limited to such that occurs
upon the merger or acquisition of either party by a third party.
b) This Agreement may be amended only by an instrument in writing, executed
by Advertiser and Wink.
c) This Agreement will be governed in all respects by the laws of the State
of California.
d) This Agreement represents the entire agreement between the parties and
supersedes and replaces all prior oral and written proposals,
communications and agreements with regard to the subject matter hereof
between Advertiser and Wink.
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
entered into this
Agreement as of the Effective Date.
For Wink Communications, Inc. For Advertiser:
By: By:
Name: Name:
Title: Title:
CONFIDENTIAL - PAGE 38
<PAGE> 39
Date: Date:
CONFIDENTIAL - PAGE 39
<PAGE> 40
EXHIBIT A. WINK RESPONSE NETWORK PRODUCTS AND SERVICES
A Purchase Response shall be defined as any Wink Revenue Response which
constitutes an agreement to purchase a product or service, regardless of the
method of payment. An RFI Response shall be defined as any other Wink Revenue
Response. A Poll Response shall be defined as a Wink
Response generated by a Wink "vote/poll" script.
<TABLE>
<CAPTION>
Wink Transactions/mo. $[*] min./mo. per IWP
Purchase Responses Price/Wink Transaction creating Purchase Responses
<S> <C>
1-5,000 [*]
5,001- 25,000 [*]
25,001 -100,000 [*]
100,001- 250,000 [*]
250,001- 500,000 [*]
500, 001 + [*]
RFI Responses $[*] min./mo. per IWP
creating RFI Responses
1-5,000 [*]
5,001- 25,000 [*]
25,001-100,000 [*]
100,001-250,000 [*]
250,001- 500,000 [*]
500, 001 + [*]
Polls-report only $[*] min./mo. per IWP creating Poll
Responses
1-250,000 Wink Responses [*]
250, 001 + [*]
</TABLE>
1. Minimum monthly charges per application include UIC (Universal ICAP
code) registration.
2. All volume price breaks are based on Advertiser's monthly transaction
volume by response category. The price breaks are based on the "average"
for the month. That is, the lowest price applies to all transactions for
the month.
PURCHASE AND REQUEST RESPONSE FEES INCLUDE;
1. Daily name & address lists delivered by fax, e-mail, or electronic FTP
or mailbox.
2. UIC and application registration.
3. Standard report showing number of Wink Responses per day per IWP per
city.
4. Weekly Usage Reports in standard format POLLS The fixed charge includes
UIC and application registration, and a standard reporting that
summarizes all Poll responses by type by city. If the application asks
the Wink-enabled viewer for telephone prefix or zip code, the summary
includes those totals.
POLLS
The fixed charge includes UIC and application registration, and a standard
reporting that summarizes all Poll responses by type by city. If the application
asks the Wink-enabled viewer for telephone prefix or zip code, the summary
includes those totals.
USAGE REPORTS
$100 monthly fee if application does not allow viewers to create a Purchase or
Request Response.
CUSTOM USAGE REPORTS OR OTHER CUSTOM REPORTING
Custom reports are quoted by the Wink Response Network.
CONFIDENTIAL - PAGE 40
- -------------
* 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
EXHIBIT 10.10
CABLE AFFILIATION AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1997, by and between WINK
COMMUNICATIONS, INC., a California corporation ("Wink"), whose address is 1001
Marina Village Parkway, Alameda, CA 94501 and Charter Communications Inc., a
Delaware corporation ("Charter"), whose address is 12444 Powerscourt Drive, St.
Louis, MO 63131
WHEREAS, Wink is the proprietary owner of a software and hardware configuration
or product (the "Product") which allows multi-channel video programming
suppliers and off-air broadcast networks to utilize that band known as the
vertical blanking interval and commonly referred to as the VBI.
WHEREAS, the Wink Product will allow programmers to program the VBI with data.
WHEREAS, Charter is an owner, manager and operator of CATV systems.
WHEREAS, Charter controls the VBI broadcast over its cable system.
WHEREAS, Charter desires to provide this data stream to its customers.
NOW, THEREFORE, the parties agree as follows:
1. GRANT OF LICENSE
1.1 Wink hereby grants to Charter Communications, Inc. and its subsidiaries
and affiliated entities (collectively referred to herein as "Affiliate")
the non-exclusive license to use the Wink ITV Studio, Wink ITV Broadcast
Server, and Wink ITV Response Server versions 1.0 and 1.x updates
(hereinafter collectively referred to as "Wink Software") to deliver
"enhanced broadcasting" capability, virtual channels, response
transaction routing and templates for pay-per-view and pay unit
enhancement trials.
1.2 Except as provided herein, this License is not transferable outside of
the Affiliate systems Operating Area, nor any rights hereunder, may be
transferred, assigned or sub-licensed in whole or in part without Wink's
prior written consent which consent will not be unreasonably withheld.
1.3 For purposes of this Agreement, the "Operating Area" of any system shall
mean, with respect to a cable television system, the geographical area
where Affiliate is authorized to construct, operate, manage or maintain
a cable television system by appropriate governmental authority.
1.4 Affiliate agrees to utilize the Wink Software on advanced analog and
digital cable set top boxes owned by Affiliate and designated by
Affiliate in its discretion, for use with Wink services. Affiliate
agrees to launch Wink services in St. Paul, MN within 90 days of
completing the Acquisition of the St. Paul, MN System. Affiliate also
agrees to launch Wink Services in its Los Angeles system within 90 days
of offering Digital or Advanced Analog converters to its customers.
<PAGE> 2
1.5 Wink agrees that a minimum of ten programmers will be offering Wink
"enhanced broadcasting" content starting at launch and through the term
of this Agreement.
2. TERM
2.1 The term of this Agreement shall commence on the date of execution of
this Agreement and terminate three (3) years thereafter.
2.2 Except as otherwise provided herein, neither Affiliate nor Wink may
terminate this Agreement except upon sixty (60) days prior written
notice and then only if the other has made a misrepresentation herein or
breaches any of its material obligations hereunder and such
misrepresentation or breach (which shall be specified in such notice) is
not or cannot be cured within sixty (60) days of such notice.
2.3 Wink agrees to not provide Wink Services to other CATV/Satellite/MMDS
operators competing in the two (2) Affiliate launch markets excluding
CATV Operators TCI, Media One and Century that have franchises that are
adjacent to the launch markets throughout the term of this Agreement,
dependent on Affiliate launching Wink in those markets.
3. INTEGRATION
3.1 Affiliate may distribute "enhanced broadcasting" through its Operating
Area head-ends. For the purposes of this Agreement, "enhanced
broadcasting" consists of video originated by a national broadcaster or
a cable programming network that has been enhanced through the use of
Wink Software.
3.2 Wink also agrees to perform all work, provide all equipment and
equipment interface necessary to integrate with advanced analog and
digital cable set top boxes at no charge to Affiliate. The Wink software
will not exceed 128k ROM and 34k RAM I the CFT-2200 converter. Attached
hereto and incorporated herein by reference is the equipment and
equipment interface to be purchased by Affiliate in order to engage the
Wink service. Any equipment or equipment interface not specifically
included on Attachment C, plus or minus ten (10) percent of the value of
the equipment listed, will be the responsibility of Wink and Charter
will have no requirement to purchase or provide, this excludes special
headend requirements unique to Charter.
3.3 Affiliate agrees to prioritize the Wink software
installation/integration and provide the necessary resources to meet
Affiliate system launch dates outlined in paragraph 1.4 of this
Agreement.
3.4 Both parties will use their best efforts to complete all installation of
equipment and equipment interface/integration work per the dates
mentioned above subject to Wink's performance of its obligations in
paragraph 3.2 to this Agreement and to successful testing of the Wink
software installation/integration, which testing shall occur at least
one month prior to launch. Both parties agree that the scheduled launch
date is dependent upon timely completion of all
Page 2 of 13
<PAGE> 3
installation/integration work necessary for launch. Failure to complete
installation/integration work as scheduled is cause for termination of
this Agreement.
3.5 Affiliate agrees to allow Wink to install and use Wink Response Servers
located in individual Affiliate cable headends to collect, aggregate,
and route responses for national "enhanced broadcasting" applications
through Wink's Alameda Data Center. Wink agrees to provide daily
reporting to Affiliate of all response traffic generated by its
Affiliate subscribers at no additional charge. Charter will retain
ownership of all information or data related to its customers buying
patterns, trends, and characteristics. Wink may utilize only what data
is necessary to fulfill response orders and may not use the data in any
way without Charter's express written consent and to keep confidential
all information pertaining to Affiliate's subscribers and proprietary
business operations that are obtained from Affiliate as a result of this
Agreement.
4. RATES AND DEPLOYMENT
4.1 Affiliate agrees to provide Wink "enhanced broadcasting" as part of its
advanced analog offering to its subscribers in the St. Paul, Minnesota
Operating Area (the Launch Market) within 90 days of completing the
acquisition of the St. Paul, MN system. Affiliate also agrees to deploy
Wink within 90 days of launching either advanced analog or digital
converters in Los Angeles, CA operating area.
4.2 Effective at launch in St. Paul, Affiliate agrees to remit a license fee
payment of [ * ] for the Launch Market until the Launch Market has [ * ]
or for a period of one year; whichever comes first. [ * ] of this
Agreement, whichever comes first, Wink's pricing of [ * ] will then be
the introductory pricing for all Affiliate Operating Areas that chose to
launch Wink Services during the term of this Agreement, including the
Launch Market. Affiliate agrees to supply all server hardware required
for deployment as listed in Attachment C of the Agreement.
4.3 Effective with deployment in Los Angeles, Affiliate agrees to pay Wink
at a rate of [ * ] per Wink subscriber per month until 30,000 Wink
subscribers are reached. During this time, Affiliate will not share in
transaction revenue. When [ * ] are reached, Affiliate will pay Wink
[ * ] and will share in transaction revenue.
4.4 Billing System Conversion fees charged to the affiliate by CableData for
supporting Winks Services will be the sole responsibility of Wink and
will be paid by Wink throughout the term of this Agreement.
4.5 During the term of this Agreement, Charter commits to make available, in
cable systems deploying Wink's Enhance Broadcasting, three (3) lines of
VBI in the Programmers Video Signal (Channel) for Wink's Enhanced
Broadcast data transportation. Charter retains ownership of all
- ----------------------
* 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 3 of 13
<PAGE> 4
VBI in its Cable Systems and at its discretion may make available
additional VBI for Wink. VBI is a term and technology inherent in analog
environment. Assuming the functional equivalent of the "VBI" is
available in the digital environment, Charter cable systems will deploy
Wink using the functional equivalent of the current contract usage of
two lines of the VBI. Affiliate agrees to keep the appropriate headend
and server equipment in good working order for an uninterrupted carriage
of "enhanced broadcasting". If Affiliate experiences problems with the
"enhanced broadcasting" delivery system, Affiliate will use its best
efforts to restore "enhanced broadcasting" service as soon as possible.
Affiliate agrees not to charge Programmer for carriage or use of the
three lines of VBI associated with delivery of " enhanced broadcasting"
for the term of the Agreement; provided that Affiliate retains all
ownership in the VBI and may refuse to transmit or may charge Programmer
for all uses of the VBI that are not essential to the delivery of
"enhanced broadcasting". Any interference by Wink or its services with
Affiliate's legal obligation to transmit signals in the VBI or any
interference with the operation of the cable system, including but not
limited to its transmission of television signals or other services
provided over the cable system is cause for immediate termination of
this Agreement.
4.6 Wink agrees to revenue share with Affiliate, its fees, on all Wink
generated purchase and request transactions by Affiliates' Wink
Subscribers for the term of this Agreement. Wink will pay Affiliate per
Schedule A of this Agreement for all fees collected by Wink for
transactions by Charter Subscribers.
4.7 For purposes of this Agreement, the term "Wink Subscriber" shall mean
each Affiliate residential customer and commercial or business
establishment receiving the Wink Service and receiving and separately
paying for Charter's cable television service.
4.8 Affiliate agrees to pay Wink [ * ] in installation and conversion fees
within thirty (30) days of execution of the Agreement and [ * ] upon
successful launch of the Wink service in the Launch Market. This fee
will cover conversion costs for the two initial systems deploying Wink.
Conversion fees for all other Affiliate Operating Areas will be [ * ] of
Wink's then standard retail rate. Any reasonable shipping or reasonable
travel costs, lodging and meals incurred by Wink in support of on-site
installation, maintenance, support, training, or consulting under this
Agreement shall be included in the conversion fees listed above.
4.9 Affiliate may choose to utilize other products and services of Wink from
time to time under this Agreement. Services that are not essential to
the operation of the Wink Service will be extended by Wink to Affiliate
at rates listed in the Attachment B of this Agreement, if not listed on
Attachment B, the then retail rate, or at a rate to be mutually agreed
upon by both the parties will prevail.
- ----------------------
* 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 4 of 13
<PAGE> 5
5. PAYMENT TERMS
5.1 On or before the forty-fifth (45th) day following Affiliate's receipt of
Wink's invoice. Affiliate shall remit to Wink all fees owed for services
rendered in the previous month. Charter shall have the option to prepay
on a yearly basis. In the event Charter chooses to exercise the prepay
option, the rate will be subject to a [ * ].
5.2 Wink's failure, for any reason, to send an invoice for a particular
monthly payment shall not relieve Affiliate of its obligation to make
any payment. Past due payments from either party shall bear interest at
a rate equal to the lesser of (i) one percent (1%) per month or (ii) the
maximum legal rate permitted under law, and Affiliate shall be liable
for all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable court costs and attorneys' fees) incurred by Wink
in collecting any past due payments.
5.3 Wink will pay Charter Revenue Share Fees, as listed in Attachment A,
within forty five (45) days of each month's accumulative total. Payments
made to Charter after the thirty day billing period will be subject to
late payment terms outlined in paragraph 5.2.
6. PROMOTION AND RESEARCH
6.1 Affiliate agrees to promote and market the Wink service to Subscribers
within the Operating Area of each Affiliate system in which service is
being provided. Advertising, promotional, marketing and/or sales
materials concerning the Wink service which are provided to Affiliate by
Wink may be used at the discretion of Affiliate.
6.2 Wink may, from time to time, but not more than four (4) times per year,
undertake marketing tests and surveys, rating polls and other research
in connection with Affiliate, provided, that Wink provides Affiliate
with prior written notice. Affiliate shall use best efforts to provide
Wink with reasonable assistance in conducting such research with respect
to Affiliate's subscribers. Affiliate agrees that Wink and Wink agrees
that Affiliate will have access to any and all research regarding the
deployment, launch, and usage of Wink service by Affiliate subscribers.
Wink agrees to treat as confidential all information about Affiliate and
Affiliate's Subscribers obtained by Wink in connection with this
Agreement.
7. NOTICES
7.1 All notices, statements, and other communications given hereunder shall
be in writing and shall be delivered by facsimile transmission, personal
delivery, certified mail, return receipt requested, or by next day
express delivery, addressed, if to WINK COMMUNICATIONS at 1001 Marina
Village Parkway, Alameda, CA 94501 and if to Affiliate at 12444
Powerscourt Drive, Ste 400, St. Louis, MO 63131. The date of such
facsimile transmission, telegraphing or personal delivery or the next
day if by express delivery, or the date three (3) days after mailing,
shall be deemed the date on which such notice is given and effective.
Page 5 of 13
<PAGE> 6
8. TRADEMARKS
8.1 All right, title and interest in and to the service or other rights, of
whatever nature, related thereto shall remain the property of Wink.
Further, Affiliate acknowledges and agrees that all names, logos, marks,
copyright notices or designations utilized by Wink in connection with
the service are the sole and exclusive property of Wink, and no rights
or ownership are intended to be or shall be transferred to Affiliate.
8.2 All right, title and interest in and to Affiliate's services, equipment
or facilities or other rights, of whatever nature, related thereto shall
remain the property of Affiliate. Further, Wink acknowledges and agrees
that all names, logos, marks, copyright notices utilized by Affiliate in
connection with Affiliate's services are the sole and exclusive property
of Affiliate, and no rights or ownership are intended to be or shall be
transferred to Wink.
9. REPRESENTATION
9.1 Wink represents and warrants to Affiliate that (i) it is a corporation
duly organized and validly existing under the laws of the State of
California; (ii) Wink has the corporate power and authority and all
necessary legal rights to enter into this Agreement and to fully perform
its obligations hereunder; (iii) Wink is under no contractual or other
legal obligation which in' any way interferes with its ability to fully,
promptly and completely perform hereunder.
9.2 Affiliate represents and warrants to Wink that (i) Affiliate is a
corporation duly organized and validly existing under the laws of the
State of Delaware; (ii) Affiliate has the requisite power and authority
to enter in this Agreement and to fully perform its obligations
hereunder; (iii) Affiliate's operating areas are operating, with respect
to any cable television system, pursuant to valid franchise agreements,
or licenses or other permits duly authorized by proper local
authorities; (iv) Affiliate is under no contractual or other legal
obligation which in any way interferes with its ability to fully,
promptly and completely perform hereunder.
10. CONFIDENTIALITY
10.1 Neither Affiliate nor Wink shall disclose to any third party (other than
its respective employees, in their capacity as such), any Proprietary
Information without prior written consent. The parties agree to keep the
terms of this Agreement and Proprietary Information confidential, but
acknowledge that certain disclosures may be required by law.
"Proprietary Information" means any ideas, plans or information,
including, without limitation, information of a technological or
business nature (including, without limitation, all trade secrets,
technology, intellectual property, data, summaries, reports, subscriber
information, or mailing lists, whether written or oral and, if written,
however produced) which is received by the receiving Party or otherwise
disclosed to the receiving Party from or by the disclosing Party, that
is marked as confidential or proprietary or bears a marking of like
import, or that the disclosing Party states, is to be considered
proprietary or confidential, or that would logically be considered to be
proprietary under the circumstances of disclosure.
Page 6 of 13
<PAGE> 7
12. TERMINATION
12.1 Notwithstanding any other provision herein, Wink will have the right to
terminate this Agreement or any licenses granted herein if Affiliate
fails to comply with any of its material obligations under this
Agreement. Should Wink elect to exercise this right to terminate for
nonperformance, it must be done in writing specifically setting forth
those items of nonperformance. Affiliate will then have sixty (60) days
from receipt of notification to remedy the items of nonperformance. In
the event that Affiliate does not remedy the items of nonperformance,
then Wink shall have the right, at reasonable times and under reasonable
conditions, with prior written notice to Affiliate, to enter upon
Affiliate's premises to repossess and remove any Wink-owned or licensed
Products. In addition, Wink's termination of this Agreement or such
taking of possession shall be without prejudice to any other remedies
Wink may have, including, without limitation, all remedies with respect
to the unperformed balance of this Agreement; provided, however, that if
Affiliate has not made payment of the fees or charges due hereunder and
such nonpayment continues after thirty (30) days prior written notice by
Wink, then Wink may terminate this Agreement or any license granted
herein.
12.2 Notwithstanding any other provision herein, Affiliate will have the
right to terminate this Agreement or all or any licenses granted herein
if Wink fails to comply with any of its material obligations under this
Agreement. Should Affiliate elect to exercise this right to terminate
for nonperformance, it must be done in writing specifically setting
forth those items of nonperformance. Unless termination is immediate,
Wink will then have sixty (60) days from receipt of notification to
remedy the items of nonperformance. In the event that Wink does not
remedy the items of nonperformance, then Affiliate shall have the right
to without limitation, all remedies with respect to the unperformed
balance of this Agreement.
12.3 Upon expiration of the term (including any extensions thereof) of this
Agreement or upon the termination of this Agreement or of any license
granted hereunder for any reason, all rights of Affiliate to use the
Products will cease and Affiliate will promptly (i) grant to Wink, at
reasonable times and under reasonable conditions, with prior written
notice, access to its business premises and the Products and allow Wink
to remove the Products, (ii) purge all copies of all Products from all
computer processors or storage media on which Affiliate has installed or
permitted others to install such Products, and (iii) when requested by
Wink, certify to Wink in writing, signed by an officer of Affiliate,
that all copies of the Products have been returned to Wink or destroyed
and that no copy of any Product remains in Affiliate's possession or
under its control. Upon expiration or termination of this Agreement, all
rights to use Affiliate's VBI shall revert back to Affiliate.
13. FORCE MAJEURE
13.1 If either party to this Agreement shall be delayed or interrupted in the
performance or completion of their performance obligations hereunder by
an embargo, war, fire, flood, earthquake, epidemic or other calamity,
act of God or of the public enemy, or by any strike or labor dispute, or
by the
Page 7 of 13
<PAGE> 8
inability to secure governmental licenses, permits or priorities, or by
the unavailability of sources of supply, or by any other outside cause
which is beyond the control of the party and without its fault or
negligence, then it shall be excused from any delay or failure to
perform under the Agreement.
14. GENERAL
The parties agree that in the event it is necessary to employ attorneys to
enforce the terms of this Agreement, the prevailing party in any lawsuit shall
be entitled to an award of reasonable attorneys' fees and court costs.
(a) Neither party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Affiliate may assign this Agreement to affiliated or
subsidiary companies without the consent of Affiliate and Wink.
(b) This Agreement will be governed in all respects by the laws of the State
of California.
(c) this Agreement represents the entire agreement between the parties and
supersedes and replaces all prior oral and written proposals,
communications and agreements with regard to the subject matter hereof
between Affiliate and Wink. This Agreement may be amended only by an
instrument in writing, executed by Affiliate and Wink.
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
entered into this Agreement as of the Effective Date.
WINK COMMUNICATIONS, INC. CHARTER COMMUNICATIONS, INC.
By: /s/ Maggie Wilderotter By: /s/ Jerald L. Kent
Name: Maggie Wilderotter Name: Jerald L. Kent
Title: President & CEO Title: Pres. & CEO
Page 8 of 13
<PAGE> 9
<TABLE>
<CAPTION>
ATTACHMENT A
WINK/AFFILIATE REVENUE SHARE
WINK RESPONSE SERVICE TRANSACTION FEE
PURCHASE TRANSACTION FEES AFFILIATE REVENUE SHARE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
(Viewer name, address, credit card) National Ads Local Ads
1-5,000 transactions/mo [ * ] [ * ]
5,001-25,000 transactions/mo [ * ] [ * ]
25,001-100,00 transactions /mo [ * ] [ * ]
100,001-250,000 transactions/mo [ * ] [ * ]
250,001-500,000 transactions/mo [ * ] [ * ]
500,001-up transactions/mo [ * ] [ * ]
REQUEST TRANSACTION FEES
- ----------------------------------------------------------------------------------------------------
(Viewer name, address only)
1-5,000 transactions/mo [ * ] [ * ]
5,001-25,000 transactions/mo [ * ] [ * ]
25,001-100,00 transactions /mo [ * ] [ * ]
100,001-250,000 transactions/mo [ * ] [ * ]
250,001-500,000 transactions/mo [ * ] [ * ]
500,001-up transactions/mo [ * ] [ * ]
</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 portion shave been filed
with the Commission.
Page 9 of 13
<PAGE> 10
ATTACHMENT B
ANCILLARY CHARGES
1. Local Ad Insertion Module
Equipment: [ * ] for Annex and SeaChange PC
[ * ]
Monthly Fee: [ * ]
2. UNLIMITED VIRTUAL CHANNELS
Equipment: [ * ]
[ * ]
Monthly Fee: [ * ]
3. CUSTOMER SUPPORT
[ * ] technical support incident per month is included with
the contract. Additional incidents are charged at a rate of [ * ].
A service contract is also available for [ * ] which includes 3
incidents per month.
4. CONSULTATIVE SERVICES
Telephone consulting is billed at [ * ]. On-site consulting is
billed at [ * ].
- ----------------------
* 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 10 of 13
<PAGE> 11
<TABLE>
<CAPTION>
ATTACHMENT C
CHARTER CFT-BOM
---------------
QTY COMPUTERS PART NUMBER UNIT COST ITEM COST
--- --------- ----------- --------- ---------
<S> <C> <C> <C> <C>
1 WINK BROADCAST SERVER (WBS) $9,136.20 $9,136.20
Sun Ultra Enterprise 1 Model A11-UBA1-9S-064CE $5,775.00
170 w/167MHz
TGX Graphics Sbus Adapter X711OA $809.00
17" Color Monitor X7103A $693.00
Sun 1.44 Internal Floppy Drive X6001A $115.00
Sun CD 12 Internal CD ROM X61661A $231.00
Fast Ethernet 10/100 Sbus Adapter X1059A $612.00
Sun Country Kit-UNIX (Keyboard, Mouse, Power Cords) X3540A $0.00
Sun Silver Server Support Ultra 1 model 170 Silver $619.20
Solaris Media 2.5.1 SOLD 2.5.1 APR97 $77.00
System Configuration-OS IS-101D $85.00
System Configuration IS-203 $120.00
Wink Broadcast Server Software License
1 WINK RESPONSE SERVER (WRS) $9,136.20 $13,336.20
Sun Ultra Enterprise 1 Model 170 w/167MHz A11-UBA1-9S-064CE $5,775.00
TGX Graphics Sbus Adapter X711OA $809.00
17" Color Monitor X7103A $693.00
Sun 1.44 Internal Floppy Drive X6001 A $115.00
Sun CD 12 Internal CD ROM X61661A $231.00
Fast Ethernet 10/100 Sbus Adapter X1059A $612.00
Sun Country Kit/UNIX (Keyboard, Mouse, Power Cords) X3540A $0.00
Sun Silver Server Support Ultra I model 170 Silver $619.20
Solaris Media 2.5.1 SOLD 2.5.1 APR97 $77.00
System Configuration-OS IS-101D $85.00
System Configuration IS-203 $120.00
Oracle Enterprise Server 7.3.2.1 for Solaris $4,200.00
Wink Response Server Software License
1 WINK GATEWAY PC $2,415.00 $2,415.00
PC-Rack Mountable
Rackmount Case w/250 Power Supply SRPC-210
Slide Rail Set
Pentium 166MHz Motherboard w/512K Cache
32 MB RAM
1.2 GB WD EIDE Internal Hard Drive
3.5" - 1.44MB Teac Internal Floppy Drive
24X Toshiba IDE CD-ROM
Diamond Stealth PCI w/2MB
3COM 3C900 PCI Ethernet (Port #1)
3COM 3C900 PCI Ethernet (Port #2)
Additional Com Card for Com3 Com4 LPT2
Windows NT Workstation 4.0 CD-ROM
Mouse
14" SVGA Color Monitor
Rackmount Keyboard w/Mouse Tray RMK-110
Wink's Gateway Software
COMPUTER PERIPHERALS
2 US Robitics Courier V. Everything A22536-001224-0 $263.00 $526.00
</TABLE>
Page 11 of 13
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
TERMINAL SERVERS
1 Xylogics Annex Three - 64-port, net-boot, twisted pair AX3-32/32-IN-100 $4,895.00 $4,895.00
12 Annex Modem (DCE) Cable-50pin Telco Fan to 6 Male DB25 AX3-CBL-DCE-100 $110.00 $1,320.00
1 Annex Three Software-DCROM CM0014007 $340.00 $340.00
CABLE HEADEND EQUIPMENT
20 Norpak TTX-745 NABTS Decoder (2/channel) $400,001 $8,000.00
10 MVPII-DIU v0.7 or greater Charter
====== ==================================================================== =========== ============
Total Cost: $39,968.40
- ------ -------------------------------------------------------------------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
CHARTER DCT-BOM
QTY COMPUTORS PART NUMBER UNIT COST ITEM COST
--- --------- ----------- --------- ---------
<S> <C> <C> <C> <C>
1 WINK BROADCAST SERVER (WBS) $9,136.20 $9,136.20
- ------ -------------------------------------------------------------------- ----------- ------------
Sun Ultra Enterprise 1 Model 170 w/167MHz A11-UBA1-9S-O64CE $5,775.00
TGX Graphics Sbus Adapter X7110A $809.00
17" Color Monitor X7103A $693.00
Sun 1.44 Internal Floppy Drive X6001A $115.00
Sun CD 12 Internal CD ROM X61661A $231.00
Fast Ethernet 10/100 Sbus Adapter X1059A $612.00
Sun Country Kit-UNIX (Keyboard, Mouse, Power Cords) X3540A $0.00
Sun Silver Server Support Ultra 1 model 170 Silver $619.20
Solaris Media 2.5.1 SOLD 2.5.1 APR97 $77.00
System Configuration - OS IS-101D $85.00
System Configuration IS-203 $120.00
Wink Broadcast Server Software License
1 WINK RESPONSE SERVER (WRS) $9,136.20 $13,336.20
- ------ -------------------------------------------------------------------- ----------- ------------
Sun Ultra Enterprise 1 Model 170 w/167MHz All-UBA1-9S-064CE $5,775.00
TGX Graphics Sbus Adapter X7110A $809.00
17" Color Monitor X7103A $693.00
Sun 1.44 Internal Floppy Drive X6001A $115.00
Sun CD 12 Internal CD ROM X61661A $231.00
Fast Ethernet 10/100 Sbus Adapter X1059A $612.00
Sun Country Kit-UNIX (Keyboard, Mouse, Power Cords) X3540A $0.00
Sun Silver Server Support Ultra 1 model 170 Silver $619.20
Solaris Media 2.5.1 SOLD 2.5.1 APR97 $77.00
System Configuration-OS IS-101D $85.00
System Configuration IS-203 $120.00
Oracle Enterprise Server 7.3.2.1 for Solaris $4,200.00
Wink Response Server Software License
1 WINK GATEWAY PC $2,415.00 $2,415.00
- ------ -------------------------------------------------------------------- ----------- ------------
PC-Rack Mountable
Rackmount Case w/250 Power Supply SRPC-210
Slide Rail Set
Pentium 166MHz Motherboard w/512K Cache
32 MB RAM
1.2 GB WD EIDE Internal Hard Drive
3.5" - 1.44MB Teac Internal Floppy Drive
24X Toshiba IDE CD-ROM
Diamond Stealth PCI w/2MB
3COM 3C900 PCI Ethernet (Port #1)
3COM 3C900 PCI Ethernet (Port #2)
Additional Com Card for Com3 Com4 LPT2
Windows NT Workstation 4.0 CD-ROM
Mouse
14" SVGA Color Monitor
Rackmount Keyboard w/Mouse Tray RMK-110
Wink's Gateway Software
</TABLE>
Page 12 of 13
<PAGE> 13
<TABLE>
COMPUTOR PERIPHERALS
<S> <C> <C> <C> <C>
2 US Robitics Courier V. Everything A22536-001224-0 $263.00 $526.00
TERMINAL SERVERS
1 Xylogics Annex Three - 32-port, net-boot, twisted pair AX3-32/32-1N-300 $3,550.00 $3,550.00
6 Annex Modem (DCE) Cable-50pin Telco Fan to 6 Male DB25 AX3-CBL-DCE-100 $110.00 $660.00
1 Annex Three Software-DCROM CM0014007 $340.00 $340.00
CABLE HEADEND EQUIPMENT
20 Norpak TTX-745 NABTS Decoder (2/channel) $400.00 $8,000.00
====== ==================================================================== =========== ============
TOTAL COST: $37,963.40
</TABLE>
Page 13 of 13
<PAGE> 14
ATTACHMENT D
ADDENDUM
March 16, 1998
Affiliate will launch Wink in St. Louis, Missouri Operating Area by September
1, 1998. Wink will negotiate the procurement of Wink engine software from
General Instrument at no charge on all CFT-2200 boxes deployed in St. Louis
through September 1, 1999. Starting on September 1, 1998, Charter will pay Wink
$1,500/mo. for Wink server software in St. Louis. After one year, monthly fee
will revert to $3,000/mo. for term of the Agreement. Per the Wink-Charter
contract, installation fee of $15,000 will be payable to Wink upon successful
launch in St. Louis. Charter will provide server hardware for launch per
Attachment C of the contract. These terms specific to St. Louis supercede any
conflicting terms that may exist in the aforementioned contract.
WINK COMMUNICATIONS, INC. CHARTER COMMUNICATIONS, INC.
By: /s/ G.R. CLARK By: /s/ STEPHEN E. SILVA
------------------------------- ------------------------------------
Name: G.R. Clark Name: Stephen E. Silva
------------------------------ -----------------------------------
Title: Vice President Title: VP Corporate Development
----------------------------- ----------------------------------
& Implementation
<PAGE> 15
ATTACHMENT E
ADDENDUM
This addendum is associated with the Cable Affiliation Agreement signed by Wink
Communications and Charter Communications on October 8, 1997. This addendum
shall supercede any contradictions in Terms in the Cable Affiliation Agreement.
Whereas Vulcan Ventures, the parent company of Charter, has purchased over nine
million (9,000,000) dollars worth of Wink preferred stock, and Wink wishes to
provide certain terms for the first two Charter systems targeted to launch
Wink."
Whereas Charter has purchased, for the first time in any Charter system, over
50,000 advanced analog or digital converters compatible with the Product, and
Wink wishes to provide certain terms to accelerate the deployment of Wink in
those markets.
Now, therefore, the parties agree as follows:
a) This addendum is effective as of the dates below and will extend the term of
the existing Cable Affiliation Agreement, signed on October 8, 1998, to
December 31st, 2001.
b) Affiliate will launch Wink to a minimum of 200,000 homes by December 31,
2001.
c) Charter will deploy Wink in all homes with advanced analog or digital
converters throughout it's St. Louis, Missouri and Maryville, Illinois
systems. A minimum of 25,000 Wink enabled two-way homes will be deployed by
December 31, 1999. If not achieved, Affiliate will not receive revenue
guarantee per (d) on any deployed boxes for that year. A minimum of 50,000
Wink enabled two-way homes will be deployed by December 31, 2000. If not
achieved, Affiliate will not receive revenue guarantee per (d) on any
deployed boxes for that year.
d) Wink will guarantee [*] of request and purchase transaction revenue share
per Wink enabled two-way household in each of the first two years of this
Agreement. Wink will guarantee [*] of revenue share in year three. If
required, an annual payment to Affiliate will occur at year-end 1999, 2000,
and 2001 for the balance of the guarantee. The guarantee payment will be
based on number of Wink two-way households launched multiplied by the number
of months each box has been installed that year. This will be multiplied by
the prorated monthly guarantee for that year minus the actual revenues paid
to Affiliate throughout the year. (Years 1999 and 2000: [*]/month) (Year
2001: [*]/month). The guarantee will apply to the St. Louis/Maryville system
only.
e) Wink will extend a revenue guarantee offer to the Affiliate system in Los
Angeles, CA. When Affiliate launches Wink in Los Angeles, all two-way boxes
deployed in subsequent six months will qualify for the same revenue guarantee
structure as outlined in (d) above through term of this Agreement.
f) Wink will provide [*] in joint launch marketing funds for St. Louis and [*]
in joint marketing funds for Los Angeles, provided that each system deploys
Wink in 1999.
- -------------
* 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> 16
g) Affiliate will sell local ads that are Wink enhanced to local advertisers
in the St. Louis, Maryville, and Los Angeles launch markets. Wink will
provide tools, training, and support to Affiliate's local advertising sales
group in all launch markets.
h) Wink will provide a [*] gross revenue share, or pay Affiliate per
Attachment A, whichever is greater, on all Wink purchase and request
transactions per Wink enabled household.
i) Wink will waive the upfront $2.00 engine software license fee and fees
associated with downloading to CFT-2200 or CFT-2200i converters in all
launch markets.
j) Affiliate will pay the lower of the Wink server license fees per Attachment
D of this contract or Wink's then current rate card.
k) Affiliate will provide launch marketing support for Wink to include local
ad avails to introduce and support the Wink Service in all markets where
Wink has been deployed.
l) Section 2.3 of the Cable Affiliation Agreement shall be modified to read:
2.3 WINK grants to Charter Communications local terrestrial exclusive use
of the WINK Service in all markets where Charter has launched the Wink
Service. Local exclusivity shall be defined as other CATV, MMDS, LMDS,
Microwave or Cellular based operators competing in Charter markets. Local
exclusivity does not include National Satellite services or National
Broadcast Network video feeds. Wink also grants to Charter Communications
[*] exclusivity through June 30, 1999, for all Charter markets where the
WINK Service is launched.
m) Section 2.3 of the Cable Affiliation Agreement shall be modified to read;
2.3 Wink grants to Charter Communications local terrestrial exclusive use
of the Wink Service in all markets where Charter has launched the Wink
Service. Local exclusivity shall be defined as other CATV, MMDS, LMDS,
Microwave or Cellular based operators competing in Charter markets. Local
exclusivity does not include National Satellite services or National
Broadcast Network video feeds. Wink also grants to Charter Communications
National Satellite Services exclusivity through June 30, 1999, for all
Charter markets where the Wink Service is launched.
WINK COMMUNICATIONS, INC. CHARTER COMMUNICATIONS, INC.
By: /s/ MARY AGNES WILDEROTTER By: /s/ STEPHEN E. SILVA
--------------------------- -----------------------------
Name: Mary Agnes Wilderotter Name: Stephen E. Silva
-------------------------- ----------------------------
Title: President & CEO Title: V.P. Corporate Development
------------------------ ---------------------------
Date: 3/12/99 Date: 1/6/99
--------------------------- ----------------------------
- -------------
* 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
EXHIBIT 10.13
MASTER AFFILIATION AGREEMENT
DIRECTV
THIS Master Agreement is made as of the 22nd day of December, 1998 (the
"Effective Date"), 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 ("DIRECTV"), whose address is
2230 East Imperial Highway, El Segundo, CA 90245.
1. GRANT OF LICENSE
1.1 Subject to the terms of this Master Agreement, Wink hereby grants to
DIRECTV a non-exclusive license (the "License") to use the Wink
software products listed in Exhibit B (hereinafter collectively
referred to as "Wink Software") to deliver interactive program(s)
which are compliant with the Wink interactive communications
application protocol ("Interactive Wink Programs") to DIRECTV
subscribers which are located in the continental United States,
Alaska, Hawaii, and the US territories in the Caribbean (the
"Territory").
1.2. Except as specifically permitted in this Master Agreement, this
License is not transferable, nor may any rights hereunder be
transferred, assigned or sub-licensed in whole or in part without
Wink's prior written consent.
1.3. "Updates" shall mean updates containing error corrections or minor
enhancements to the Wink Software created by or for Wink, and
designated by a change in version number to the right of the decimal
point. Updates do not include major enhancements to the Wink Software
designated by changes in the version number to the left of the
decimal point. Wink shall provide a license to all Updates at no
charge to DIRECTV during the term of this Master Agreement and
DIRECTV, in its sole discretion, shall have the option to utilize
such Updates in providing Interactive Wink Programs to DIRECTV
subscribers. "New Release" shall mean a major release of the Wink
Software which occurs subsequent to the Measurement Date (as defined
below), which contains significant new functionality), and/or major
enhancements, and which is designated by a change in the digit or
digits to the left of the decimal point in the version number. Wink
shall offer to DIRECTV a license to all New Releases created by Wink
during the Term on terms that are as favorable or more favorable than
the terms of any agreement Wink has entered into with other United
States video distributors, including all cable operators, for the
provision of the New Releases; provided, however, that in no event
shall DIRECTV's decision not to license any New Release have any
impact whatsoever on the functionality of the current Wink Software
or DIRECTV's ability to provide Interactive Wink Programs to DIRECTV
subscribers throughout the Term, and provided that DIRECTV shall be
under no obligation to license or launch such New Releases. If a New
Release has not been made available to other parties, Wink agrees to
offer to DIRECTV a license to such New Release at a one- time fee
equal to Wink's costs (on a Time and Materials basis) in developing
and testing the New Release, which estimate shall be made by Wink in
it's sole and reasonable discretion, and documented in writing to
DIRECTV.
1.4. For purposes of this Master Agreement, a "Participating Manufacturer"
shall mean a manufacturer of equipment capable of receiving DIRECTV
signals ("DIRECTV System Receiver") which has:
(a) a valid and current Manufacturer Agreement with DIRECTV
("DIRECTV System Manufacturer") for the manufacture and
sale of DIRECTV Systems; and
- -------------
* 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.
Proprietary and Confidential 1
<PAGE> 2
(b) a valid and current license agreement with Wink for Wink's
client software for digital TV reception products (the
"Wink Engine"). A DIRECTV System Receiver which has a
resident Wink Engine, and which has been enabled to
receive both DIRECTV programming and Interactive Wink
Programs transmitted over DIRECTV's network, shall be
referred to in this Master Agreement as a "Wink-enabled
DIRECTV System Receiver".
2. TERM
The "Term" of this Master Agreement shall commence on the Effective
Date and shall automatically terminate five (5) years thereafter.
DIRECTV may terminate the Master Agreement at any time after a period
of three (3) years following the first day the Interactive Wink
Programs are distributed to and received by at least 10,000
Wink-enabled DIRECTV System Subscribers (the "Measurement Date") in
accordance with the terms of this Master Agreement. Notice of
DIRECTV's intent to so terminate must be received by Wink no later
than sixty (60) days prior to the effective date of such termination.
As used herein, "Wink-enabled DIRECTV System Subscriber" shall mean
each DIRECTV subscriber that (i) receives or separately pays for
satellite television service from DIRECTV or a company acting on
behalf of DIRECTV; and (ii) has activated one or more Wink-enabled
DIRECTV System Receivers. The parties agree that DIRECTV may, in its
sole discretion, extend the Master Agreement upon the expiration of
the Term for a three year period, provided that DIRECTV shall provide
prior written notice to Wink no later than sixty (60) days prior to
the date of expiration of the Term of its intention to extend the
Term. Such extension of the Term shall be granted on the most
favorable rates, terms and conditions offered or made available to
any United States video distributor, including cable operators, but
may not reflect the terms of this Master Agreement. Wink agrees to
give written notice to DIRECTV no later than one hundred and twenty
(120) days prior to the date of expiration of the Term of the rates,
terms and conditions available to DIRECTV for such extension.
3. INTEGRATION AND DEPLOYMENT
3.1. The parties agree to the preliminary statement of work defined in
Exhibit E and the preliminary schedule defined in Exhibit F. The
parties further agree to use their best commercially reasonable
efforts to develop a final statement of work ("Final Statement of
Work") and a final schedule ("Final Schedule") within thirty (30)
days of the Effective Date of this Master Agreement. Once the Final
Statement of Work and Final Schedule have been agreed upon, neither
party shall make any modifications to the Final Statement of Work
and/or the Final Schedule without the other party's prior written
consent. Each party acknowledges and agrees that changes to the Final
Statement of Work or the Final Schedule may result in additional work
and/or expense for the other party and may require changes to the
Wink Engine for all or some Wink-enabled DIRECTV System Receivers.
The work and expense incurred by Wink shall be estimated and provided
to DIRECTV on a cost (Time and Materials) basis, and, if accepted by
both parties, shall be incorporated into a revised Final Statement of
Work and Final Schedule. The work and expense incurred by DIRECTV
shall be estimated and provided to Wink on a cost (Time and
Materials) basis, and, if accepted by both parties, shall be
incorporated into a revised Final Statement of Work and Final
Schedule. The work and expense incurred by Participating
Manufacturers, if any, shall be estimated and provided by Wink in
collaboration with Participating Manufacturers, and, if accepted by
each of DIRECTV, Wink and the applicable Participating Manufacturer,
shall be incorporated into a revised Engine Statement of Work, as
described further in Exhibit A-1 of Exhibit I. The parties agree that
DIRECTV shall pay Wink fifty percent (50%) of any non-recurring
engineering fees detailed in such Engine Statement of Work and waived
by Wink in accordance with Section 4.1 of Exhibit I, up to a maximum
of one hundred and fifty thousand dollars ($150,000); provided,
however, that Wink
Proprietary and Confidential 2
<PAGE> 3
shall not charge any Participating Manufacturer for any cost or
expense related to such non-recurring engineering fees. Such payment
shall be made within thirty (30) days of such Participating
Manufacturer's acceptance of the final object code for the applicable
Wink Engine. The parties further agree that the total cumulative
incremental expense incurred by DIRECTV and Participating
Manufacturers caused by changes to the Final Schedule and Final
Statement of Work shall not exceed one hundred thousand dollars
($100,000) unless the changes requested introduce major new
functionality, result in major architectural changes to Wink Software
or result in other similar major disruption of the project not
contemplated by the preliminary statement of work in Exhibit E and
the preliminary schedule in Exhibit F; provided, however, that
neither DIRECTV nor any Participating Manufacturer shall be
responsible for any such incremental costs or expense due to changes
to either the Final Statement of Work or the Final Schedule which
have been proposed solely by Wink.
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 [ * ]. 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.
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 panics 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.
(a) Wink shall assist DIRECTV, as DIRECTV may request and at no
additional cost to DIRECTV, in connection with the installation of
the Equipment at its Facilities. For purposes of this Master
Agreement, "Facilities" shall mean DIRECTV's broadcast centers in
Castle Rock, CO, Los Angeles, CA and those locations designated by
DIRECTV as additional DIRECTV broadcast centers, if any, during the
Term. Exhibit J provides a preliminary list of Equipment to be
provided by Wink, and is
- -------------
* 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.
Proprietary and Confidential 3
<PAGE> 4
subject to a final site visit by Wink's Operations department.
(b) Wink, at its sole cost and expense, shall, subject to DIRECTV's
direction and control, install and integrate the Wink Software into
DIRECTV's equipment and facilities to ensure the reliable
transmission of the Interactive Wink Programs. Alternatively, at
DIRECTV's option, Wink shall assist DIRECTV in DIRECTV's installation
and integration thereof.
(c) Wink's assistance and/or installation and integration as provided in
paragraphs (a) and (b), above (i) shall occur during normal business
hours (i.e., 9am to 5pm, Monday through Friday, excluding holidays)
and during such time periods which are scheduled in advance by the
parties and (ii) shall be subject to DIRECTV's customary safety and
security procedures employed at its Facilities.
3.4. Wink agrees to provide DIRECTV with Technical Development Fees, as
compensation for DIRECTV's technical development and support of
Interactive Wink Programs, in the amount of [ * ] due and payable on
the Measurement Date, as defined in Section 2, above.
3.5. Except as otherwise set forth herein, DIRECTV will not prevent the
distribution on the DIRECTV system of Interactive Wink Programs
inserted by Programmer, as defined below, in the VBI or MPEG of video
signals, distributed 24 hours a day, from a broadcaster or cable
programmer with whom DIRECTV, and entities wholly owned by DIRECTV
and which provide video programming to DIRECTV Subscribers, have a
valid agreement for carriage (each, a "Programmer"), and agrees to
pass Interactive Wink Programs to Wink-enabled DIRECTV System
Receivers without any charge to such Programmers during the Term of
this Master Agreement, provided that each Programmer has agreed to
provide and does provide such Interactive Wink Programs at no cost to
DIRECTV, and that such Interactive Wink Programs shall be limited to
using the equivalent of three (3) VBI lines (equal to 30 kbits/sec.)
per programming service. Notwithstanding the above, the parties agree
that DIRECTV shall not be obligated to dedicate aggregate bandwidth
in excess of [*] to all Interactive Wink Programs provided by
Programmers in conjunction with such Programmers' video signals,
unless separately agreed upon between Wink and DIRECTV. During such
time that the actual, aggregate bandwidth utilized by such Programs
is less than [*], DIRECTV agrees to transmit all such Interactive
Wink Programs: provided, however, that once the aggregate amount of
available Interactive Wink Programming meets or exceeds [*], DIRECTV,
in its sole discretion, shall select the Interactive Wink Programming
transmitted to the applicable DIRECTV System Subscribers, which
selection shall, in the aggregate, equal no less than [*].
3.6 Wink shall use commercially reasonable efforts to ensure that each
Interactive Wink Program provided by a Programmer is directly related
in content, nature and intended audience to the video programming and
advertising actually being provided by such Programmer at the same
time that such Interactive Wink Program is provided and thus has the
purpose of enhancing or providing additional detail or information
regarding such video programming or advertising, as applicable. Wink
shall ensure that the Interactive Wink Programs are provided to
DIRECTV pursuant to a then-current and valid license agreement
between the Programmer and Wink. If the conditions, including but not
limited to those set forth above, related to any Programmer's
obligations to Wink are not met, or any Programmer uses Interactive
Wink Programs to promote, either directly or indirectly, competing
multichannel video service providers, or DIRECTV is challenged and
fails to receive an acceptable indemnity from Programmer for the
content of Interactive Wink Programs, DIRECTV shall not be obligated
to pass such Interactive Wink Programs and may, at DIRECTV's option,
immediately terminate carriage of the Interactive Wink Programs with
respect to such Programmer
- -------------
* 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.
Proprietary and Confidential 4
<PAGE> 5
for the remainder of the Term; provided, however, DIRECTV, in its
sole discretion, may elect to reinstate the transmission of such
Programmer's Interactive Wink Programs, if any, at any point during
the Term. The parties further agree that this Master Agreement in no
way creates any obligation on behalf of DIRECTV to carry or pass any
other form of programming or data of any Programmer.
3.7 Wink shall ensure that at least ten (10) Programmers have agreements
with Wink to provide original Interactive Wink Programs for no less
than five (5) hours each week during the Term and Wink shall provide
DIRECTV with weekly Interactive Wink Program schedules for such
Programmers. Wink shall provide DIRECTV with notice at least thirty
(30) days before commencement of national transmission of Interactive
Wink Programs by new Programmers or termination of national
transmission of Interactive Wink Programs by existing Programmers.
Notwithstanding the above, and although the parties acknowledge and
agree that the elimination or addition of individual Interactive Wink
Programs does not require notice by Wink to DIRECTV, Wink shall use
commercially reasonable efforts to notify DIRECTV of such changes as
soon as possible. If the number of Programmers falls below ten (10),
Wink shall promptly notify DIRECTV in writing that the number has
fallen below ten (10), and Wink shall have sixty (60) days to acquire
additional Programmers such that there are at least ten (10)
Programmers or more providing at least the Minimum Amount (as defined
below) of Interactive Wink Programs. If after sixty (60) days
following notice to DIRECTV Wink does not have at least ten (10)
Programmers providing the Minimum Amount of Interactive Wink
Programs, DIRECTV shall have the right to (a) cease passing any
Interactive Wink Programs from Programmers and (b) declare that Wink
has materially breached this Master Agreement. DIRECTV may then
terminate this Master Agreement in accordance with the terms of
Section 13 and/or exercise its other rights and remedies hereunder.
If any Programmer fails to provide at least five (5) hours of
original Interactive Wink programming per week (the "Minimum
Amount"), Wink shall promptly notify DIRECTV in writing of this fact,
and Wink shall have thirty (30) days to increase that Programmer's
amount of such programming to at least the five (5) hour weekly
minimum. If Wink is unable to deliver the Minimum Amount of such
programming within the thirty (30) day cure period, or (ii) such
Programmer falls below the Minimum Amount of required programming
more than three times in any running six (6) month period, DIRECTV,
at its option, may immediately terminate carriage of the Interactive
Wink Programs with respect to such Programmer for the remainder of
the Term; provided, however, DIRECTV, in its sole discretion, may
elect to reinstate the transmission of such Programmer's Interactive
Wink Programs, if any, at any point during the Term.
3.8 DIRECTV, at its option, shall either (i) provide to Wink maximum
bandwidth equivalent to sixty (60) kbits/sec in one DIRECTV satellite
transponder data stream provided that Wink shall use such bandwidth
solely for the purpose of delivering various full screen Interactive
Wink Programs ("Wink Virtual Channels") required for customer-related
educational services for Wink DIRECTV System Subscribers, including
but not limited to a credit card registration program, a Wink user's
guide program and interactive tutorial, a transaction history program
featuring Wink DIRECTV System Subscribers most recent transactions,
and a Wink guide to upcoming Interactive Wink Programs related to
scheduled video programming (collectively, the "Wink Customer Service
Virtual Channel"), or (ii) incorporate the applicable content of
Wink's Virtual Channels, in the aggregate amount of no more than the
bandwidth equivalent of sixty (60) kbits/sec., into one or several
Interactive Wink Programs provided by DIRECTV to DIRECTV System
Subscribers for purposes of delivering customer service to such
subscribers at no cost or fee charged by Wink for such incorporation.
If applicable, Wink shall not use its Wink Customer Service Virtual
Channel for advertising or any purpose other than as specified herein
without DIRECTV's prior written
Proprietary and Confidential 5
<PAGE> 6
consent. DIRECTV, in its reasonable discretion, shall review the
content of the Wink Customer Service Virtual Channel prior to
DIRECTV's insertion and delivery to its DIRECTV Subscribers.
3.9. Subject to DIRECTV's prior written request and commitment to
distribute selected Interactive Wink Programs, Wink, at its sole cost
and expense, agrees to create and deliver in final electronic form,
to the Facilities, a minimum of five (5) Wink Virtual Channels as
described in Exhibit G. DIRECTV may also elect distribute other
Interactive Wink Programs, including but not limited to Wink Virtual
Channels, created by DIRECTV and/or third parties using the Wink
Software. Third party providers of additional Interactive Wink
Programs accepted for carriage by DIRECTV shall be referred to as
"Third Party Wink Program Providers." DIRECTV shall be responsible
for any additional equipment required to support and transmit Third
Party Interactive Wink Programs not created and provided by Wink or
Programmers as part of such programmer's video signal, and for
payment, if any, to third party rights holders, including but not
limited to studios, acting, on-air and other talent, news and sports
data providers, professional and college sports leagues or teams, and
all other entities necessary for the creation and distribution by
DIRECTV of Interactive Wink Programs supplied by DIRECTV or Third
Party Program Providers. Other than those revenues related to Wink
Revenue Transactions, as defined below, any and all other revenue,
access fees or other payments received by DIRECTV from such Third
Party Wink Program Providers shall, as between DIRECTV and Wink,
belong solely to DIRECTV. Wink agrees to offer any Wink Virtual
Channels created or marketed by Wink on terms that are at least as
favorable as those offered to any other distributor of video
programming (each an "Other Programming Distributor").
3.10 Wink agrees to fully fund the full time services of an experienced
Wink Consultant (including, but not limited to travel, lodging and
living expenses) working at either DIRECTV's Facilities or Wink's
offices, and under DIRECTV's direction, starting within sixty (60)
days of the Effective Date and continuing through the Term. DIRECTV
agrees that this Wink staff member will work exclusively on the
development of Interactive Wink Programs. The Wink Consultant shall
act in the capacity of an independent contractor with respect to
DIRECTV. As an independent contractor, Wink hereby agrees that Wink
Consultant shall accept, and shall direct the Wink Consultant to
follow, any reasonable directions issued by DIRECTV, through a
designated executive representative of DIRECTV, pertaining to the
goals to be attained and the results to be achieved by the Wink
Consultant, including, but not limited to the execution of a
Nondisclosure Agreement with DIRECTV, to be provided to Consultant by
DIRECTV upon the commencement of services at DIRECTV's Facilities. As
an independent contractor, Wink acknowledges and agrees that the Wink
Consultant shall not have the status of an employee of DIRECTV or its
subsidiaries. Wink acknowledges and agrees that the Wink Consultant
shall not be eligible to participate in any employee benefit, group
insurance or executive compensation plans or programs maintained by
DIRECTV. DIRECTV shall not be responsible for Social Security,
unemployment compensation, disability insurance, workers'
compensation or similar coverage, nor any other statutory benefits,
with respect to the Wink Consultant. Wink further agrees to provide
any and all necessary licenses permits, insurance policies and other
documents required for the performance of its duties hereunder at its
own expense.
3.11 Wink, at its sole cost and expense, shall perform all Wink-related
installation work necessary to ensure proper operation of the Wink
Software, the Wink Response Network (as defined in section 4.1
below) and the Wink Engine, and reliable delivery of Interactive Wink
Programs, and shall provide on-going technical support for the Wink
Software, the Wink Response Network and the Wink Engine during the
Term. DIRECTV shall permit Wink secure remote access to the Wink
Software and associated equipment solely for the specific purpose of
monitoring and troubleshooting the provisioning of Interactive Wink
Programs to Wink DIRECTV System Subscribers. Wink, at its sole
Proprietary and Confidential 6
<PAGE> 7
cost and expense. shall provide all technical support to DIRECTV
staff ("Technical Support") as DIRECTV may reasonably request in
connection with the development and distribution of Interactive Wink
Programs and any related aspect of the Wink Software. The parties
agree that technical support may be categorized as follows:
(a) support to ensure proper operation of the Wink Broadcast Server
and all other software directly associated with the transmission of
Interactive Programs ("Emergency Technical Support") and
(b) all other technical support, including but not limited to,
support for Wink Studio and Wink Server Studio ("Regular Technical
Support").
Without limiting the generality of the foregoing, all Technical
Support (i) shall include on-call (by telephone and dial-in modem)
availability of Wink personnel knowledgeable in the operation and
troubleshooting of the Wink Software and/or the Wink Response
Network, and (ii) shall be made available at all times during the
normal business hours of Wink. In addition, Emergency Technical
Support shall be made available after normal business hours during
the week and during all holidays and week-ends. If technological
problems persist, such on-call Emergency Technical Support shall be
provided by expert engineers and programmers. If technological
problems prevent transmission of Interactive Wink Programs. and
cannot be resolved through remote support, Wink shall provide on-site
visit(s) by Wink personnel, at no cost to DIRECTV, within twenty four
hours of DIRECTV's request.
3.12 Wink agrees to provide support to Wink-enabled DIRECTV System
Subscribers as follows: Wink shall provide all customer service,
without limitation, related to the Interactive Wink Programs in
accordance with those DIRECTV Customer Service Standards set forth in
Exhibit N hereto. Wink shall meet or exceed all requirements to the
level set forth under Wink Standards in Exhibit N and shall use
commercially reasonable efforts to meet or exceed all requirements to
the level set forth under Goal in Exhibit N. Wink shall make
available one or more toll-free numbers, staffed with such level of
customer service representatives as is reasonably necessary to
promptly service customer calls related to the Interactive Wink
Programs and/or any Wink Response, as defined below in Section 4.2.
The toll-free line(s) shall be operational at the commencement of
Interactive Wink Program delivery and available 24 hours per day, 7
days per week. Wink will forward all non Interactive Wink Programming
inquiries (meaning DIRECTV Services inquiries) to the DIRECTV
customer service line designated by DIRECTV. DIRECTV will forward all
non DIRECTV Services inquiries (meaning Wink inquiries) to the Wink
customer service line designated by Wink. On a quarterly basis,
DIRECTV will review the volume of calls it receives at its call
center that are solely related to Interactive Wink Programs. If,
during the quarter, the volume of such calls exceeds that number
which is equal to ten percent (10%) of the Wink-enabled DIRECTV
System Subscribers, then the parties shall meet in order to discuss
and determine the implementation of corrective training, staffing or
systems as required. If, within thirty days thereafter, the volume of
calls primarily concerning Interactive Wink Programs that are
received by DIRECTV continues to exceed 10% of the Wink enabled
DIRECTV System Subscriber level, then DIRECTV shall charge Wink on a
monthly basis for the incremental costs incurred by DIRECTV in
providing such customer service response and/or referring such calls
to Wink. Such costs shall not average, on a monthly basis, more than
three dollars ($3.00) per call from DIRECTV subscribers. Similarly,
Wink will review on a quarterly basis the volume of calls it receives
at its call center that are solely related to DIRECTV services other
than the Interactive Wink Programs provided by Wink and Wink's
national programming partners or basic operation of the Wink Engine
(i.e., not including any Third Party Interactive Wink Programs). If,
during the quarter, the volume of such calls exceeds that number
which is equal to ten percent (10%) of the Wink-enabled DIRECTV
System
Proprietary and Confidential 7
<PAGE> 8
Subscribers, then the parties shall meet in order to discuss and
determine the implementation of corrective training, staffing or
systems as required. If, within thirty days thereafter, the volume of
calls that are solely related to DIRECTV services other than the
Interactive Wink Programs provided by Wink and Wink's national
programming partners or basic operation of the Wink Engine continues
to exceed ten percent (10%) of the Wink enabled DIRECTV System
Subscriber level, then Wink shall charge DIRECTV on a monthly basis
for the incremental costs incurred by Wink in providing such customer
service response and/or referring such calls to DIRECTV. Such costs
shall not exceed three dollars ($3.00) per call from DIRECTV
subscribers.
3.13 DIRECTV agrees to provide technical specifications and other support
reasonably required to enable Wink to:
(a) receive the minimum information necessary from DIRECTV's billing
system, or other system designated by DIRECTV, to support routing of
Wink Transactions (as defined in section 4.1 below). This
information, which includes subscriber name, bill-to and service
address, phone number, unique identifier of the Wink-enabled DIRECTV
System Receiver(s), and any other information to be mutually agreed
upon between the parties, shall be deemed Confidential Information,
as defined in Section 12.
(b) interface with DIRECTV equipment in order for DIRECTV to insert
Interactive Wink Programs into a DIRECTV satellite transponder data
stream such that the Interactive Wink Programs can be either (x)
linked to particular video programming and only accessible to
Wink-enabled DIRECTV System Receivers tuned to that service (e.g.
"program-related" or "program-synchronous" Interactive Wink Programs)
or (y) accessed independently of video programming through direct
tuning or a Wink provided menu that can be accessed through direct
tuning (e.g., "virtual channels"). The specifications for this
interface are attached as Exhibit H.
(c) integrate the Wink Software with other DIRECTV equipment and
software, including but not limited to video playout and playlist
control systems, asset management systems, LANs and WANs, etc., as
reasonably necessary and determined jointly by the parties.
3.14 Wink shall keep the Wink Software, the Wink Response Network (as
defined in Section 4.1 below) and associated equipment provided by
Wink in good working order for uninterrupted reception and use of
Interactive Wink Programs by Wink -enabled DIRECTV System
Subscribers, and to ensure regular and reliable collection, reporting
and forwarding of Wink Responses (as defined in Section 4.2 below).
3.15 Upon written request by DIRECTV, Wink agrees to develop, test and
deliver to DIRECTV a software product capable of [*]. The preliminary
specification for the [*] is defined in Exhibit C, and may be amended
by mutual agreement. The parties agree that Wink shall deliver the
[*] on the later of (a) when [*] national programming services
carried by DIRECTV which either (i) do not transmit Interactive Wink
Programs transmit [*] on the signal received and re-transmitted by
DIRECTV or (ii) transmit more (measured in minutes of original
content) [*] than Interactive Wink Programs, measured over a three
month period, (b) [*] has been released to the public for a minimum
of [*] months and (c) [*] months following receipt of DIRECTV written
request for the [*]. Failure by Wink to deliver to DIRECTV the [*]
within this time period shall constitute a material breach by Wink of
this Master Agreement.
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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.
Proprietary and Confidential 8
<PAGE> 9
3.16 Notwithstanding anything to the contrary set forth herein. DIRECTV
has the right without prior notice to interrupt the carriage of
Interactive Wink Programs at any time for the purpose of Emergency
Broadcast and other Federal Communications Commission (FCC) mandated
broadcasts in the Territory, or if the Interactive Wink Programs or
response collection interferes in any way with transmission of the
signal of the applicable channel, interferes with the operations of
DIRECTV or causes other technical problems. DIRECTV agrees that it
shall use commercially reasonable efforts to give notice to Wink
within one (1) hour of any such interruption, and DIRECTV and Wink
will each use their commercially reasonable efforts to restore the
delivery of Interactive Wink Programs and collection of viewer
responses as soon as possible.
4. RESPONSES
4.1 The parties agree that Wink shall be responsible for operating a
network (the "Wink Response Network") capable of receiving in-bound
calls from Wink-enabled DIRECTV System Receivers, collecting Wink
Responses (as defined in Section 4.2 below), distributing such Wink
Responses to applicable Fulfillment Entities (as defined below), and
reporting on such Wink Responses to DIRECTV, Programmers and other
agreed-upon parties as necessary, for the fulfillment of Wink
Transactions (as defined below). Wink agrees to adhere to the
following performance standards for collection of Wink Responses:
(a) [*] of all calls from Wink-enabled DIRECTV System Receivers shall
connect on the 1st try.
(b) Wink shall manage the call "load balancing" by staggering the
calls during early morning hours, allowing for DIRECTV subscriber
preference settings.
(c) Wink Transactions (as defined in section 4.2 below) shall be
collected daily. Wink will use commercially reasonable efforts to
collect all Wink Transactions from the previous day by 6 am local
time for responses. Wink shall ensure that [*] of all Wink
Transactions shall be collected (and transmitted to the applicable
Fulfillment Entity, if any) by day 1, [*] by day 2, and [*] by day 3.
(d) Wink Responses (as defined in section 4.2 below) other than Wink
Transactions shall be collected daily if capacity is available. Wink
shall ensure that all Wink Responses are collected within 7 days.
4.2 For purposes of this Master Agreement, the following definitions
shall apply:
(a) A "Wink Response" is any DIRECTV System Subscriber response data
generated by an Interactive Wink Program and collected electronically
by Wink.
(b) A "Wink Transaction" is a Wink Response initiated by Wink-enabled
DIRECTV System Subscriber, and in which the Wink-enabled DIRECTV
System Subscriber uses a Wink-enabled DIRECTV System Receiver to
request products or services, whether such products and services are
either provided at no charge to the Wink-enabled DIRECTV System
Subscribers or require payment by the Wink-enabled DIRECTV System
Subscriber, and where the fulfillment of that request requires the
release of subscriber specific information by such DIRECTV System
Subscriber, such as name and address.
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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.
Proprietary and Confidential 9
<PAGE> 10
(c) "Wink Revenue Transaction" are all Wink Transactions whereby Wink
derives any revenue from any source pursuant to a DIRECTV System
Subscriber's Wink Response; provided, however, both Wink Transactions
and Wink Revenue Transactions specifically do not include (i) the
purchase of a subscription to a DIRECTV television programming
service, (ii) the purchase of a DIRECTV-supplied pay-per-view movie
or event, or (iii) the purchase of any other video programming
product similar to (i) and (ii) provided by DIRECTV.
Commencing on the Measurement Date and throughout the remainder of
the Term, Wink shall, no later than Wednesday of each week, provide
to DIRECTV standard weekly reporting, at no charge to DIRECTV, of all
Wink Responses generated during the previous week. Wink further
agrees to provide at no charge to DIRECTV daily standard reports of
Wink Transactions generated by Interactive Wink Programs inserted by
DIRECTV into DIRECTV promotional programming, including, without
limitation, programming which promotes DIRECTV subscription
programming, pay-per-view movies and events and other
DIRECTV-provided products and services ("DIRECTV Wink Programs").
DIRECTV accepts Wink's terms for all other reporting regarding Wink
Responses, as defined in Exhibit K. Wink warrants and represents that
such terms are as favorable or more favorable than the terms of any
agreement Wink has entered into with other United States video
distributors, including cable operators, for the provision of the
same or similar services. Wink further agrees to promptly notify
DIRECTV in writing, should Wink decide to enter into new agreements
or amend existing agreements with any United States video
distributors to include more favorable terms for services similar to
those defined in Exhibit K, and to immediately offer such terms to
DIRECTV. Notwithstanding the foregoing and Exhibit K, Wink
acknowledges and agrees that Wink Transactions for any DIRECTV Wink
Program will be processed at no charge to DIRECTV (For purposes of
illustration only, there would be no charge to DIRECTV in the event
that a Wink-enabled DIRECTV System Subscriber upgrades his current
DIRECTV programming package via a Wink-enabled DIRECTV Virtual
Channel or a Wink-enabled DIRECTV barker channel). DIRECTV agrees
that Wink Revenue Transactions shall be subject to Wink's rates for
request for information responses ("RFI Response") and purchase
responses ("Purchase Response"), as defined in Exhibit K. Wink agrees
to provide all reports described above in hard copy or electronic
form, per DIRECTV's instructions. In addition, Wink agrees that it
shall provide DIRECTV with any improvements or additions to the
amount and type of data that Wink generally provides to any other
video distributor with respect to Wink Responses, Wink Transactions
or Wink Revenue Transactions. All Wink Transactions and Wink Revenue
Transactions shall be undertaken by Wink or its agents in accordance
with applicable law, including, without limitation, truth in
advertising and customer privacy laws.
4.3 During the Term of this Master Agreement, Wink shall pay to DIRECTV,
on a monthly basis, a share of the fees on each Wink Revenue
Transaction that is generated by a Wink-enabled DIRECTV System
Subscriber and routed by Wink to the appropriate entity. Wink's gross
revenues (net of returns, cancellations, bad debt allowance, etc.)
from Wink Revenue Transactions generated by Wink DIRECTV System
Subscribers shall be referred to as "Gross Transaction Routing Fees."
DIRECTV's share of Gross Transaction Routing Fees shall be as set
forth in Exhibit A. These payments made by Wink to DIRECTV for
DIRECTV's share of such Gross Transaction Routing Fees" shall be
defined as "Transaction Revenue Share" for purposes of this Master
Agreement. DIRECTV specifically acknowledges and agrees that Wink is
under no obligation to provide Participating Manufacturers with any
share of Wink's Gross Transaction Routing Fees; [ * ]. Wink shall be
solely responsible for all taxes and/or other similar governmental
transactional charges, if any, with respect to all Gross
Transactional Routing Fees.
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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.
Proprietary and Confidential 10
<PAGE> 11
5. FEES AND PAYMENT TERMS
5.1. DIRECTV acknowledges and accepts Wink's licensing fees, rates for
Wink services, and payment terms for DIRECTV as set forth in Exhibits
D and K. DIRECTV may choose to utilize other products and services of
Wink from time to time under this Master Agreement. These products
and services will be offered by Wink to DIRECTV at the most favorable
rate and terms and conditions offered or made available to any United
States video distributor, including cable operators.
5.2. Wink specifically agrees to provide the [*] to DIRECTV on the
following terms:
(i) Non Recurring Expense fees: lower of [*] or [*] percent of
the directly attributable costs on a Time and Materials basis,
payable in three equal installments on the following milestones:
agreement by the parties on the Statement of Work, delivery/approval
of beta, and final delivery/approval.
(ii) On-going support at [*] mo. during the Term, payable
monthly in advance.
(iii) In the event any copyrightable material results from the
performance of Wink with respect to this paragraph 5.2. Wink agrees
that such material and any related intellectual property rights,
including without limitation, any copyrights, will be DIRECTV and
Wink's joint property. The performance of the creation of the [*]
and any additional works and products derived from the [*] will,
from inception of their creation, be entirely the property of both
Wink and DIRECTV in perpetuity throughout the world, under copyright
and otherwise, free of any claim whatsoever any other person or
entity. Wink further agrees, at the request of DIRECTV, to execute
any and all documents which in the judgment of DIRECTV are necessary
to vest ownership of such copyrightable material as provided herein
and to defend the rights of DIRECTV in and to such material.
(iv) if Wink uses this [*] for the other customers, [*] of all
proceeds from licensing the [*] to other customers (other than
annual support fee not to exceed [*] per customer) shall be paid to
DIRECTV up to the total NRE payment made by DIRECTV for the [*].
Once the total initial NRE payment made by DIRECTV has been fully
recouped, the parties shall share equally in all non-support
proceeds.
5.3. Wink specifically represents that the rates defined in Exhibit K are
the most favorable rates, terms and conditions offered or made
available to any United States video distributor, including cable
operators, and agrees to immediately offer DIRECTV any terms for such
services that Wink may choose to offer such parties in the future. In
addition, Wink agrees to provide such terms to the parent company of
DIRECTV and entities wholly owned by the parent company of DIRECTV.
5.4. The parties agree that Wink shall adapt the Wink Software for
DIRECTV's facilities at DIRECTV's expense, and that the estimated
expense associated with such adoption is [*]. Payment by DIRECTV
shall be as follows: upon DIRECTV's approval of the final Statement
of Work, DIRECTV shall pay Wink [*]. Upon Wink's delivery of the
first Beta Release of the Wink Broadcast Server and A/D Gateway (as
defined in the Statement of Work), DIRECTV shall pay Wink another
[*]. Upon Wink's of delivery the final version of the Wink Software
adopted for DIRECTV's Facilities (as defined in the Statement of
Work), DIRECTV shall pay Wink the final [*]. Wink shall immediately
reimburse DIRECTV [*] on the Measurement Date, in addition to any
other sums due to DIRECTV from Wink on the Measurement Date.
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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.
Proprietary and Confidential 11
<PAGE> 12
5.5 In no event shall Wink enter into any similar Master Agreement and/or
licensing agreement with any other distributor of programming or
other services received by DIRECTV Subscribers via the DIRECTV System
without the prior written approval of DIRECTV, including but not
limited to United States Satellite Broadcasting ("USSB").
Notwithstanding the above, DIRECTV agrees to permit Wink to enter
into an agreement with USSB under which USSB's usage of Wink Software
is limited to pass through by USSB of Interactive Wink Programs
provided as part of video signals received by USSB from video
programmers which whom Wink has an agreement to provide such
Interactive Wink Programs. Wink agrees that DIRECTV shall have the
right to review and approve the terms of any such agreement between
Wink and USSB, which approval shall not be unreasonably withheld.
5.6 On or before the forty fifth (45th) day following each month
throughout the Term, DIRECTV shall remit to Wink all fees owed for
the License, and for maintenance, support and other services rendered
by Wink to DIRECTV in such month, as invoiced by Wink no later than
fifteen days following the applicable month. Wink shall provide
reports of and pay the Transaction Revenue Share to DIRECTV on or
before the forty fifth (45th) day following each month throughout the
Term. Past due payments by either party. shall bear interest at a
rate equal to the lesser of (i) one percent (1%) per month or (ii)
the maximum legal rate permitted under law.
5.7 DIRECTV agrees to provide quarterly reports on all Incremental Wink
Revenues (as defined herein) generated through the use of the Wink
Software. "Incremental Wink Revenues" shall be defined as (a)
Transaction Revenue Share for Wink-enabled DIRECTV System Subscribers
(for the report of which DIRECTV may attach the Transaction Revenue
Share reports provided by Wink pursuant to Section 5.6), (b)
incremental, net advertising sales revenue received from selling
Interactive Wink Program enhancements in connection with local spot
ads or any form of third party advertising or sponsorship on
Interactive Wink Programs; provided, however that the parties
acknowledge and agree that DIRECTV shall not report, and Wink shall
not be entitled to any portion of, any fees or similar revenues
related directly to the video exhibition of spot advertising and/or
sponsorship, and (c) DIRECTV revenue shares or fees received from
Third Party Wink Program Providers .in exchange for Wink-enabled
advertising or other marketing services; provided, however that the
parties acknowledge and agree that DIRECTV shall not report, and Wink
shall not be entitled to any portion of, any fees or similar revenues
related to payments from Third Party Program Providers for access to
DIRECTV subscribers or distribution of that party's Interactive Wink
Programs to DIRECTV subscribers.
5.8. [*]
(a) A "1999 Wink Subscriber Unit" shall be a DIRECTV System
subscriber provided with an activated Wink-enabled DIRECTV System
Receiver on or before the Measurement Date or, for a subscriber whose
Wink-enabled DIRECTV System Receiver was activated prior to January
1, 2000, the number x = the number of full months that such
subscriber had an activated Wink-enabled DIRECTV System Receiver
prior to January 1, 2000, divided by the number of months elapsed
between the Measurement Date and January 1, 2000. The 1999 Revenue
Guarantee shall be the lesser of (x) one dollar ($1.00) and (y) one
dollar ($1.00) multiplied by the number of months
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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.
Proprietary and Confidential 12
<PAGE> 13
elapsed between the Measurement Date and January 1, 2000 and divided
by six (6). If. during 1999, DIRECTV's Incremental Wink Revenues have
not reached a cumulative total equal to the 1999 Revenue Guarantee
per 1999 Wink Subscriber Unit, Wink shall pay DIRECTV within forty
five (45) days, the difference between the 1999 Revenue Guarantee per
1999 Wink Subscriber Unit and the actual cumulative Incremental Wink
Revenues per 1999 Wink Subscriber Unit. If DIRECTV has reached a
minimum of one million (1,000,000) Wink-enabled DIRECTV System
Subscribers by the first anniversary of the Measurement Date, Wink
agrees to guarantee certain revenues for DIRECTV as follows:
(b) A "First Year Wink Subscriber Unit" shall be a Wink-enabled
DIRECTV System subscriber provided with an activated Wink-enabled
DIRECTV System Receiver on or before the Measurement Date or, for a
subscriber whose Wink-enabled DIRECTV System Receiver was activated
within twelve (12) months of the Measurement Date, the number x = the
number of full months elapsed prior to 12 months following the
Measurement Date that such subscriber had a Wink-enabled DIRECTV
System Receiver, divided by 12. If, within twelve (12) months of the
applicable Measurement Date, DIRECTV's Incremental Wink Revenues have
not reached a cumulative total of $2.50 per First Year Wink
Subscriber Unit, Wink shall pay DIRECTV within forty five (45) days,
the difference between $2.50 per First Year Wink Subscriber Unit and
the actual cumulative Incremental Wink Revenues per First Year Wink
Subscriber Unit, provided that any payments made by Wink under
section 5.8(a) shall be deducted first.
(c) A "Second Year Wink Subscriber Unit" shall be a Wink-enabled
DIRECTV System Subscriber provided with an activated Wink-enabled
DIRECTV System Receiver on or before the first anniversary of the
Measurement Date or, for a subscriber whose Wink-enabled DIRECTV
System Receiver was activated after such anniversary, the number x =
the number of full months elapsed after the first anniversary of the
Measurement Date and prior to twenty four 24 months following the
Measurement Date that such subscriber had a Wink-enabled DIRECTV
System Receiver, divided by 12. If DIRECTV's Incremental Wink
Revenues between the first and second anniversaries of the
Measurement Date ("Year Two") have not reached a cumulative total of
$2.50 per Second Year Wink Subscriber Unit, Wink shall pay DIRECTV
within forty five (45) days, the difference between $2.50 per Second
Year Wink Subscriber Unit and the actual cumulative Incremental Wink
Revenues captured in Year Two per Second Year Wink Subscriber Unit.
(d) A "Third Year Wink Subscriber Unit" shall be a Wink-enabled
DIRECTV System subscriber provided with an activated Wink-enabled
DIRECTV System Receiver on or before the second anniversary of the
Measurement Date or, for a subscriber whose Wink-enabled DIRECTV
System Receiver was activated after such anniversary, the number x =
the number of full months elapsed after the second anniversary of the
Measurement Date and prior to thirty six (36) months following the
Measurement Date that such subscriber had a Wink-enabled DIRECTV
System Receiver, divided by 12. If DIRECTV's Incremental Wink
Revenues between the second and third anniversaries of the
Measurement Date ("Year Three") have not reached a cumulative total
of $2.50 per Third Year Wink Subscriber Unit, Wink shall pay DIRECTV
within forty five (45) days, the difference between $2.50 per Third
Year Wink Subscriber Unit and the actual cumulative Incremental Wink
Revenues captured in Year Three per Third Year Wink Subscriber Unit.
If DIRECTV has not reached a minimum of one million (1,000,000)
Wink-enabled DIRECTV System Subscribers by the first anniversary of
the Measurement Date, but does reach a minimum of one million
(1,000,000) Wink-enabled DIRECTV System Subscribers within eighteen
(18) months
Proprietary and Confidential 13
<PAGE> 14
of the Measurement Date, and (x) Hughes Network Systems or Sony
Electronics ships over 10,000 units of a Wink-enabled DIRECTV System
Receiver to residential customers prior to March 31, 2000, and (y)
such Wink-enabled DIRECTV System Receiver model is reasonably
anticipated by such Participating Manufacturer to be its highest
volume model during the applicable model year, Wink agrees to
guarantee certain revenues for DIRECTV as follows:
(e) A "First Period Wink Subscriber Unit" shall be a Wink-enabled
DIRECTV System subscriber provided with an activated Wink-enabled
DIRECTV System Receiver on or before the Measurement Date or, for a
subscriber whose Wink-enabled DIRECTV System Receiver was activated
within eighteen (18) months of the Measurement Date, the number x =
the number of full months elapsed prior to eighteen (18) months
following the Measurement Date that such subscriber had a
Wink-enabled DIRECTV System Receiver, divided by 18. If, within
eighteen (18) months of the applicable Measurement Date, DIRECTV's
Incremental Wink Revenues have not reached a cumulative total of
$2.50 per First Period Wink Subscriber Unit, Wink shall pay DIRECTV
within forty five (45) days, the difference between $2.50 per First
Period Wink Subscriber Unit and the actual cumulative Incremental
Wink Revenues per First Period Wink Subscriber Unit, provided that
any payments made by Wink under section 5.8(a) shall be deducted
first.
(f) The Second Period shall be defined as the time between 18 months
following the Measurement Date and 30 months following the
Measurement Date. A "Second Period Wink Subscriber Unit" shall be a
Wink -enabled DIRECTV System Subscriber provided with an activated
Wink-enabled DIRECTV System Receiver within 18 months of the
Measurement Date or, for a subscriber whose Wink-enabled DIRECTV
System Receiver was activated after such date, the number x = the
number of full months elapsed during the Second Period that such
subscriber had a Wink-enabled DIRECTV System Receiver, divided by 12.
If DIRECTV's Incremental Wink Revenues during the Second Period have
not reached a cumulative total of $2.50 per Second Period Wink
Subscriber Unit, Wink shall pay DIRECTV within forty five (45) days,
the difference between $2.50 per Second Period Wink Subscriber Unit
and the actual cumulative Incremental Wink Revenues captured in the
Second Period per Second Period Wink Subscriber Unit.
(g) The Third Period shall be defined as the time between 30 months
following the Measurement Date and 42 months following the
Measurement Date. A "Third Period Wink Subscriber Unit" shall be a
Wink-enabled DIRECTV System Subscriber provided with an activated
Wink-enabled DIRECTV System Receiver within 30 months of the
Measurement Date or, for a subscriber whose Wink-enabled DIRECTV
System Receiver was activated after such date, the number x = the
number of full months elapsed during the Third Period that such
subscriber had a Wink-enabled DIRECTV System Receiver, divided by 12.
If DIRECTV's Incremental Wink Revenues during the Third Period have
not reached a cumulative total of $2.50 per Third Period Wink
Subscriber Unit, Wink shall pay DIRECTV within forty five (45) days,
the difference between $2.50 per Third Period Wink Subscriber Unit
and the actual cumulative Incremental Wink Revenues captured in the
Third Period per Third Period Wink Subscriber Unit.
6. PROMOTION AND RESEARCH
6.1 The parties agree to issue a joint and mutually agreeable press
release announcing this Master Agreement promptly after the Effective
Date, and in any event within 30 days of the Effective Date. Wink
shall provide DIRECTV with a draft of this release for review and
approval within three (3) business days of the last party's execution
of the Master Agreement. The parties agree that such press release
shall include a specific statement regarding the expected volume of
Wink-enabled
Proprietary and Confidential 14
<PAGE> 15
DIRECTV System Receivers to be shipped during the Term (e.g., a
minimum of one million units) and the expected Measurement Date
(e.g., June 1999). DIRECTV agrees to sponsor an event for the press
at the announcement of the Master Agreement, the incremental cost of
which shall be shared equally by the parties, subject to Wink's prior
approval of such incremental costs. If the event is held at the
Winter Consumer Electronics Show in January of 1999, DIRECTV agrees
to fully fund such event. Wink agrees to provide all necessary
support for the development of mutually agreed upon sample
Interactive Wink Programs for such event, including, without
limitation, adequate training of DIRECTV personnel and adequate
Wink-employee staffing for demonstrations at the Winter Consumer
Electronics Show.
6.2. Wink may, from time to time and in conformance with all applicable
federal, state or other law, undertake marketing tests and surveys,
rating polls and other research in connection with Wink-enabled
DIRECTV System Subscribers, subject to limitations on Subscriber
contacts with customers of certain sales agents of DIRECTV, as
identified by DIRECTV from time to time. Wink shall give prior
written notice to DIRECTV of the nature and scope of each such test,
survey, poll or project which applies to or involves Wink-enabled
DIRECTV System Subscribers. DIRECTV may in its sole discretion, to
the extent permissible under applicable law, provide Wink, upon
request from Wink, with reasonable assistance in conducting such
research in connection with undertaking such test, survey, poll or
project. Wink shall reimburse DIRECTV for all costs and expenses
incurred in connection with rendering such assistance upon demand.
Wink shall promptly provide DIRECTV with the results of all such
tests, surveys, polls and projects at no cost to DIRECTV. The results
of all such tests, surveys, polls and projects shall be Confidential
Information, shall be in an aggregate form only, and shall not
identify any Wink-enabled DIRECTV System Subscriber. DIRECTV agrees
that Wink shall be provided with any and all research in an aggregate
and anonymous form directly related to the deployment, launch, and
usage of the Interactive Wink Programs service by Wink-enabled
DIRECTV System Subscribers that is created or paid for by DIRECTV at
no cost to Wink. Such research shall be Confidential Information as
defined in Section 12 hereof.
6.3. DIRECTV acknowledges that Wink will be providing to Programmers and
Third Party Wink Program Providers, if any, aggregate reports on
Wink-enabled DIRECTV System Subscriber usage, vote and poll responses
to the Interactive Wink Programs that originate from such
Programmer's video programming and advertising or from such Third
Party Wink Program Provider's Interactive Wink Programs,
respectively. DIRECTV further acknowledges that Wink will be
providing to Programmers, Third Party Wink Program Providers,
advertisers, or parties designated by such entities to fulfill Wink
Transactions ("Fulfillment Entities") both (a) aggregate reports on
Wink-enabled DIRECTV System Subscriber responses and (b) provided
that such Wink-enabled DIRECTV System Subscribers have not requested
their removal from any such data collection, reports on individual
Wink Transactions that are generated as a result of a Wink-enabled
DIRECTV System Subscriber's deliberate interaction with the
Interactive Wink Program to which the report relates. Wink represents
and warrants to DIRECTV that: (i), except as set forth herein, it
shall not collect, use or provide to any third party any information
related to a Wink-enabled DIRECTV System Subscriber including, but
not limited to, name, address, phone number and credit card number,
(collectively, "Wink-enabled DIRECTV System Subscriber Data"); (ii)
Fulfillment Entities shall be expressly prohibited pursuant to
executed written agreements with Wink from (x) collecting or using
any Wink-enabled DIRECTV System Subscriber Data for purposes other
than fulfilling orders and requests from the Wink -enabled DIRECTV
System Subscriber, and (y) selling or providing any Wink-enabled
DIRECTV System Subscriber Data to third parties, except that,
notwithstanding the foregoing (x) and (y) Fulfillment Entities may be
permitted to use or provide to third parties the Wink-enabled DIRECTV
System Subscriber Data related to a particular Subscriber
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if such Wink-enabled DIRECTV System Subscriber has purchased a
product through an Interactive Wink Program, provided that such
Wink-enabled DIRECTV System Subscriber Data shall not identify
DIRECTV Subscribers as "DIRECTV Subscribers." Notwithstanding the
foregoing, Fulfillment Entities may use any data regarding a
Wink-enabled DIRECTV System Subscriber that is collected other than
in connection with the Interactive Wink Programs and without Wink's
assistance. Wink agrees to provide Wink-enabled DIRECTV System
Subscribers with a means of securely registering their credit card or
other preferred method of payment with the Wink Response Network
through an on-screen Interactive Wink Program, and agrees to clearly
disclose and provide Wink-enabled DIRECTV System Subscribers with a
means of "opting out" of allowing Fulfillment Entities to provide
their DIRECTV System Subscriber Data to third parties (such "opt-out"
option shall apply to all Wink Transactions initiated by that
Wink-enabled DIRECTV System Subscriber). Such credit card
registration process shall be encrypted according to current
television industry encryption standards, provided that if no such
standard exists, the parties shall use reasonable efforts to reach
agreement on such an encryption standard. Wink further agrees to make
DIRECTV a third party beneficiary of Wink's agreements with
Fulfillment Entities, if permitted by such agreements, Wink
represents and warrants that it shall use its best reasonable efforts
to enforce its rights under such agreements with Fulfillment
Entities, to DIRECTV's benefit, should such Fulfillment Entities be
in breach of such agreements with respect to their unauthorized use
of any DIRECTV Subscriber data.
6.4. DIRECTV agrees to promote and market the availability of the
Interactive Wink Programs to Wink enabled DIRECTV System Subscribers
in the Territory. The parties agree that DIRECTV may brand such
interactive capabilities of the Wink-enabled DIRECTV System Receiver
in DIRECTV's sole discretion under any brand DIRECTV chooses, and
that DIRECTV's use of any Wink-owned or controlled brand may be done
in a manner so as to be clearly subordinate to DIRECTV's brand and in
conformance with DIRECTV's trademark utilization guidelines. Subject
to the preceding understanding and agreement, DIRECTV agrees to use
reasonable efforts to explore the use of Wink brands in DIRECTV's
marketing of Interactive Wink Programs and Wink-enabled DIRECTV
System Receivers. Advertising, promotional, marketing and/or sales
materials concerning the Interactive Wink Programs or the Wink
Software provided by Wink may be used at the sole discretion of
DIRECTV. Wink agrees that it shall only provide to DIRECTV those
marketing materials whereby Wink has received all necessary prior
approval from the applicable Programmers and Third Party Wink Program
Providers featured in such marketing materials such that no further
approvals shall be required from Programmers and Third Party Wink
Program Providers for minor customization of the materials, including
but not limited to, adding the name, logo and other marks of DIRECTV.
6.5 DIRECTV agrees that any marketing materials separately developed by
DIRECTV intended to promote the capabilities of the Interactive Wink
Programs must be approved in writing by Wink prior to distribution,
which approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, use of the names and marks of Wink and
separately Wink-developed marketing and promotional materials
regarding Wink and the Interactive Wink Programs in routine
promotional materials, such as program guides, program listings and
bill stuffers, shall be deemed approved unless Wink specifically
gives written notice to DIRECTV to the contrary. Nothing contained
herein shall limit or restrict the right of DIRECTV to use such names
and marks (i) in connection with the exercise of its rights hereunder
or (ii) as permitted under any other contract or agreement, in
connection with any advertising inserted in any television service or
programming if the sponsor of such advertisement had the right to use
such names and marks therein or otherwise than under this Master
Agreement.
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<PAGE> 17
6.6 DIRECTV agrees to provide to Wink at no charge, on a monthly basis,
DIRECTV's good faith estimate of the number of Wink-enabled DIRECTV
System Subscribers and the number of Wink-enabled DIRECTV System
Receivers installed in Wink-enabled DIRECTV System Subscriber homes.
The panics shall use good faith efforts in exploring methods to
include in the monthly report data detailing the total number of
Wink-enabled DIRECTV System Subscriber deletions, if any, and
Subscriber breakdowns by state and metropolitan DMAs. The parties
agree that Wink shall have the right to audit DIRECTV's good faith
estimates as defined in Section 14.12.
6.7 Subsequent to the sale of the one millionth (l,000,000th)
Wink-enabled DIRECTV System Receiver, Wink agrees to provide DIRECTV
with matching promotional funds from Wink in the amount of one (1)
dollar per Wink-enabled DIRECTV System Receiver ("Wink MDF Funds").
All promotional and marketing expenses deemed eligible for matching
promotional funds by DIRECTV must be submitted to Wink for approval
prior to commitment to such expenses, which approval shall not be
unreasonably withheld. Such payments shall be made monthly within 30
days of receipt of both (a) the subscriber reports defined in section
6.6 and (b) presentation of evidence of expenditure of such amounts.
Marketing and promotional expenses eligible for matching promotional
funds include events, television, print, radio or outdoor
advertising, retail marketing materials, direct mail campaigns and
other marketing communications specifically aimed at improving sales
of Wink-enabled DIKECTV System Receivers and/or awareness or usage of
Interactive Wink Programs among Wink-enabled DIRECTV System
Subscribers. The parties agree that each party may contribute
"in-kind" products and services in place of cash outlays on the
approval of the other party. "In-kind" products and services include,
but are not limited to, local advertising avails and templates for
various forms of advertising and promotion that can be tailored for
DIRECTV's use.
7. REPRESENTATIONS, WARRANTIES AND LIABILITY LIMITATION
7.1 WINK'S WARRANTIES.
7.1.1 Wink hereby represents and warrants to DIRECTV that:
(i) Wink is a corporation duly organized, validly existing and in
good standing under the laws of the State of California;
(ii) Wink has the requisite power and authority to execute and
deliver this Master Agreement and to fully perform its obligations
hereunder;
(iii) Wink has the right to furnish the Wink Software, the
Interactive Wink Programs, the Wink Virtual Channels and all content
contained therein and the services related thereto as provided in
this Master Agreement, free and clear of any restrictions by third
parties;
(iv) the execution, delivery and performance of this Master Agreement
has been duly authorized by all corporate actions necessary on the
part of Wink;
(v) Wink is not subject to any contractual or other legal obligation
which will in any way interfere with its full performance of this
Master Agreement;
(vi) the individual executing this Master Agreement on behalf of Wink
has the authority to do so;
(vii) the Wink Software and the Wink Response Network (and subsequent
revisions and upgrades to same provided by Wink to DIRECTV) will
operate and perform in accordance with all published specifications
with respect thereto;
(viii) the use or carriage by DIRECTV of the Wink Software, the Wink
Engine, the Wink Virtual Channels or any other rights granted by Wink
hereunder will not infringe upon the patent, copyright, trademark, or
other proprietary right of any third party; and
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<PAGE> 18
(ix) Wink will perform all obligations and render all services
hereunder in a professional and workmanlike manner to the best of its
abilities.
7.1.2 Wink represents and warrants to DIRECTV that the Wink Software, the
Wink Engine, the Wink Virtual Channels and the Wink Response Network
(collectively, "Wink Products") are designed and developed, to be and
will continue to be Year 2000 Compliant. "Year 2000 Compliant" shall
mean that:
(a) the Wink Products are fully functional and performs in accordance
with Wink's published specifications and the specific warranties set
forth elsewhere in this Master Agreement (together, the "Standards")
prior to, during, and after the calendar year 2000 A.D., and that the
Wink Products shall perform during each such period of time without
any error relating to date functionality and/or data;
(b) without limiting the generality of the foregoing, that the Wink
Products (i) shall not cease to perform or provide or cause any
software and/or system with which the Wink Products operates to
provide invalid or incorrect results as a result of date
functionality and/or data. or otherwise experience any degradation of
performance or functionality with respect to the Standards as a
result of such interfacing specifically arising from. relating to or
including date functionally, (ii) has been developed and designed to
be fully interoperable with year 2000-compliant software. hardware,
and data and to ensure year 2000 compatibility, including, but not
limited to, date data century recognition and calculations which
accommodate same century and multi-century and leap year formulas and
date values; (iii) shall effectively and accurately manage and
manipulate data derived from, involving or relating in any way to
dates including single century formulas and multi-century or leap
year formulas, and will not cause an abnormally ending scenario
within the Wink Products, or generate incorrect values or invalid
results involving such dates, and (iv) provides that all date-related
user interface functionalities and data fields include an indication
of century.
7.2 DIRECTV represents and warrants to Wink that:
(i) DIRECTV is a corporation duly organized and validly existing
under the laws of the State of California;
(ii) DIRECTV has the requisite power and authority to enter in this
Master Agreement and to fully perform its obligations hereunder;
(iii) the execution, delivery and performance of this Master
Agreement has been duly authorized by all corporate actions necessary
on the part of DIRECTV;
(iv) DIRECTV is not subject to any contractual or other legal
obligation which will in any way interfere with its full performance
of this Master Agreement;
(v) the individual executing this Master Agreement on behalf of
DIRECTV has the authority to do so; and
(vi) DIRECTV will perform all obligations and render all services
hereunder in a professional and workmanlike manner to the best of its
abilities.
7.3 LIMITATION OF LIABILITY
NEITHER WINK, ON THE ONE HAND, NOR DIRECTV, ON THE OTHER HAND, SHALL,
FOR ANY REASON OR UNDER ANY LEGAL THEORY, BE LIABLE TO THE OTHER OR
ANY THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR LOSS OF PROFITS, REVENUES, DATA OR
SERVICES, REGARDLESS OF WHETHER SUCH DAMAGES OR LOSS WAS FORESEEABLE
AND REGARDLESS OF
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<PAGE> 19
WHETHER IT WAS INFORMED OR HAD DIRECT OR IMPUTED KNOWLEDGE OF THE
POSSIBILITY OF SUCH DAMAGES OR LOSS IN ADVANCE.
8. INDEMNIFICATION
8.1 Wink shall indemnify, defend and hold harmless DIRECTV, its parents,
subsidiaries, and their respective officers, directors, employees and
agents from and against any and all losses, settlements. claims,
actions, suits, proceedings, investigation, judgments, awards,
damages, liabilities, costs and expenses including, without
limitation, reasonable attorneys' fees (collectively "Losses" and,
individually, a "Loss") which arise out of or as a result of:
(i) any breach of this Master Agreement by Wink;
(ii) any claim, demand, action, suit or proceeding in which it
is alleged that the Wink Products or any part thereof, or
the content of the Wink Virtual Channel violates or
infringes any patent or copyright, trademark or other
proprietary right of any third party or constitutes a
misappropriation of any third party's trade secrets;
(iii) any improper disclosure by Wink of any Confidential
Information as defined herein ("Confidential Information
Disclosures");
(iv) any misuse under the terms of this Agreement by Wink or
any third party, including, without limitation any
Fulfillment Entity, of any DIRECTV Subscriber information,
including but not limited to DIRECTV Subscriber credit
card information or other personal financial data;
and shall reimburse them for any and all legal, accounting and other
fees, costs and expenses (collectively, "Expenses") reasonably
incurred by any of them in connection with investigating, mitigating
or defending any such Loss; provided, however, that Wink will not
have any obligation or liability under this Section 8.1 to the extent
that DIRECTV has an obligation or liability with respect to the same
Loss under Section 8.2. If it is, or in the opinion of Wink may be,
determined by competent authority that the Wink Products or any part
thereof infringes any patent, copyright, trade secret or trademark of
a third party or is enjoined, then Wink at its sole option and
expense may: (a) procure for DIRECTV the right under such patent,
copyright, trade secret or trademark to use, reproduce and distribute
the Wink Products or such part thereof or such trademark as
authorized in this Master Agreement, at no cost to DIRECTV; (b)
subject to DIRECTV's approval which shall not be unreasonably
withheld, replace the Wink Products or such part thereof or such
trademark with other suitable software or trademark without material
degradation in performance or functionality at no cost to DIRECTV; or
(c) subject to DIRECTV's approval which shall not be unreasonably
withheld, modify the Wink Products or such part thereof or such
trademark to avoid infringement without material degradation in
performance or functionality at no cost to DIRECTV.
8.2 Wink shall indemnify, defend and hold harmless Participating
Manufacturers, their parents, subsidiaries, and their respective
officers, directors, employees and agents from and against any and
all losses, settlements, claims, actions, suits, proceedings,
investigation, judgments, awards, damages, liabilities, costs and
expenses including, without limitation, reasonable attorneys' fees
(collectively "Losses" and, individually, a "Loss") which arise out
of or as a result of any claim, demand, action, suit or proceeding in
which it is alleged that the Wink Products or any part thereof, or
any Wink Virtual Channel, violates or infringes any patent or
copyright, trademark or other
Proprietary and Confidential 19
<PAGE> 20
proprietary right of any third party or constitutes a
misappropriation of any third party's trade secrets.
8.3 DIRECTV shall indemnify Wink. its officers, directors, shareholders,
employees and agents for, and shall hold them harmless from and
against, any and all Losses which are sustained or incurred by or
asserted against any of them and which arise out of any breach of
this Master Agreement by DIRECTV and shall reimburse them for any and
all Expenses reasonably incurred by any of them in connection with
investigating, mitigating or defending any such Loss.
8.4 Promptly after receipt by a party of notice of the commencement of
any action, suit, proceeding or investigation in respect of which
such party may make a claim for indemnification hereunder, such party
will give written notice thereof to the other party; but the failure
to so notify the other party will not relieve the other party from
any liability or obligation which the other party may have to any
indemnified person (i) otherwise than under this Master Agreement or
(ii) under this Master Agreement except to the extent of any material
prejudice to the other party resulting from such failure. If any such
action, suit, proceeding or investigation is brought against an
indemnified person, the indemnifying party will be entitled to
participate therein and, if it wishes to assume the defense thereof
and gives written notice to the indemnified person of its election so
to assume the defense thereof within 15 days after notice shall have
been given to it by the indemnified person pursuant to the preceding
sentence, will be entitled to assume the further defense thereof.
Each indemnified person will be obligated to cooperate reasonably
with the indemnifying party, at the expense of the indemnifying
party, in connection with such defense and the compromise or
settlement of any such action, suit, proceeding or investigation. If
Wink is the indemnifying party, Wink shall make no compromise or
settlement of any claim without the prior written consent of DIRECTV,
which consent shall not be unreasonably withheld.
9. NOTICES
All notices, statements, and other communications given hereunder
shall be in writing and shall be delivered by personal delivery,
certified mail. return receipt requested, or by next day express
delivery. Such notices must be addressed as follows:
If to WINK COMMUNICATIONS:
Attn.: Chief Financial Officer
1001 Marina Village Parkway
Alameda, CA 94501
If to DIRECTV:
Attn.: Vice President, Advanced Products
2230 East Imperial Hwy,
El Segundo, CA 90245
With a copy to:
Senior Vice President and General Counsel
Business Affairs
The date of such telegraphing, personal or express delivery, or the
date of receipt of a certified notice, if applicable, shall be deemed
the date on which such notice is given and effective.
Proprietary and Confidential 20
<PAGE> 21
10. TRADEMARKS
Other than as expressly provided otherwise herein, all right, title
and interest in and to the Interactive Wink Programs or other rights,
of whatever nature, related thereto shall remain the property of
Wink. Further, the parties acknowledge and agree that with respect to
all names, logos, marks, copyright notices or designations owned and
utilized by the respective party in connection with the activities of
that party are the sole and exclusive property of that party and no
rights or ownership are intended to be or shall be transferred as a
result of this Agreement. Wink shall not use, and no right or license
is herein granted to Wink to use, any of the trade names, trademarks,
copyrights, styles, slogans, titles, logos or service marks of
DIRECTV. Notwithstanding the foregoing, DIRECTV permits Wink to
include DIRECTV's trade name and logo for Wink's industry marketing
materials, subject to (i) DIRECTV's Trademark and Style Guide.
attached hereto and incorporated herein as Exhibit M and (ii) prior
written approval by DIRECTV.
11. FORCE MAJEURE
Neither party shall have any liability to the other party for any
failure to perform hereunder, if such failure is due to: an act of
God; inevitable accident; fire; lockout; strike or other labor
dispute; riot or civil commotion; act of government or governmental
instrumentality (whether federal, state or local); act of terrorism;
failure of performance by a common carrier; failure in whole or in
part of technical facilities; sun spots or other electronic,
electro-magnetic, atmospheric or other condition affecting
transmission; loss or degradation of any DIRECTV satellite capacity
(regardless of whether the Wink Interactive Programs are currently
delivered on the affected transponder(s) at the time of such loss or
degradation); or other cause (excluding financial inability or
difficulty of any kind) beyond such party's reasonable control.
Either party may terminate this Master Agreement upon written notice
to the other party in the event of a Force Majeure which prevents
either party from substantially performing under this Master
Agreement for a period of sixty (60) continuous days.
12. CONFIDENTIALITY
As used herein, "Confidential Information" shall include: (x) the
terms and conditions, other than the existence and duration, of this
Master Agreement; (y) any information marked or orally disclosed as
"confidential;" and (z) all personally identifiable information
related to Wink-enabled DIRECTV System Subscribers or any other
subscriber of DIRECTV, excluding such information which Wink-enabled
DIRECTV System Subscribers have affirmatively provided to (i) Wink,
(ii) a Programmer, or (iii) a Third Party Wink Program Provider with
the express permission that the receiving party could provide such
information to advertisers and other third parties. Neither party
shall disclose Confidential Information to any third party (other
than as necessary to its respective employees, in their capacity as
such) except: (i) as expressly provided herein; (ii) as may be
required by any court of competent jurisdiction, governmental agency,
law or regulation, provided that the disclosing party takes
reasonable steps to obtain confidential treatment of such information
pursuant to an appropriate Protective Order (in such event the
disclosing party. shall also notify the other party a reasonable time
prior to disclosure so that the non-disclosing party may take further
steps to protect the confidentiality of such information); (iii) as
part of the normal reporting or review procedure to a party's
accountants, auditors, agents, legal counsel and employees of parent
and subsidiary companies, provided such accountants, auditors,
agents, investors and potential investment partners, legal counsel,
and employees of parent and subsidiary companies agree to be bound by
this Section; and (iv) to enforce any of a party's rights pursuant to
this Master Agreement. Any data transmission, including all reports,
between Wink, DIRECTV and approved third parties
Proprietary and Confidential 21
<PAGE> 22
containing DIRECTV Subscriber data, is hereby identified as
Confidential Information and all such Subscriber data shall be
transmitted and stored in such a manner so as to ensure, through the
use of best efforts, the security of such data from access by
unauthorized parties.
13. TERMINATION
13.1 BREACH. Notwithstanding any other provision herein, either party
shall have the right to terminate this Master Agreement and any
License granted herein by giving written notice to the other party if
such other party breaches any of its material obligations under this
Master Agreement and such breach is not cured within thirty (30) days
of receipt of written notification specifically setting forth those
items of nonperformance. The termination of this Master Agreement by
either party shall be without prejudice to any other remedies that
party may have. Each party shall be obligated to pay outstanding fees
and payments accrued as of the date of termination,
13.2 BANKRUPTCY. If a party (i) becomes bankrupt or insolvent, however
evidenced, (ii) admits in writing its inability to pay its debts when
due, (iii) makes a general assignment for the benefit of creditors,
(iv) has appointed, voluntarily or involuntarily, any trustee,
receiver, custodian or conservator with respect to it or a
substantial part of its property, (v) files, or has filed against it,
a voluntary or involuntary petition in bankruptcy or (vi) makes any
arrangement or otherwise becomes subject to any proceedings under the
bankruptcy, insolvency, reorganization or similar laws of the United
States or any state, then the other party shall have the right at any
time thereafter to terminate this Master Agreement by giving written
notice to such party.
13.3 RIGHTS UPON TERMINATION. All rights of DIRECTV to use the Wink
Software (or any License granted hereunder for any reason) will cease
upon expiration of the Term or upon the termination of this Master
Agreement, and DIRECTV will (i) immediately purge all copies of all
Wink Software from all computer processors or storage media on which
DIRECTV has installed or permitted others to install such Wink
Software (not including software, if any, within any Wink-enabled
DIKECTV System Receiver, (ii) within ninety (90) days of such
expiration or termination return all materials (other than the
Equipment) provided by Wink or allow Wink to retrieve such materials
at DIRECTV's Facilities on notice during regular business hours and
without interrupting DIKECTV operations and (iii) within ninety (90)
days of such expiration or termination, certify to Wink in writing,
signed by an officer of DIRECTV, that all copies of the Wink Software
have been returned to Wink or destroyed and that no copy of any Wink
Software remains in DIRECTV's possession or under its control. Upon
termination or expiration of the Master Agreement Wink shall
immediately discontinue all use of all DIRECTV trademarks, including
all marks associated in any way whatsoever with the Wink-enabled
DIRECTV System and all marks or names associated with any programming
or product offered by DIRECTV.
14. GENERAL
14.1 BINDING EFFECT. Assignment This Master Agreement and License shall be
binding upon the parties hereto and their respective successors and
assigns, except that it may not be assigned by transfer, by operation
of law or otherwise, without the prior written consent of the
non-transferring party, which shall not be unreasonably withheld;
provided, however, that either party may assign its rights and
obligations under this Master Agreement and License, in whole or in
part (i) to an Affiliated Company or to a successor entity to
assignor's business; (ii) to a third party as part of preparing to go
or going public; or (iii) to a third party, provided the assignor
remains primarily liable for the performance of such third party's
obligations hereunder. Except as otherwise provided herein, any
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assignment of rights or delegation of duties under this Master
Agreement by a party without the prior written consent of the other
party, if such consent is required hereby, shall be void. Except as
otherwise provided herein, no person shall be a third party
beneficiary of this Master Agreement. For the purposes of this Master
Agreement, "Affiliated Company(ies)" shall mean, with respect to any
person or entity, any other person or entity directly or indirectly
controlling, controlled by or under common control (i.e., the power
to direct affairs by reason of ownership of voting stock, by contract
or otherwise) with such person or entity and any member, director,
officer or employee of such person or entity.
14.2 AMENDMENTS, MODIFICATIONS, CANCELLATIONS. Except as otherwise
contemplated herein, no addition to, and no cancellation, renewal,
extension, modification or amendment of, this Master Agreement shall
be binding upon a party unless such addition, cancellation, renewal,
extension, modification or amendment is set forth in a written
instrument which states that it adds to, amends, cancels, renews,
extends or modifies this Master Agreement and which is executed and
delivered on behalf of each party by an officer of each party.
14.3 WAIVERS LIMITED. No waiver of any provision of this Master Agreement
shall be binding upon a party unless such waiver is set forth in a
written instrument which is executed and delivered on behalf of such
party by an officer of such party. Such waiver shall be effective
only to the extent specifically set forth in such written instrument.
14.4 RELATIONSHIP. Neither party shall be or hold itself out as the agent
of the other party under this Master Agreement. Nothing contained
herein shall be deemed to create, and the parties do not intend to
create, any relationship of partners or joint venturers as between
DIRECTV and Wink, and neither party is authorized to or shall act
toward third parties or the public in any manner which would indicate
any such relationship. Likewise, no supplier of advertising or
programming or anything else included in connection with the
Interactive Wink Programs shall be deemed to have any privity of
contract or direct contractual or other relationship with DIRECTV by
virtue of this Master Agreement or DIRECTV's License hereunder. Wink
disclaims any present or future right, interest or estate in or to
the transmission facilities of DIRECTV.
14.5 GOVERNING LAW. The validity, interpretation, performance and
enforcement of this Master Agreement shall be governed by the law of
the State of California, without regard to its principles of
conflicts of laws. The respective obligations of the parties under
this Master Agreement are subject to all applicable federal, state
and local laws, rules and regulations.
14.6 DISPUTE RESOLUTION/ARBITRATION.
(i) DISPUTES. Any dispute or disagreement arising between
DIRECTV and Wink shall be resolved according to the following dispute
resolution procedure: First, such dispute shall be addressed to each
party's project manager for discussion and attempted resolution. If
any such dispute cannot be mutually resolved by such project managers
within 5 business days, then such dispute shall be immediately
referred to the senior management of both parties for discussion and
attempted resolution. If such dispute cannot be mutually resolved by
such management representatives within 10 business days, then such
dispute or disagreement may be referred by either party to
arbitration in Los Angeles, California before one arbitrator and
arbitrated in accordance with the Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the
"AAA"), in effect on the date that such notice is given. Once
appointed, the arbitrator shall appoint a time and place for a
pre-hearing status conference not more than 14 days from the date of
his or her appointment, and shall appoint a time and place for a
final hearing not
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<PAGE> 24
more than 45 days from the date of the status conference. The final
hearing shall. if at all possible as determined by such arbitrator,
conclude no later than 30 days after its commencement. The parties
shall also specifically have the right to seek injunctive relief as
part of any arbitration.
(ii) ARBITRATOR. The party that demands arbitration of the
unresolved dispute or disagreement shall specify in writing the
matter to be submitted to arbitration. The dispute or disagreement
shall be referred for resolution by a single arbitrator appointed in
accordance with the Arbitration Rules of the AAA.
(iii) AWARD. The arbitrator shall render a written decision
stating with reasonable detail the reasons for the decision rendered.
Any monetary award shall be payable in immediately available funds
and in United States dollars through a bank in the United States.
(iv) COSTS. Each party shall bear its own cost of preparing
for and presenting its case; and the cost of arbitration, including
the fees, and expenses of the arbitrator, will be shared equally by
DIRECTV and Wink.
(v) ENFORCEMENT. The arbitration award shall be final and
binding upon the parties and may be confirmed by the judgment of any
court having appropriate jurisdiction, including but not limited to
any court located in California.
14.7 ENTIRE AGREEMENT. This Master Agreement together with the Schedules
and Exhibits attached hereto constitutes the entire contract between
the parties with respect to the subject matter hereof and cancels and
supersedes all of the previous or contemporaneous contracts,
representations, warranties and understandings (whether oral or
written) by, between or among the parties with respect to the subject
matter hereof.
14.8 SEVERABILITY. If any provision of this Master Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole
or in part, in any jurisdiction under any circumstances for any
reason, (i) such provision shall be reformed to the minimum extent
necessary to cause such provision to be valid, enforceable and legal
while preserving the intent of the parties as expressed in, and the
benefits to the parties provided by, this Master Agreement or (ii) if
such provision cannot be so reformed, such provision shall be severed
from this Master Agreement and an equitable adjustment shall be made
to this Master Agreement (including, without limitation, addition of
necessary further provisions to this Master Agreement) so as to give
effect to the intent so expressed and the benefits so provided. Such
holding shall not affect or impair the validity, enforceability or
legality of such provision in any other jurisdiction or under any
other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or
enforceability of any other provision of this Master Agreement.
14.9 HEADINGS. The headings set forth in this Master Agreement have been
inserted for convenience of reference only, shall not be considered a
part of this Master Agreement and shall not limit, modify or affect
in any way the meaning or interpretation of this Master Agreement.
11.10 SURVIVAL OF REPRESENTATIONS. All representations and warranties set
forth herein shall survive the termination or expiration of this
Master Agreement and the consummation of the transactions
contemplated hereby. In addition, Sections 8, 10, 12 and 14 shall
survive any termination or expiration of this Master Agreement.
Proprietary and Confidential 24
<PAGE> 25
14.11 MOST FAVORED NATIONS. The term "Distributor" shall be defined as any
entity distributing (or controlling an entity which distributes)
video programming to subscribers. It does not include Programmers as
defined herein. If Wink has agreed to provide or at any time during
the Term agrees to provide, pursuant to a written agreement with any
Distributor ("Third Party Agreement"), on any day during the term
hereof, fees, rates, discounts, credits, commissions, rebates,
marketing support or adjustments (collectively, "Financial
Provisions") which are more favorable to such other distributor than
those set forth in this Master Agreement, Wink shall give written
notice thereof to DIRECTV and, at DIRECTV's election, this Master
Agreement shall be deemed to have been modified so that, from the
date on which such more favorable Financial Provisions are first so
provided (or, if such more favorable Financial Provisions are now
being provided, from the date hereof) and thereafter for so long as
such more favorable Financial Provision continues to be so provided,
DIRECTV shall receive such more favorable Financial Provisions.
14.12 AUDIT RIGHTS. During the term of this Master Agreement and for one
(1) year thereafter, both parties shall maintain accurate and
complete documents and information, as well as books and records in
accordance with generally accepted accounting principles and
practices which, at a minimum, shall contain sufficient information
to enable an auditor to verify compliance with this Master Agreement.
Upon not less than 30 days' prior written notice, either party shall
have the right, during the term of this Master Agreement and for one
(1) year thereafter to examine during normal business hours all of
the documents, information, books and records of the other party to
the extent necessary to verify compliance with this Master Agreement;
provided, however, that such examinations shall not be conducted more
frequently than once annually. If any such examination reveals a
discrepancy in the amount paid by or to either party and the amount
which should have been paid by or to either party, the party who has
been demonstrated to have paid too little shall immediately pay to
the other party an amount equal to the cost of such examination, plus
the amount of the discrepancy, plus interest on the amount of such
discrepancy at the rate of 1.5% per month (or, if lower, the maximum
rate permitted by law) from the date on which such amount was paid by
or should have been paid to the other party through the date on which
payment is made to the other party (such payments shall only be made
by DIRECTV if the under reporting by DIRECTV actually caused Wink to
make payments to DIRECTV).
Proprietary and Confidential 25
<PAGE> 26
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
entered into this Master Agreement as of the Effective Date.
WINK COMMUNICATIONS, INC. DIRECTV, INC.
Title: Title:
By: MAGGIE WILDEROTTER By: Bradley Beale
Name: President CEO Name: Vice President
Proprietary and Confidential 26
<PAGE> 27
EXHIBIT A.: WINK/DIRECTV REVENUE SHARE
WINK RESPONSE SERVICE TRANSACTION FEES
Transaction Revenue Share is calculated as a percentage of Wink's gross revenues
on the applicable Gross Transaction Routing Fees, based on the schedule below:
<TABLE>
<CAPTION>
Responses to Interactive Wink
Number of Wink-enabled Programs carried with third Response to Interactive Wink
DIRECTV System party video programming or Programs inserted by
Subscribers (as reasonably advertising, including those DIRECTV at DIRECTV's
determined by DIRECTV, and provided by Programmers facilities, excluding all
subject to audit by Wink) ("National Responses") National Responses
<S> <C> <C>
Less than 2,006,000 [ * ] [ * ]
2,000,000 - 2,999,999 [ * ] [ * ]
3,000.000 - 3,999,999 [ * ] [ * ]
4,000.000 - 4,999,999 [ * ] [ * ]
5,000.000 - 5,999,999 [ * ] [ * ]
6,000.000 or more [ * ] [ * ]
</TABLE>
The Transaction Revenue Share for the applicable number of Wink-enabled DIRECTV
System Subscribers shall apply for all Gross Transaction Routing Fees captured
by Wink in the month in which that number of Wink-enabled DIRECTV System
Subscribers is reached and for all months thereafter during the Term, until the
next threshold for Wink-Enabled DIRECTV System Subscribers is met, at which
point that next Transaction Revenue Share shall apply for all Gross Transaction
Routing Fees thereafter, and so forth.
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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.
Proprietary and Confidential 27
<PAGE> 28
EXHIBIT B: WINK SOFTWARE
STANDARD ITEMS:
- - WINK BROADCAST SERVER VERSION 2.X
- - WINK SERVER MODULE ENGINE VERSION 1.X
- - WINK RESPONSE SERVER (MODEM RETURN PATH) VERSION 1.X
- - WINK BILLING SYSTEM INTERFACE VERSION 1.X
- - WINK A/D GATEWAY FOR CAPTURING AND REINSERTION OF INTERACTIVE WINK OGRAMS
- - PROVIDED IN ANALOG VBI AND REINSERTED IN DIRECTV DATA BROADCAST STREAMS
- - WINK STUDIO VERSION 2.X (5-SEAT LICENSE)
- - WINK SERVER STUDIO 1.X (5-SEAT LICENSE)
OPTIONAL ITEMS:
- - WINK AD INSERTION SERVER MODULE, DIFFERENT INTERFACES AVAILABLE
Proprietary and Confidential 28
<PAGE> 29
EXHIBIT C.: ATVEF TRANSLATOR ADDENDUM
[*]
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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.
Proprietary and Confidential 29
<PAGE> 30
EXHIBIT D.: PRICING AND PAYMENT TERMS
All products and services are billed Net/45.
(A) WINK SOFTWARE PROVIDED FREE OF CHARGE DURING THE TERM:
- - Site License for the Wink Broadcast Servers 2.x
- - Site License for the Wink Response Server 1.x
- - License for the Wink Billing System Interface l.x
- - Site License for Wink Server Module Engine 1.x
- - Site License for A/D Gateway
- - 5 seat license for Wink Studio 2.x
- - 5 seat license for Wink Server Studio 1.x
DIRECTV may deploy as many copies of each Wink Software program as necessary to
ensure reliable transmission from Facilities for the purpose of serving Wink
- -enabled DIRECTV System Subscribers in the Territory.
(B) WINK SERVICES PROVIDED FREE OF CHARGE:
- - Site survey and installation of all Wink Software and other products
provided by Wink
- - A two-day training session for operating and maintaining the Wink
Broadcast Server
- - A two-day training session for developing Interactive Wink Programs using
Wink Studio and Wink Server Studio
- - Up to five one day Customer Service and Sales training sessions for
DIRECTV staff
- - All training to be provided at DIRECTV facilities at a mutually agreeable
time
(C) THIRD PARTY PRODUCTS PROVIDED FREE OF CHARGE:
- - All necessary server hardware to support reception and transmission of
national Interactive Wink Programs and the Wink Virtual Channels
- - Norpak VBI readers for each incoming analog video stream carrying
Interactive Wink Programs
- - Cables, hubs, etc. necessary to connect all Wink related equipment
- - All telecom products and services to support collecting of Wink Responses
from Wink -enabled DIRECTV System Receivers, and to interface to
DIRECTV's billing system
All hardware products provided must be returned to Wink upon termination or
expiration of the Master Agreement.
(D) REQUIRED THIRD PARTY PRODUCTS TO BE LICENSED BY PARTICIPATING
MANUFACTURERS
- - Wink Engine software
(E) OPTIONAL WINK SOFTWARE AND SERVICES:
- - License for Wink Ad Insertion Server Module (delivery dependent on
vendor/interface)
<TABLE>
<S> <C>
Existing interfaces Free
New interfaces NRE based on time and materials,
not to exceed $25,000
Custom interface work $ 1,000/day
Additional 5-seat license packs for Wink Studio $ 3,000
Additional 5-seat license packs for Wink Server Studio $ 5,000
Phone training and consulting beyond bundled services $125/hr
Technical support $2,500/month
Application development $2,500 min., $125/hr
ATVEF Translator See Section 5.200
</TABLE>
Proprietary and Confidential 30
<PAGE> 31
EXHIBIT E.: PRELIMINARY STATEMENT OF WORK
See Wink/DIRECTV Statement of Work, draft dated 12/22/98
[*]
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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.
Proprietary and Confidential 31
<PAGE> 32
[ * ]
- -------------
* 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> 33
[ * ]
- -------------
* 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> 34
[ * ]
- -------------
* 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> 35
[ * ]
- -------------
* 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> 36
[ * ]
- -------------
* 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> 37
[ * ]
- -------------
* 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> 38
[ * ]
- -------------
* 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> 39
[ * ]
- -------------
* 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> 40
[ * ]
- -------------
* 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> 41
[ * ]
- -------------
* 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> 42
[ * ]
- -------------
* 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> 43
STATEMENT OF WORK
code downloads to the IRD
software. This prototype
will not support broadcast
data nor a return path.
ET5.D2 Manufacturer to Wink
Manufacturer delivers
updated version of the
module software (SW2) which
adds a device control
driver, a broadcast data
driver and a functional TV
Control task.
ET5.D5 DIRECTV to Wink DIRECTV brings up
'Engineering SCID'
transmitting Wink data in
the correct format. Wink
will have telnet access to
control the behavior and
content of the data.
ET6: ET5 + 2 Weeks
ET6.D1 Wink to Manufacturer A version of the Wink Engine
(PROTO2)' which supports
apps delivered via broadcast
data stream. and user input
from the IRD control task.
ET6.D2 Manufacturer to Wink QA Test Environments
ET6.D2 Manufacturer to Wink An updated version module
software (SW3) which adds
support for the modem, and a
??TCP/IP/PPP?? stack.
ET7: ET6 + 3 Weeks QA Begins at Wink
ET7.D 1 Wink to Manufacturer Wink delivers a 3rd version
of the Wink Engine (PROTO3)
which supports a' return
path over the modem. Wink
Engine is 'code complete'
with all features and
functions having passed
engineering test.
ET8: ET7 + 6 Weeks
ET8.D1 Wink to Manufacturer Wink Software on HW1 modules
ready for Certification at
Manufacturer (PROTO4).
ET8.D2 Manufacturer to Wink Final Manufacturer Hardware
(HW2) and updated software
(SW4).
ET9: ET8 + 4 weeks IRD with Wink Engine pass
Certification at
Manufacturer.
ET9.D1 Manufact. to DIRECTV IRD with Wink Engine begin
SI&T at DIRECTV
ET10: ET9 + 0 weeks (2 week prelim. integration
at DIRECTV begins 2 weeks
before ETS.)
ET10.D1 All IRD with Wink Engine begin
SI&T at DIRECTV
THE FOLLOWING MILESTONES ARE REALLY SYSTEM RELATED - THUS NAMED STN. THIS BEGINS
AFTER ALL COMPONENTS ARE DELIVERED TO DTV AFTER HAVING COMPLETED COMPONENT
TESTING.
ST1: ET10/BT7/RT6 + 4 weeks 4 weeks for f'inal
integration after last
component arrives
ST1.D1 All Pass SI&T at DIRECTV. Begin
Acceptance Test.
ST2: ST1 + 7 weeks Field Test
ST2.D1 All Pass Acceptance Test at
DIRECTV.
TOTAL: 35 WEEKS
CONFIDENTIAL
10:42 AM 12/23/98 STATEMENT OF WORK Page 12 / 23
<PAGE> 44
[ * ]
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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.
<PAGE> 45
[ * ]
- -------------
* 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> 46
[ * ]
- -------------
* 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> 47
[ * ]
- -------------
* 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> 48
[ * ]
- -------------
* 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> 49
[ * ]
- -------------
* 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> 50
[ * ]
- -------------
* 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> 51
[ * ]
- -------------
* 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> 52
[ * ]
- -------------
* 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> 53
[ * ]
- -------------
* 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> 54
[ * ]
- -------------
* 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> 55
EXHIBIT F: PRELIMINARY SCHEDULE
See Wink/DIRECTV Statement of Work, draft dated 12/22/98.
Proprietary and Confidential 32
<PAGE> 56
[ILLUSTRATION]
<PAGE> 57
[ILLUSTRATION]
<PAGE> 58
EXHIBIT G.: WINK PROVIDED VIRTUAL CHANNELS
<TABLE>
<CAPTION>
BRANDING
NAME DESCRIPTION BANDWIDTH MINIMUM TERMS
<S> <C> <C> <C> <C>
WEATHER Current weather and [ * ] TBD [ * ]
forecasts on demand- [ * ]
localization based on [ * ]
user location and/or
preferences
SPORTS Current pro and [ * ] TBD [ * ]
college scores on [ * ] [ * ]
demand - football, [ * ]
basketball, baseball,
hockey, golf, tennis
and auto racing -
localization based on
user location and/or
preferences
GENERAL Current news [ * ] TBD [ * ]
NEWS headlines, articles on [ * ]
Demand [ * ]
BUSINESS Financial news and [ * ] TBD [ * ]
NEWS market data - may [ * ] [ * ]
include limited [ * ] [ * ]
personalization for
tracking of
stocks/portfolio in a
later release
SHOPPING Virtual stores for [ * ] TBD [ * ]
select merchandise - [ * ] [ * ]
books, music, videos, [ * ]
clothes, travel,
flowers, etc.
</TABLE>
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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.
Proprietary and Confidential 33
<PAGE> 59
[ * ]
- -------------
* 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.
Proprietary and Confidential 34
<PAGE> 60
[*]
- -------------
* 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.
Proprietary and Confidential
Execution Copy
<PAGE> 61
[*]
- -------------
* 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.
Proprietary and Confidential
Execution Copy
<PAGE> 62
[*]
- -------------
* 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.
Proprietary and Confidential
Execution Copy
<PAGE> 63
[*]
- -------------
* 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.
Proprietary and Confidential
Execution Copy
<PAGE> 64
EXHIBIT I.: STANDARD WINK ENGINE LICENSE TERMS FOR PARTICIPATING MANUFACTURERS
See Sample December 22, 1998 - Development and License Agreement between Wink
and a Manufacturer of DIRECTV System Receivers
Proprietary and Confidential 35
<PAGE> 65
SAMPLE - DECEMBER 22, 1998
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT (the "Agreement") is made as of _____
___199_ (the "Effective Date"), between Wink Communications, Inc., a California
corporation with offices at 1001 Marina Village Parkway, Alameda, CA 94501
('"Wink") and __________ , _________ , __________ , ___________ , a __________
corporation, with offices at ______________________ ("Manufacturer").
BACKGROUND
A. Wink is a software developer that has developed an end-to-end system
for delivering interactive applications synchronized with or independent of
television programs and advertisements. Among other software, Wink develops,
customizes, supports and licenses its software engine (the "Wink Engine") that
decodes Wink's protocol and displays the interactive applications overlaid on a
television screen.
B. DIRECTV, a California corporation ("DIRECTV"), whose address is 2230
East Imperial Highway, El Segundo, CA 90245 and Wink have entered into a license
agreement (the "Master Agreement") under which DIRECTV has licensed certain
software from Wink and has agreed to transmit certain interactive programs that
can be decoded and displayed by a Wink Engine resident in a DIRECTV System
Receiver (as defined below).
C. Manufacturer is a manufacturer of television set top boxes and video
products, and has a valid and current license with DIRECTV to produce and
distribute devices incorporating DIRECTV technologies and capable of receiving
and decoding DIRECTV signals ("DIRECTV System Receivers").
D. Wink and Manufacturer desire that Wink grant to Manufacturer the
right to embed a customized version of the Wink Engine on DIRECTV System
Receivers to be distributed in continental United States.
AGREEMENT
1. DEFINITIONS
1.1 "ICAP" means the Interactive Communicating Applications Protocol
developed by Wink. ICAP defines a method for delivering self-contained, compact,
platform independent, graphical interactive applications which are decoded and
executed by the Wink Engine in the Wink-enabled DIRECTV System Receiver.
<PAGE> 66
1.2 "Wink Engine" means Winks proprietary platform- and user
interface-independent software engine that implements Wink's
Interactive Communicating Applications Protocol for the
interpretation of interactive graphical applications.
1.3 "Statement of Work" means one or more document(s) to be mutually
agreed upon and executed by the parties and attached as Exhibit
A (and numbered successively, A-l, A-2, etc.) setting forth the
Development Plan, Specifications, Deliverables, each party's
respective development obligations, payment and related terms
and conditions with respect to each Manufacturer product for
which the Wink Engine is customized and each development project
undertaken otherwise relating to customize the Wink Engine.
1.4 "Development Plan" means the schedule and plan for completion of
the development activities under this Agreement as set forth in
each Statement of Work.
1.5 "Specifications" means the technical and other specifications
for the Deliverables to be developed by the parties under this
Agreement as set forth in each Statement of Work.
1.6 "Deliverables" means each item identified as a deliverable in
each Statement of Work.
1.7 "Licensed Engine" means version 2.0 of the Wink Engine as
customized under each Statement of Work in object code format
and any Updates, and any related documentation which Wink may
create, in Wink's sole discretion.
1.8 "Update" means a release of the Licensed Engine which contains
error corrections or minor enhancements, but which is not a new
version containing significant new features or functionality, in
each case as determined in Winks sole discretion. An Update
shall be designated by a change in the digit or digits only to
the right of the decimal point in the version number.
1.9 "Manufacturer Device" means the DIRECTV System Receiver as
identified in each Statement of Work,
1.10 "Wink-enabled DIRECTV System Receiver" means a DIRECTV System
Receiver containing the Licensed Engine (or a DIRECTV System
Receiver that contains a memory component into which the
Licensed Engine may be loaded or transmitted) and which is able
to receive both DIRECTV programming and Wink interactive
programs transmitted by DIRECTV.
<PAGE> 67
1.11 "Subdistributors" means entities authorized by Manufacturer to
distribute the Wink-enabled DIRECTV System Receiver(s) including
subsidiaries, affiliates, distributors, resellers, value-added
resellers, dealers or sales representatives.
1.12 "Intellectual Property Rights" means all current and future
worldwide patents and other patent rights, copyrights, mask work
rights, trade secrets, know-how and all other intellectual
property rights, including without limitation all applications
and registrations with respect thereto.
2. DEVELOPMENT, DELIVERY AND ACCEPTANCE
2.1 Development. The parties agree to use their reasonable
commercial efforts to customize the Wink Engine for the
Manufacturer Device identified in each Statement of Work or to
complete any additional development of a Licensed Engine after
Final Acceptance as set forth in each respective Statement of
Work. Each party's obligations under this Agreement are
contingent upon mutual agreement to each Statement of Work. The
terms of this Agreement shall apply to all such development
efforts except to the extent expressly set forth in a particular
Statement of Work.
2.2 Cooperation and Assistance. Manufacturer shall (i) assist Wink
in producing the Specifications and (ii) provide other necessary
materials and information, as mutually agreed by the parties in
the Development Plan or otherwise.
2.3 Provision of Software, Hardware and Equipment. Manufacturer
shall provide to Wink free of charge (including all taxes and
freight) all hardware, software, and equipment reasonably
necessary for Wink to complete development and duplicate the
Manufacturer environment ("Equipment"). A preliminary list of
Equipment shall be included in each Statement of Work and may be
updated from time to time by mutual agreement. Manufacturer
shall retain title to all such Equipment provided to Wink, and
Wink shall return all such Equipment to Manufacturer upon
written request and at Manufacturer's sole cost and expense.
Wink shall exercise the same degree of care with the Equipment
as Wink does for its own equipment.
2.4 Modifications. Wink may alter the Specifications commensurate
with good faith efforts to finalize and refine the Deliverables
in accordance with Manufacturer's needs and objectives for the
Licensed Engine, and subject to DIRECTV's written permission.
Any such changes will be documented in writing and provided to
Manufacturer. Any other changes to a Statement of Work may only
be made by mutual agreement of the parties and all provisions
affected by such changes shall be appropriately adjusted.
<PAGE> 68
2.5 Delays. In the event Manufacturer is late in the performance of
its obligations in accordance with the Development Plan, and
such delay affects Wink's obligations hereunder, Wink's
performance of such affected obligations shall be delayed by the
time period necessary to account for such delay.
2.6 Delivery and Acceptance. Upon completion, Wink shall deliver to
Manufacturer each Deliverable, Accompanying the final
Deliverable for a given Statement of Work, Wink shall include
test criteria that will exercise critical functionality of such
Deliverables, Test criteria will include test cases and test
applications that test for cross-platform compatibilities and
for Manufacturer-specific implementation features. Within thirty
(30) days after receipt, Manufacturer shall review and evaluate
each Deliverable according to Wink's test criteria, if
applicable, and shall provide Wink with a written acceptance of
the Deliverables or a written statement setting forth those
material errors to be corrected ("Statement of Errors").
Manufacturer shall not withhold acceptance of any Deliverable
unless such Deliverable materially deviates from the
Specifications. Wink and Manufacturer recognize that the
Deliverables will not be error-free. If Manufacturer provides a
Statement of Errors, Wink shall use reasonable commercial
efforts to correct such errors as are validated by Wink, if any,
as soon as practicable, and to return a copy of the updated
Deliverables to Manufacturer for review and reevaluation. The
foregoing procedure shall be repeated until acceptance by
Manufacturer of the Deliverables or the parties mutually agree
to cease development and terminate this Agreement or the
applicable Statement of Work. Manufacturer's failure to accept
or provide a Statement of Errors within such thirty day period
shall be deemed an acceptance of such Deliverables. The parties
agree that additional testing performed in conjunction with
DIRECTV or their designated party may be required, and agree to
include an estimate of the time and effort involved in such
testing in the Statement of Work.
2.7 Transfer of Software. Upon Manufacturer's acceptance of the
completed' Licensed Engine ("Final Acceptance"), Wink shall
deliver to Manufacturer a master diskette or other digital
storage media for use by Manufacturer in accordance with the
terms of this Agreement.
2.8 Right to Pursue Other Projects. Wink is in the business of
developing and modifying the Wink Engine for itself and for
others. This Agreement shall not be construed as prohibiting
Wink from granting rights to the Licensed Engine to third
parties or Wink's further development, modification or
distribution of the Wink Engine.
<PAGE> 69
3. GRANT OF RIGHTS
3.1 Licensed Engine. Subject to the terms and conditions of this
Agreement, effective upon Final Acceptance, Wink grants to
Manufacturer a, non-exclusive, non-transferable (except as
provided in Section 13.3), right and license, under Wink's
Intellectual Property Rights in the Licensed Engine, to (a) use,
reproduce and have reproduced the Licensed Engine, solely for
the purpose of incorporating the Licensed Engine into a
Manufacturer Device and as necessary in the course of
distribution and support of the Wink-enabled DIRECTV System
Receiver as permitted hereunder; (b) distribute copies of the
Licensed Engine solely for incorporation into a Wink-enabled
DIRECTV System Receiver which was previously acquired (directly
or indirectly) from Manufacturer for use only with such
previously acquired unit, and not otherwise on a stand-alone
basis; and (c) distribute the Wink-enabled DIRECTV System
Receiver in the United States of America. Manufacturer's right
to distribute copies of the Licensed Engine pursuant to Section
3.1 (b), above, is subject to the condition that Manufacturer
and its Subdistributors shall observe procedures reasonably
acceptable to Wink for monitoring such stand alone distribution
of the Licensed Engine, including encryption where distributed
electronically or broadcast. All such procedures, including
related record retention and audit procedures, shall be mutually
agreed in writing by Manufacturer and Wink prior to any such
distribution.
3.2 Submanufacturers. Manufacturer shall have the right to provide
the Licensed Engine to its third party manufacturers (each a
"Submanufacturer"), provided that each Submanufacturer agrees in
a signed writing (i) to use and reproduce Licensed Engines and
Wink-enabled DIRECTV System Receivers only for Manufacturer's
account, (ii) not to sell or distribute Licensed Engines and
Wink-enabled DIRECTV System Receivers except to Manufacturer,
(iii) to keep the Licensed Engine confidential pursuant to terms
and conditions no less restrictive than the terms and conditions
described in Section 10 below and (iv) that Wink is a third
party beneficiary of such agreement and may enforce such
agreement directly against such Submanufacturer. Manufacturer's
provision of the Licensed Engine to such Submanufacturer shall
in all instances be subject to (a) Manufacturer's assurance that
it will use the same level of care in choosing Submanufacturers
for Manufacturer Devices incorporating the Licensed Engine as it
does for its other products, and will take all reasonable steps
to prevent unauthorized disclosure of Wink Confidential
Information, and (b) Manufacturer's prompt notification to Wink
if Manufacturer knows or believes that a Submanufacturer has
breached the provisions of subsection (i) - (iii) above. In the
event that Manufacturer desires to provide the Licensed Engine
to a Submanufacturer without also
<PAGE> 70
providing such Submanufacturer with software owned by
Manufacturer, Manufacturer's provision of the Licensed Engine to
such Submanufacturer shall be subject to Wink's written approval
(not to be unreasonably withheld) of such Submanufacturer.
Manufacturer shall use commercially reasonable efforts to ensure
that all Submanufacturers abide by the terms of their written
agreements described herein and keep Wink apprised of its
activities in enforcing such agreements.
3.3 Subdistributors. Manufacturer may exercise its distribution
rights hereunder through the use of Subdistributors; provided,
that each Subdistributor must agree in a signed writing, prior
to obtaining any copy of the Licensed Engine from Manufacturer,
to be bound by all applicable restrictions on Manufacturer set
forth in this Agreement. Such writing shall provide that Wink is
a third party beneficiary of such agreement and may enforce such
agreement directly against such Subdistributor. Manufacturer
shall promptly notify Wink if Manufacturer has reason to believe
that any of Manufacturer's Subdistributors may not be abiding by
such restrictions. Manufacturer shall diligently police and
enforce such restrictions including specific measures reasonably
requested by Wink from time to time.
3.4 Proprietary Notices. All copies of the Licensed Engine
reproduced or distributed by Manufacturer shall contain
copyright and other proprietary notices in the same manner in
which Wink incorporates such notices in the Licensed Engine or
in any other manner requested by Wink. Wink's current copyright
and proprietary notices are set forth in Exhibit B. In addition,
at Wink's request, Manufacturer shall mark the Manufacturer
Device with such patent notices as may be permitted or required
under Title 35, United States Code. Manufacturer shall
incorporate such notices not more than 90 days after the date on
which Wink provides the form of notice and will use its best
efforts to incorporate such notices sooner.
3.5 Limitations, Manufacturer shall not modify, prepare derivative
works of, reverse engineer, disassemble, decompile, or otherwise
attempt to obtain access to the source code of the Licensed
Engine,
4. FEES
4.1 Wink agrees that there shall be no per copy license fees or
other license fees due Wink in connection with Manufacturer's
license of the Licensed Engine. Manufacturer agrees to pay the
support fees defined in Exhibit C, section 6 within thirty days
of receipt of an invoice from Wink. Manufacturer further agrees
to pay the non-recurring engineering charges ("NRE") set forth
in each Statement of Work upon acceptance of the final version
of the object
<PAGE> 71
code for the applicable Licensed Engine ("Gold Master"). In no
event shall such NRE exceed $300,000 per Licensed Engine. Wink
agrees that such NRE shall be waived if the following conditions
are met:
(a) Manufacturer and Wink meet the deadline for delivery and
acceptance of the Gold Master, as stated in the Development
Plan, and as amended by mutual agreement between the parties. If
the parties fail to meet the deadline for delivery of the Gold
Master in the Development Plan, the parties shall evaluate the
causes of such delay. If Wink has, in Wink's sole and reasonable
opinion, contributed to such delay, the deadline shall be
extended to reflect such delay by Wink.
(b) For each full month that the acceptance of the Gold Master,
as stated in the Development Plan, is delayed through no fault
of Wink, the waiver of non-recurring engineering charges shall
be reduced by one third. After three months of a delay, the full
amount shall be due and payable on the date of acceptance of the
Gold Master by Manufacturer.
4.22 Currency; Taxes. All payments hereunder shall be in United
States dollars. All payments, if any, by Manufacturer shall be
made free and clear of, and without reduction for, any sales,
use, value added, or similar taxes, other than taxes based on
the net income of Wink, including foreign withholding tax. Any
such taxes which are otherwise imposed on payments to Wink shall
be the sole responsibility of Manufacturer.
5. WARRANTY
5.1 Product Warranty. Wink warrants to Manufacturer that under
ordinary use the Licensed Engine shall function substantially in
conformance with the Specifications for a period of no less than
ninety (90) days after Manufacturer's Final Acceptance.
5.2 Defects not Covered by Warranty. Wink's warranty shall not extend
to problems in the Licensed Engine that result from: (i)
Manufacturer's, or any of its customer's, failure to implement
any Updates to the Licensed Engine which are, provided by Wink;
(ii) changes to the operating system or environment or to
Manufacturer Devices which adversely affect the Licensed Engine;
(iii) any alterations of or additions to the Licensed Engine
performed by parties other than Wink without Wink's prior written
authorization; (iv) use of the Licensed Engine in a manner
inconsistent with the Specifications or in a manner in which it
was not intended; or (v) combination of the Licensed Engine with
other products not supplied by Wink or specifically identified in
<PAGE> 72
the applicable Specifications as compatible with the Licensed
Engine, which problems do not affect the Licensed Engine
standing alone.
5.3 Exclusive Remedy. Wink's sole obligation and Manufacturer's
exclusive remedy under the above warranty shall be for Wink to
use commercially reasonable efforts at Wink's facilities to
correct reproducible errors in the Licensed Engine to the extent
necessary bring it into conformity with Wink's warranty set
forth above.
5.4 Disclaimer. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTY, WINK
MAKES AND MANUFACTURER RECEIVES NO WARRANTIES WITH RESPECT TO
THE LICENSED ENGINE, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
AND WINK SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. Wink does not warrant that operation of the Licensed
Engine will be error free.
6. PROPERTY RIGHTS
Manufacturer agrees that as between Manufacturer and Wink, Wink owns all
right, title and interest in the Licensed Engine and all modifications and
derivatives thereof including all Intellectual Property Rights. Except as
expressly provided in Section 3, Wink does not grant to Manufacturer any right,
title or interest in the Licensed Engine, whether by implication, estoppel or
otherwise. All rights with respect to the Licensed Engine not specifically
granted herein are reserved to Wink.
7. MARKETING; TRADEMARKS AND TRADE NAMES
7.1 USE OF TRADEMARKS.
7.1.1 Promotion and Advertising. During the term of this
Agreement, in the event that Manufacturer or any
Subdistributor advertises, promotes or markets the
functionality of the Licensed Engine, Manufacturer may,
and may require its Subdistributors to, use the
trademarks, marks, trade names, logos, and other product
and company identifiers of Wink that Wink may adopt,
from time to time ("Wink Trademarks"). Use of the Wink
Trademarks shall be consistent with Wink's trademark
usage policy which Wink may adopt from time to time and
of which Wink has notified Manufacturer. Manufacturer
and its Subdistributors may use trade names, marks or
trademarks in addition to the Wink Trademarks in
connection with the Wink-enabled DIRECTV System
Receiver.
<PAGE> 73
7.1.2 Approval of Representations. All representations of
Wink's Trademarks that Manufacturer or its
Subdistributors intend to use shall first be submitted
to Wink for approval (which shall not be unreasonably
withheld) of design, color, and other details, or shall
be exact copies of those used by Wink. To ensure
trademark quality, within a reasonable time prior to
Manufacturer's first commercial shipment of the
Wink-enabled DIRECTV System Receiver bearing one or more
Wink Trademarks, Manufacturer shall supply to Wink one
such Wink-enabled DIRECTV System Receiver for inspection
and testing by Wink to ensure that such Wink-enabled
DIRECTV System Receiver conforms to Wink's standards of
quality for products sold under the Wink Trademarks. In
no event shall Manufacturer commence commercial shipment
of any such Wink-enabled DIRECTV System Receiver (except
as set forth above) under the Wink Trademarks without
Wink's prior written approval.
7.1.3 Restrictions. At no time during or after the term of
this Agreement shall either party register, attempt to
register or cause the registration of any of the
trademarks of the other party which give rise to the
likelihood of confusion. Except as expressly set forth
herein, nothing herein shall grant to either party any
right, title or interest in the other party's
trademarks. At no time during or after the term of this
Agreement shall either party challenge or assist others
to challenge the other party's trademarks or the
registration thereof or attempt to register any
trademarks, marks or trade names confusingly similar to
those of the other party.
7.2 Marketing and Promotion. Manufacturer shall promote the
functionality of the Licensed Engine in its presentations to
customers and in its marketing materials as a prominent feature
of the Wink-enabled DIRECTV System Receiver.
7.3 Wink Markings and User Interface Elements.
7.3.1 Remote Button. All remote controls that Manufacturer
markets for use with Wink-enabled DIRECTV System
Receivers shall contain a dedicated button for enabling
the functionality of the Licensed Engine ("Wink
Button"). The Wink Button shall include a marking chosen
by Wink, on and/or adjacent to the Wink Button. For each
remote, the location and size of the Wink Button shall
be mutually agreed upon, but shall be as prominent as
buttons and markings for the menu, info, guide and
select options on any such remote.
<PAGE> 74
7.3.2 Manuals. Manufacturer shall ensure that manuals, or any
other documentation describing functionality of the
Licensed Engine will contain information on use of the
Licensed Engine functionality and Wink copyright and
proprietary notices. The content and location of such
information and notices shall be mutually agreed upon,
but shall be in the same place, the same size and same
prominence as similar information for other
functionality.
7.3.3 Device Specific and On-screen Information. Wink will
provide to Manufacturer artwork for a logo that may be
placed on all Wink- enabled DIRECTV System Receivers.
Manufacturer may silk screen or similarly affix this
logo on each Wink-enabled DIRECTV System Receiver.
Manufacturer shall ensure that: (i) if a Wink-enabled
DIRECTV System Receiver has a main menu or menu with
similar functionality, a menu item will be reserved for
Wink, which will allow users to access information
regarding the Licensed Engine functionality, the content
of screen and name of menu item in menu shall be
mutually agreed upon by the parties; and (ii) if a
Wink-enabled DIRECTV System Receiver has the capability
to display help screens that include descriptions of
device or remote control functionality, information
regarding Licensed Engine functionality shall be
provided, the content and style of such information
shall be mutually agreed to by the parties.
7.3.4 Splash Screens. Wink shall have the right to include a
splash screen that shall be displayed from time to time
and that will contain information, including without
limitation, Wink markings, and copyright and other
proprietary right notices to be mutually agree upon with
respect to placement and timing.
7.4 Press Releases. The parties intend to cooperate and
participate in public relations programs to promote the
Licensed Engine and the relationship between the
parties. Appropriate personnel from each party shall
participate in such public relations programs. The
parties shall cooperate with respect to and mutually
approve (not to be unreasonably withheld or delayed) all
press releases issued by either party with respect to
this Agreement or the parties' relationship. Unless
otherwise agreed in writing by the parties, each press
release issued pursuant to this Section shall contain:
(i) in the body of the release, the name and location of
both parties and a quote from an executive of both
parties; (ii) in a footnote at the end of the release,
both parties' proprietary notices with respect to
technology discussed in the body of the release.
Whenever feasible, the press release shall also include
the logo of each party.
<PAGE> 75
7.5 Disclosures of Terms. Each party agrees not to disclose the terms
of this Agreement to any third party without the other's written
consent in its sole discretion, except to such party's
accountants, attorneys and other professional advisors, or as
required by securities or other applicable laws; provided,
however, that the parties agree that DIRECTV, Inc. shall be
provided with an executed copy of this Agreement, and all
schedules, attachments and exhibits attached hereto, within
thirty (30) days of the Effective Date. Notwithstanding this
paragraph, each party shall have the right to say the following
in meetings with customers, prospective customers, or prospective
investors:
- Manufacturer and Wink are working together,
- Manufacturer is licensing Wink's technology.
- Wink is porting the Wink Engine to Manufacturer set-tops.
8. TRAINING, SUPPORT AND MAINTENANCE
8.1 Maintenance. Wink agrees to make available to Manufacturer, at no
charge to Manufacturer, all Updates released by Wink and permit
Manufacturer to distribute Updates to its Subdistributors and
Submanufacturers for their use consistent with this Agreement,
Manufacturer shall promptly notify its Submanufacturers and
Subdistributors of the availability of each Update and
Manufacturer shall require its Submanufacturers and shall use
reasonable commercial efforts to require its Subdistributors to
promptly begin using each such Update in place of the previous
version of the Licensed Engine. Manufacturer shall be responsible
for making such Updates available to its customers,
8.2 Technical Support. Wink shall make available to Manufacturer
technical support, as set forth in Exhibit C. Wink may
subcontract its technical support obligations and shall notify
Manufacturer as to the appropriate contact to obtain support.
8.3 Equipment. In order to facilitate Wink's performance of the
support activities contemplated herein, Manufacturer shall, at
its own expense, continue to provide Wink with Equipment (as
defined in Section 2.3). In the event that Manufacturer fails to
provide Equipment or is late in the performance of its
obligations with respect to this Section and such delay affects
Wink's obligations under this Section, Wink's performance of such
affected obligations shall be delayed by an appropriate time
period.
<PAGE> 76
8.4 Training. Wink shall make available, at Wink's facilities,
training for Manufacturer employees from time to time as mutually
agreed, at rates and costs to be agreed upon but not to exceed
$1000 per person per day.
9. TERM AND TERMINATION
9.1 Term. This Agreement shall commence on the Effective Date and
shall continue in full force and effect until the earlier of (a)
five (5) years from the first commercial shipment of Wink-enabled
DIRECTV System Receiver by Manufacturer, and (b) the term of the
Master Agreement. The term of this Agreement may be extended by
mutual agreement of the parties. Notwithstanding the foregoing,
if the Master Agreement is extended, this Agreement shall be
automatically extended until the Master Agreement lapses or is
terminated. Wink agrees to provide written notice to Manufacturer
in the event of any such extension of the Master Agreement.
9.2 Termination for Cause. If either party materially defaults in the
performance of any provision of this Agreement, the
non-defaulting party may give written notice to the defaulting
party that if the default is not cured within thirty (30) days
this Agreement shall be terminated, If the non-defaulting party
gives such notice and the default is not cured within thirty (30)
days, this Agreement shall terminate immediately upon notice by
the non-defaulting party. For the purposes of determining a
material default by Wink based on late or non-delivery of a
Deliverable, Wink shall not be in material default of this
Agreement unless it fails to deliver a Deliverable within six (6)
months of the date such Deliverable is due; provided that
Manufacturer has fulfilled all its obligations with respect to
such Deliverable and in such event the cure period provided for
above shall be ninety (90) days.
9.3 Termination for Insolvency. Either party may terminate this
Agreement upon written notice upon: (i) the institution by or
against the other party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of the
other party's debts, (ii) the other party's making an assignment
for the benefit of its creditors, or (iii) the other party's
dissolution or ceasing to conduct business as a going concern.
9.4 Effect of Termination. Upon the expiration or termination of this
Agreement, the following provisions shall take effect:
9.4.1 Subject to the provisions of Section 9.5, the rights and
licenses granted to Manufacturer under this Agreement
shall automatically terminate, and Manufacturer and its
Subdistributors shall immediately
<PAGE> 77
cease distribution of Licensed Engines and use of the Wink
Trademarks, provided, however, that if the Agreement is
terminated by Manufacturer due to Wink's material breach or
insolvency, Manufacturer may, at its option, continue to use,
reproduce, and distribute the Licensed Engine under the right
and license granted hereunder, subject to the payment of the
royalties and other provisions of Section 4;
9.4.2 Rights of end users to use the Licensed Engine as part of a
Wink-enabled DIRECTV System Receiver shall continue in effect;
9.4.3 Within ten (10) days after such expiration or termination,
except as provided in Section 9.6, or the case where
Manufacturer elects to continue the license pursuant to Section
9.4.1 above, Manufacturer shall return, and shall certify to
Wink the return of, all copies of the Licensed Engine and all
Wink Confidential information (as defined in Section 10.1) in
its or its Submanufacturers' possession at the time of
expiration or termination. Wink shall return, and shall certify
to Manufacturer the return of, all Manufacturer Confidential
Information in its possession at the time of expiration or
termination. Notwithstanding the foregoing, Manufacturer may
except upon termination by Wink (i) maintain a single copy of
the Licensed Engine and (ii) retain any Confidential Information
necessary for support, subject to the provisions of Section 10,
solely to provide support to its permitted Subdistributors and
end users.
The parties agree to enter into a source code escrow agreement
with a mutually selected escrow agent, Wink agrees to deposit
the Wink Engine source code upon final technical acceptance of
the Wink Engine by Manufacturer. Manufacturer shall be entitled
to the release of such source code during any time period in
which: (i) Wink is subject to the jurisdiction of any bankruptcy
court or (ii) Wink is material of the provisions of section 5,
which material breach has not been cured within (90) days after
Manufacturer's written notice to Wink thereof. The foregoing is
subject, however, to the condition that Manufacturer is not at
that time in material breach of any of its obligations under
this Agreement, and such breach has not been cured within (90)
days after written notice thereof by Wink. Manufacturer shall
assume all start-up fees, annual renewal fees, deposit fees and
any and all other fees due to such escrow agent.
Upon any release of the Wink Engine source code to
Manufacturer, (i) Manufacturer shall have a non-exclusive, non-
<PAGE> 78
[*]
- -------------
* 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> 79
9.4.4 Manufacturer shall pay all outstanding amounts owed to
Wink within thirty (30) days. In the event Wink is
performing development tasks for Manufacturer at the
time of any termination, Manufacturer shall also pay to
Wink the portion of the next milestone that is
proportional to the amount of work completed by Wink for
that milestone.
9.4.5 The provisions of Sections 4.7, 5, 6, 9, 10, 11, 12, and
13 shall survive the expiration or termination of this
Agreement for any reason.
9.5 Sell-off Period. In the event of the expiration of this
Agreement or a termination by Manufacturer, Manufacturer may,
dispose of its inventory of Wink-enabled DIRECTV System
Receivers on hand, for a period not to exceed sixty (60) days
after the effective date of such expiration or termination (the
"Sell-Off Period"), and in connection therewith, Manufacturer
shall use the Wink Trademarks during the Sell-Off Period
pursuant to the provisions of Section 7.
9.6 Destruction of Inventory. Within ten (10) days after the end of
the Sell-Off Period, Manufacturer shall destroy, and shall
certify to Wink the destruction of, all copies of the Licensed
Engine in its or its Subdistributors' or Submanufacturers'
possession.
10. CONFIDENTIALITY
10.1 Obligation of Confidentiality. The parties acknowledge that each
may have access to certain information and materials concerning
the other's business, plans, customers, technology and products
that is confidential ("Confidential Information"). Each party
agrees that it shall not use in any way, for its own account or
the account of any third party, nor disclose to any third party,
except as may be expressly permitted under this Agreement, any
such Confidential Information revealed to it by the other party
and shall take every reasonable precaution to protect the
confidentiality of such information. Upon request by either
party, the other party shall advise whether or not it considers
any particular information or materials to be confidential.
10.2 Exceptions. Information shall be deemed not to be Confidential
Information hereunder if such information:
10.2.1 Is or becomes part of the public domain through no fault
or breach on the part of the receiving party;
10.2.2 Is known to the receiving party prior to the disclosure
by the disclosing party and such knowledge can be shown
by written records;
<PAGE> 80
10.2.3 Is subsequently rightfully obtained by the receiving
party from a third party who has the legal right to
disclose it;
10.2.4 Is independently developed by the receiving party
without the use of any Confidential Information or any
breach of this Agreement;
10.2.5 Is approved for public release by the disclosing party;
or
10.2.6 Is required to be disclosed by judicial action provided
that the F receiving party has first given the
disclosing party reasonable notice of such requirement
and fully cooperates with the disclosing party in
seeking confidential treatment for any such disclosure.
10.3 Injunctive Relief. The parties acknowledge that any breach of the
provisions of this Section may cause irreparable harm and
significant injury to an extent that may be extremely difficult
to ascertain. Accordingly, each party agrees that each will have,
in addition to any other rights or remedies available to it at
law or in equity, the right to seek injunctive relief to enjoin
any breach or violation of this Section.
11. INTELLECTUAL PROPERTY, WARRANTY AND INDEMNITY
11.1 Representations and Warranties. Each party represents and
warrants that neither the execution or performance by such party
of this Agreement will violate any law, order, regulation or
ruling applicable to such party or its efforts hereunder. In
addition, Wink represents and warrants that as of the Effective
Date, no action or proceeding alleging intellectual property
infringement by the Wink Engine is proceeding against Wink.
11.2 Indemnity. Wink agrees, at its expense, to defend, or at its
option to settle, any claim, suit, action or proceeding brought
against Manufacturer, Subdistributors, and/or Customers by a
third party alleging that the Licensed Engine used as authorized
hereunder infringes the copyright, trade secret, trademark or
U.S. patent rights of such third party (an "Action"), and to pay
any settlement or final judgment entered thereon against
Manufacturer, subject to the limitations set forth hereafter.
Wink shall be relieved of its obligations hereunder unless
Manufacturer gives Wink (i) prompt written notice of an Action,
(ii) sole control over the defense or settlement of the Action
and (iii) reasonable assistance in the defense or settlement
thereof. If it is, or in the opinion of Wink may be, determined
by competent authority that the Licensed Engine or any part
thereof, or the sale, distribution or use thereof as permitted
hereunder infringes any patent, copyright, trade secret or
<PAGE> 81
trademark of a third party or is enjoined, then Wink at its sole
option and expense may: (a) procure for Manufacturer the right
under such patent, copyright, trade secret or trademark to use,
as mentioned in this Agreement reproduce and distribute the
Licensed Engine or such part thereof or such trademark as
authorized in this Agreement; (b) replace the Licensed Engine or
such part thereof or such trademark with other suitable software
or trademark without material degradation in performance or
functionality; (c) modify the Licensed Engine or such part
thereof or such trademark to avoid infringement without material
degradation in performance or functionality; (d) if (a)(b) or (c)
are not commercially reasonable, (d) replace or modify the
Licensed Engine or portion thereof to disable the infringing
portion reducing performance or functionality but retaining some
commercial viability of the product or (e) if none of the
foregoing are commercially reasonable after diligent attempts by
Wink to pursue such alternatives, terminate this Agreement with
respect to the infringing product in whole or in part.
11.3 Limitations. The foregoing indemnity shall not apply to an Action
to the extent it arises out of (i) any modification of the
Licensed Engine by a party other than Wink, (ii) any combination
of the Licensed Engine with hardware and/or software (including
software written using the Wink Authoring Tool or using the Wink
APIs) not supplied by Wink, or (iii) any trademarks, trade names
or other brandings not supplied by Wink.
11.4 Disclaimer. THE FOREGOING PROVISIONS OF THIS SECTION 11 STATE THE
ENTIRE LIABILITY AND OBLIGATION OF WINK AND THE EXCLUSIVE REMEDY
OF MANUFACTURER WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF ANY
PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHT.
12.0 INDEMNITY BY MANUFACTURER
Except with respect to any claim, suit, action or proceeding for which
Wink is obligated to indemnify under Section 11, Manufacturer agrees, at its
expense, to defend, or at its option to settle, any claim, suit, action or
proceeding brought against Wink by a third party arising out of Manufacturer's
use of the Licensed Engine or exercise of the rights and licenses granted
hereunder, and to pay any settlement or final judgment entered thereon against
Wink, subject to the limitations set forth hereafter. Manufacturer shall be
relieved of its obligations hereunder unless Wink gives Manufacturer (i) prompt
written notice upon becoming aware of the existence of any such claim, suit,
action or proceeding, (ii) sole control over the defense or settlement of such
claim, suit, action or proceeding and (iii) reasonable assistance in the defense
or settlement thereof.
13.0 GENERAL
<PAGE> 82
13.1 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed under the laws of the State of California,
without reference to conflict of laws principles.
13.2 Import & Export Controls. Manufacturer understands that Wink is
subject to regulation by agencies of the U.S. government which
prohibit export or diversion of certain products and technology
to certain countries. Any and all obligations of Wink including
without limitation obligations to provide products, technology,
documentation, or technical assistance, will be subject in all
respects to such United States laws and regulations that will
from time to time govern the license and delivery of technology
and products abroad or to foreign nationals by persons subject to
the jurisdiction of the United States. Manufacturer warrants that
it will comply in all respects with all applicable export and
re-export restrictions. Manufacturer warrants that it will not,
and will take all actions which may be reasonably necessary to
assure that its Subdistributors and end users do not, contravene
such United States laws or regulations.
13.3 No Assignment. This Agreement shall not be assigned by either
party without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that either
party may assign its rights and obligations hereunder to any
entity (i) which controls, is controlled by or is under common
control with such party or (ii) which acquires all or
substantially all of the assets or business of such party to
which this Agreement pertains, provided in both cases that such
entity shall assume in writing or by operation of law such
party's obligations under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
13.4 Independent Contractors. The relationship of the parties
established by this Agreement is that of independent contractors,
and nothing contained in this Agreement shall be construed to (i)
give either party the power to direct and control the day-to-day
activities of the other, (ii) constitute the parties as partners,
joint venturers, co-owners or otherwise as participants in a
joint or common undertaking, or (iii) allow either party to
create or assume any obligation on behalf of the other party for
any purpose whatsoever.
13.5 Compliance with Laws. In exercising its rights under this
license, each party shall fully comply with the requirements of
any and all applicable laws, regulations, rules and orders of any
governmental body having jurisdiction over the exercise of rights
under this license.
<PAGE> 83
13.6 Notices. All notices under this Agreement shall be in writing and
sent by (i) certified air mail, return receipt requested, postage
prepaid or (ii) commercial courier service. If properly addressed
to or delivered at the address for each party set forth above, a
notice shall be deemed given upon delivery or, where delivery
cannot be effected due to the actions of the addressee, upon
tender.
13.7 Entire Agreement. This Agreement represents the entire agreement
of the parties with respect to the subject matter hereof and
supersedes all prior or contemporaneous agreements,
understandings, proposals and representations by the parties.
13.8 No Waiver. 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.
13.9 No Oral Modification. No alteration, amendment, waiver,
cancellation or any other change in any term or condition of this
Agreement shall be valid or binding on either party unless
mutually agreed in writing.
13.10 Language. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions
hereof in any other language shall not be binding on the parties.
All communications and notices to be made or given pursuant to
this Agreement shall be in the English language.
13.11 Use of "Including". Use of the word "including" in this Agreement
is intended to be illustrative and not limiting.
13.12 Limitation of Liability. EXCEPT WITH RESPECT TO WINK'S
OBLIGATIONS TO INDEMNIFY FOR COPYRIGHT, TRADE SECRET OR TRADE
MARK INFRINGEMENT CLAIMS (BUT NOT PATENT) UNDER SECTION 11, IN NO
EVENT SHALL WINK BE LIABLE TO MANUFACTURER OR ANY THIRD PARTY IN
THE AGGREGATE FOR ANY AMOUNT IN EXCESS OF THE AMOUNTS PAID (AND
THE AMOUNTS WHICH HAVE ACCRUED HEREUNDER BUT HAVE NOT BEEN PAID)
BY MANUFACTURER HEREUNDER. IN NO EVENT SHALL WINK BE LIABLE TO
MANUFACTURER, SUBDISTRIBUTORS, AND/OR CUSTOMERS FOR LOST PROFITS,
LOSS OF DATA OR FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
INDIRECT DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT,
HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS LIMITATION
SHALL APPLY EVEN IF WINK KNOWS OR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND
<PAGE> 84
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY PROVIDED FOR HEREIN.
13.13 Counterparts. This Agreement may be executed in any number of
counterparts and when so executed and delivered shall have the
same force and effect as though all signatures appeared on one
document.
13.14 Severability. The provisions of this Agreement shall be
severable, and if any provision of this Agreement shall be held
or declared to be illegal, invalid, or unenforceable, such
illegal, invalid or unenforceable provision shall be severed from
this Agreement and the remainder of the Agreement shall remain in
full force and effect, and the parties shall negotiate a
substitute, legal, valid and enforceable provision that most
nearly reflects the parties' intent in entering into this
Agreement.
13.15 Basis of Bargain. Wink and Manufacturer acknowledge and agree
that Wink's entering into this Agreement and the amount of
Manufacturer's royalty hereunder have been done or set in
reliance upon the limitations of liabilities and disclaimers of
warranty set forth in this Agreement, and that the same form an
essential basis of the parties' bargain.
IN WITNESS WHEREOF, the parties by their duly authorized representatives
have entered into this Agreement as of the Effective Date.
WINK COMMUNICATIONS, INC. MANUFACTURER
By: By:
Name: Name:
Title: Title:
<PAGE> 85
EXHIBIT A-1
[SAMPLE] STATEMENT OF WORK
1. Device
Wink and Manufacturer agree that Wink shall port the Wink Engine to
the Manufacturer DIRECTV System Receiver.
2. Specifications
See attached Addendum to Exhibit A-1
3. Development Activities and Schedule
<TABLE>
<CAPTION>
Responsible Completion Milestone
Task Party Date Payment
<S> <C> <C> <C>
Signing of Agreement Manufacturer no
Delivery of development equipment as required to a Manufacturer no
location specified by Wink
Delivery by Wink of Project Plan for development of Wink no
Wink Engine Version 2.0 as customized for
Manufacturer
First Delivery of Equipment to Wink Manufacturer no
On-site support at Wink to set up Equipment Manufacturer no
Delivery by Wink of Alpha version of object code of Wink no
Wink Engine Version 2.0 as customized for __
Final Delivery of Equipment to Wink Manufacturer no
Delivery by Wink of Beta version of object code of Wink Wink no
Engine Version 2.0 as customized for
Acceptance of final version of object code of Wink Manufacturer no
Engine Version 2.0 as customized for
4. Materials and Equipment
First Delivery of Equipment
To be defined
Final Delivery of Equipment
To be defined
5. Payment Schedule: All amounts in US Dollars.
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EVENT NRE PAYMENT ROYALTY PAYMENT
<S> <C> <C>
Signing of Agreement [ $0] [ $0 ]
Delivery by Wink of Project Plan for development [ $0 ] [ $0 ]
of Wink Engine Version 2.0 as customized for
Manufacturer____
Delivery by Wink of Alpha version of object code [ $0 ] [ $0 ]
of Wink Engine Version 2.0 as customized for
Acceptance of final version of object code of Wink [ $0 ] [ $0 ]
Engine Version 2.0 as customized for
Totals: [ $0 ] [ $0 ]
</TABLE>
WINK COMMUNICATIONS INC MANUFACTURER
By: By:
Name: Name:
Title: Title:
<PAGE> 87
EXHIBIT B
PROPRIETARY NOTICES
1. Screens displayed to the End-Users from time to time shall contain, at a
minimum, the following:
Copyright 199_ Wink Communications, Inc.
Patent Pending.
2. Wink, the Wink eye and "i" shall be marked with either "Registered in U.S.
Patent and Trademark Office" or with the letter R enclosed within a circle.
<PAGE> 88
EXHIBIT C
SUPPORT
The following provisions govern the support to be provided by Wink to
Manufacturer for the Licensed Engine.
1. Contact People. Manufacturer shall appoint two (2) individuals within
its organization who will serve as primary contacts between it and Wink
to receive support ("Contact People"). All of Manufacturer's support
inquiries shall be initiated through the Contact People.
2. Support Obligations. Manufacturer will be responsible for providing
First Level Support and Second Level Support (as defined below) to its
Subdistributors and other customers with respect to the Licensed Engine.
Wink will provide Third Level Support (as defined below) for the
Licensed Engine in the manner specified in these support terms.
3. Support Levels. Levels of customer support are defined as follows:
(a) "First Level Support" shall mean: (i) generating product
information; (ii) providing configuration support; (iii)
collection of relevant technical problem identification
information; (iv) filtering user errors from real technical
problems; and (v) solving simple problems by reference to
existing documentation.
(b) "Second Level Support" shall mean First Level Support plus
providing the following areas of support: (i) isolating the
problem to determine that it is a problem with the Licensed
Engine; (ii) recreating the problem in a lab simulation and/or
through interoperability testing; (iii) determining whether or
not the problem is a defect; (iv) collecting and analyzing
diagnostic data; and (v) defining an action plan with the
customer to solve the problem.
(c) "Third Level Support" shall mean: (i) confirming duplication of
the problem and validating that it's a defect; (ii) fixing
software bugs or generating workarounds.
4. Third Level Support.
(a) Escalation. Manufacturer can escalate a problem to Third Level
Support, once Manufacturer exhausts the items enumerated above
in First and Second Level Support. When escalating, Manufacturer
shall provide enough information to allow Wink to duplicate the
problem.
<PAGE> 89
(b) Assignment of Severity Level. When a Third Level support call
comes into Wink from Manufacturer, the parties will mutually
assign a Severity Level as specified below that describes the
nature of the call and how critical it is to Manufacturer's
customer base(s).
(c) Response: Wink agrees to use commercially reasonable efforts to
meet the response times for the respective problems commensurate
with the severity of the error as specified below:
<TABLE>
<CAPTION>
Severity First Response Frequency of
Level Definition Time Status Update
<S> <C> <C> <C>
Critical Bug causes a crash and/or data 4 business hours Each business day
loss to a part or all of the system
High Bug causes a feature to violate a 4 business hours Each business day
performance specification (i.e.,
feature consistently does not work
as specified, or not at all)
Medium Bug causes an occasional failure 1 business day Weekly
of a feature (i.e., feature fails in
specific cases)
Low Bug is characterized by a "glitch" 1 business day Weekly
that does not affect a feature's performance
(e.g., confusing messages, typo-graphical
errors, visual abnormalities, etc.)
Doc Error Error in documentation 2 business days
</TABLE>
(d) Support. Wink agrees to provide Third Level Support from 9 a.m.
to 6 p.m. (San Francisco time) on business days ("Support
Hours"). Support requests shall be submitted by Manufacturer via
email.
5. Exclusions. Wink's support obligations shall not extend to problems that
result from: (i) Manufacturer's failure to implement any Updates to the
Licensed Engine which are provided by Wink; (ii) changes to the
operating system or environment or Manufacturer Devices which adversely
affect the Licensed Engine; (iii) any alterations of or additions to the
Licensed Engine performed by parties other than Wink or Wink's
authorized Subcontractors; (iv) use of the Licensed Engine in a manner
inconsistent with the applicable Specifications or in a manner for which
such Licensed Engine was not intended; or (v) combination of the
Licensed Engine with
<PAGE> 90
other products not supplied by Wink, which problems do not affect the
Licensed Engine standing alone. Errors arising from the foregoing may be
addressed by Wink at its then current hourly rates.
6. Fees. In consideration for the support of the Licensed Engine provided
by Wink under this Exhibit, Manufacturer shall pay an annual fee of
25,000 as prepaid support for fees for up to 125 hours of support. Any
additional support will be provided at Wink's then current hourly rates.
The fee does not include travel expenses (air, lodging, food, local
transport). The first support period will begin on the date of Final
Acceptance and the fees for such period are due upon execution of this
Agreement. The fees for any renewal period are due in advance within 60
days prior to the beginning of the renewal period. Travel availability
is not guaranteed. The support terms will automatically renew unless one
party notifies the other of its intent not to renew.
7. Change. These support terms are subject to change annually. Any changes
will be documented in writing at least 90 days prior to the renewal
date.
<PAGE> 91
EXHIBIT J.: EQUIPMENT PROVIDED BY WINK
- - Sun Spare Servers (primary + back-up) as necessary to operate the Wink
Broadcast Server and Server Module Engine for the Interactive Wink
Programs supplied by Programmers and the Wink virtual Channels.
- - Norpak VBI readers for all incoming national video signals which contain
Interactive Wink Programs and which DIRECTV has agreed to pass through
to Wink-enabled DIRECTV System Receivers (including 2 spare units that
can be "swapped" for defective ones by DIRECTV staff)
- - All modems, servers and other equipment associated with the Wink
Response Network
Proprietary and Confidential
36
<PAGE> 92
EXHIBIT K.: WINK RESPONSE ROUTING PRICING
All products and services are billed Net/45. A Purchase Response shall be
defined as any Wink Transaction which constitutes an agreement to purchase a
product or service, regardless of the method of payment. An RFI Response shall
be defined as any other Wink Transaction. A Poll Response shall be defined as a
Wink Response generated by a Wink "vote/poll" script. The purpose of Poll
Responses is to measure responses to specific questions, and may serve to
aggregate both multiple choice and free form responses.
<TABLE>
<CAPTION>
WINK TRANSACTIONS/MO. PRICE/WINK TRANSACTION
<S> <C>
PURCHASE RESPONSES $[*] min./mo. per Interactive Wink Program
creating Purchase Responses
1-5,000 [*]
5,001 - 25,000 [*]
25,001 - 100,000 [*]
100,001 - 250.000 [*]
250,001 - 500,000 [*]
500, 001 + [*]
RFI RESPONSES $250 min./mo. per Interactive Wink Program
creating RFI Responses
1-5,000 [*]
5,001 - 25,000 [*]
25,001 - 100,000 [*]
100,001 - 250,000 [*]
250,001 - 500,000 [*]
500, 001 + [*]
</TABLE>
<TABLE>
<S> <C>
Polls - report only $[*] min./mo. per Interactive Wink Program creating Poll
Responses
1-250,000 Wink Responses [*]
250, 001 + [*]
</TABLE>
1. Minimum monthly charges per application include UIC (Universal ICAP
code) registration.
2. All volume price breaks are based on DIRECTV's monthly transaction
volume by response category. The price breaks are based on the "average"
for the month. That is, the lowest price applies to all transactions for
the month.
Purchase and Request Response Fees Include;
1. Daily name & address lists delivered by fax, e-mail, or electronic FTP
or mailbox.
2. UIC and application registration.
3. Standard report showing number of Wink Responses per day per Interactive
Wink Program per city.
Polls
The fixed charge includes UIC and application registration, and a
standard reporting that summarizes all Poll responses by type by city.
If the application asks the viewer for telephone prefix or zip code, the
summary includes those totals.
Custom Usage Reports or other Custom Reporting
Custom reports are quoted by the Wink Response Center.
Proprietary and Confidential 37
- -------------
* 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> 93
EXHIBIT M.: DIRECTV TRADEMARK AND STYLE GUIDELINES
DIRECTV Trademark and Style Guide, dated December 1998 (and as amended by
DIRECTV in the future in it's sole discretion.
Proprietary and Confidential 38
<PAGE> 94
[ * ]
- -------------
* 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> 95
EXHIBIT N
DIRECTV CUSTOMER SERVICE STANDARDS
<TABLE>
<CAPTION>
Metrics: Wink Standard Goal
<S> <C> <C>
[*] [*]
Service Level (percentage of calls
answered within 30 seconds)
Attendance [*] [*]
Call Abandon Rate [*] [*]
Call Busy Rate [*] [*]
% Calls Handled [*] [*]
Average Speed of Answer [*] [*]
Average Call Handle Time [*] [*]
Average Call Hold Time [*] [*]
Longest Call Waiting [*] [*]
% Calls Transferred [*] [*]
QUALITY:
EC calls are rated at a Meets or Ex [*] [*]
% of calls where EC is polite and r [*] [*]
% of calls that have one call resol [*] [*]
LEGAL COMPLIANCE [*] [*]
Call Monitoring per EC per month [*] [*]
SYSTEMS:
Telemarketing - available [*] [*]
Telecom - available [*] [*]
Networks - available [*] [*]
</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.
Proprietary and Confidential 39
<PAGE> 96
FIRST AMENDMENT TO THE MASTER AFFILIATION AGREEMENT
BY AND BETWEEN
WINK COMMUNICATIONS, INC. AND DIRECTV, INC.
This First Amendment (the "First Amendment") to that certain MASTER
AFFILIATION AGREEMENT dated as of December 22, 1998 (the "Agreement") by and
between Wink Communications, Inc., a California corporation ("Wink") with
offices at 1001 Village Parkway, Alameda, CA 94501, and DIRECTV, Inc., a
California corporation with offices at 2230 East Imperial Highway, El Segundo,
CA 90245 ("DIRECTV"), is hereby made and entered into this 8th day of March,
1999, as follows:
1. Amendment. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto amend the
Agreement, pursuant to Section 14.2 thereof, as hereby follows;
A. Section 5.8. The Paragraph immediately following Paragraph
(d) of Section 5.8 is hereby amended to read as follows:
If DIRECTV HAS NOT REACHED A MINIMUM OF ONE MILLION (1,000,000)
WINK-ENABLED DIRECTV SYSTEM SUBSCRIBERS BY THE FIRST ANNIVERSARY OF THE
MEASUREMENT DATE, BUT DOES REACH A MINIMUM OF ONE MILLION (1,000,000)
WINK-ENABLED DIRECTV SYSTEM SUBSCRIBERS WITHIN EIGHTEEN (18) MONTHS OF
THE MEASUREMENT DATE, AND (x) HUGHES NETWORK SYSTEMS, PHILIPS CONSUMER
ELECTRONICS OR SONY ELECTRONICS SHIPS OVER 10,000 UNITS OF A
WINK-ENABLED DIRECTV SYSTEM RECEIVER TO RESIDENTIAL CUSTOMERS PRIOR TO
MARCH 31, 2000, AND (y) SUCH WINK-ENABLED DIRECTV SYSTEM RECEIVER MODEL
IS REASONABLY ANTICIPATED BY SUCH PARTICIPATING MANUFACTURER TO BE ITS
HIGHEST VOLUME MODEL DURING THE APPLICABLE MODEL YEAR, WINK AGREES TO
GUARANTEE CERTAIN REVENUES FOR DIRECTV AS FOLLOWS:
2. Counterparts. This First Amendment may be executed in counterparts,
each of which shall be deemed an original, and all such counterparts together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this First Amendment
through their duly authorized representatives as of the date first set forth
above.
ACCEPTED AND AGREED TO:
Wink Communications, Inc. DIRECTV, Inc.
By: /s/ ALLEN THYGESN By: /s/ BRADLEY BEALE
--------------------------------- -------------------------------------
Name: Allen Thygesn Name: Bradley Beale
------------------------------- -----------------------------------
Title: SVP Title: Vice President
------------------------------ ----------------------------------
1
<PAGE> 1
EXHIBIT 10.14
MASTER CABLE AFFILIATION AGREEMENT
TIME WARNER CABLE
THIS Master Agreement is made as of the 23rd day of September,
1998 (the "Effective Date"), by and between WINK
COMMUNICATIONS, INC., a California corporation ("Wink"), whose
address is 1001 Marina Village Parkway, Alameda, CA 94501 and
TIME WARNER CABLE, a division of Time Warner Entertainment
Company, L.P., a Delaware limited partnership ("Affiliate"),
with offices at 290 Harbor Drive, Stamford, Connecticut 06902.
1. GRANT OF LICENSE
1.1 Subject to the terms of this Master Agreement, Wink
hereby grants to Affiliate a non-exclusive license
(the "License") to use the Wink software products
listed in Exhibit B (hereinafter collectively
referred to as "Wink Software") to deliver
interactive program(s) which utilize the vertical
blanking interval ("VBI") and are compliant with the
Wink interactive communications application protocol
("Interactive Wink Programs") to: (A) the subscribers
of all cable systems: (i) managed by a Time Warner
Company (as defined herein) or (ii) of which a Time
Warner Company (as defined herein) directly or
indirectly owns, or has the right to become owner, of
at least 25% of the equity and which are located in
the continental United States, Alaska, Hawaii, and
the US territories in Caribbean and Canada
("Affiliate System"); and (B) satellite master
antenna television systems, multi-point distribution
services, multi-channel multi-point distribution
services, equipment owned or operated by the owners
or residents of individual dwelling units for private
viewing capable of receiving audio/visual signals
and/or programming directly via satellite (including,
without limitation, C-Band and Ku-Band signals), as
modified, manipulated, compressed or replaced now or
in the future and all other methods of distributing
or receiving audio/visual signals and/or programming,
excluding traditional broadcast television, in an
Operating Area (as defined in Section 1.2), in any
area of a county in which an Operating Area is
located and in any county adjacent to such a county.
As used herein, a "Time Warner Company" shall mean
Affiliate, Time Warner Inc. ("TWI"), Time Warner
Entertainment Company, L.P. ("TWE"), Time Warner
Entertainment-Advance/Newhouse, L.P. ("TWE-NN"), TWI
Cable Inc. ("TWIC"), or Paragon Communications or any
other corporation, partnership, joint venture, trust,
joint stock company, association, unincorporated
organization (including a group acting in concert) or
other entity of which Affiliate, TWI, TWE, TWEAN,
TWIC or Paragon Communications, directly or
indirectly own at least 25% of the equity.
Proprietary and Confidential
Execution Copy
1
<PAGE> 2
1.2 For purposes of this Master Agreement, the "Operating
Area" of any Affiliate System shall mean that area
where such Affiliate System is authorized by the
appropriate governmental agency, authority or
instrumentality (if required) to operate an audio or
video distribution facility and is operating or is
obligated to operate or become operational.
1.3 Except as permitted in this Master Agreement, this
License is not transferable outside of each Affiliate
System's Operating Area, nor may any rights hereunder
be transferred, assigned or sub-licensed in whole or
in part without Wink's prior written consent.
1.4 For purposes of this Master Agreement, a
"Participating System" shall mean an Affiliate System
that has: (A) executed Exhibit C (the "System
Addendum"), which provides Wink, Affiliate and the
Participating System with specific information
regarding exceptions or modifications, if any, to the
terms defined in this Master Agreement, equipment
inventory and requirements, test and launch dates,
and other information specific to Participating
System, and which, when executed, shall be deemed a
part of this Master Agreement (all references
hereinafter to "this Master Agreement" shall be
deemed to include each executed System Addendum); and
(B) licensed the Wink-developed client software for
Affiliate's advanced analog and digital cable set top
boxes (the "Wink Engine", a cable set top box for
which the Wink Engine is commercially available shall
be referred to as a "Wink-capable STB"), separately
from the manufacturer of such set top boxes in order
to enable reception of Interactive Wink Programs.
Wink has arranged for special preferential terms for
the license of the Wink Engine for Participating
Systems meeting certain criteria, as defined in
Exhibit D. The parties agree that a System Addendum
shall not be effective and binding upon a
Participating System unless and until executed by
Affiliate's Senior Vice President of Programming (or
another person designated in writing by him or her),
Participating System and Wink.
2. TERM
2.1 The "Term" of this Master Agreement shall commence on
the Effective Date and terminate five (5) years
thereafter.
2.2 The term of each System Addendum shall commence on
the date of execution of the System Addendum and
shall terminate on expiration or termination of the
Master Agreement, unless terminated earlier as
provided herein. Participating System and Affiliate
shall have the right, but not the obligation, in
their sole discretion, to terminate an individual
System Addendum at any time after a period of three
(3) years following the first day the Interactive
Wink Programs are distributed to and received by such
Participating System's subscribers (the "Launch
Date") in accordance with
Proprietary and Confidential
Execution Copy
2
<PAGE> 3
the terms of this Master Agreement. Notice of
Affiliate's or Participating System's intent to so
terminate must be received by Wink no later than
sixty (60) days prior to the effective date of such
termination.
2.3 Each Participating System that has provided
Interactive Wink Programs to its subscribers on or
before December 31, 1999 shall have the option, in
its and Affiliate's sole discretion, to terminate its
System Addendum at any time after a period of
eighteen (18) months following the Launch Date for
that Participating System by providing Wink with
thirty (30) days prior written notice.
2.4 At any time during the Term, each Participating
System shall have the right to terminate the carriage
or provision of the Interactive Wink Programs of any
Programmer (as defined in Section 3.1), if one or
several of such Interactive Wink Programs do not
meet, in Participating System's sole discretion
(which shall be reasonable) the requirements of
Section 3.2. Affiliate and Wink acknowledge that a
Participating Programmer (as defined herein) may
offer more than one programming service and may
provide Interactive Wink Programs in connection with
more than one of its programming services. Affiliate
and Participating Systems agree that any termination
of carriage or provision of the Interactive Wink
Programs pursuant to this Section 2.4 shall be of
only the non-complying Interactive Wink Programs
offered in connection with a particular programming
service(s), and not of all Interactive Wink Programs
offered in connection with all programming services
provided by the Participating Programmer.
3. INTEGRATION
3.1 Except as otherwise set forth herein, Affiliate and
Participating Systems will not prevent the
distribution of Interactive Wink Programs carried in
the VBI of video signals from a broadcaster or cable
programmer with whom Affiliate or a Participating
System has a valid agreement for carriage or
re-transmission of video programming, or whose signal
Participating System is otherwise obligated by
applicable law to distribute to its subscribers
(each, a "Programmer"), and agree to pass Interactive
Wink Programs to Wink STB Subscribers (as defined
herein) without any charge to Programmers (except as
set forth in Section 3.3) during the Term of this
Master Agreement, provided that (i) each Programmer
has agreed to provide and does provide such
Interactive Wink Programs at no cost to Affiliate,
Affiliate Systems or any Wink STB Subscriber; (ii)
the content of such Interactive Wink Programs
complies with Section 3.2; and (iii) Affiliate or
Participating System is receiving its appropriate
revenue share (if applicable) as set forth in Section
3.3. Upon receipt of written notice from Affiliate or
any Participating System that a Programmer does not
have a valid and current agreement for carriage or
retransmission of video programming with Affiliate or
any Participating
Proprietary and Confidential
Execution Copy
3
<PAGE> 4
System, Wink shall assist Participating Systems in
ensuring that such Programmer's Interactive Wink
Programs for the applicable programming service(s)
offered by the Programmer are not passed to Wink STB
Subscribers.
As used herein, "Wink STB Subscriber" shall mean each
Participating System customer that (i) receives or
separately pays for cable television service; (ii)
has a Wink-capable STB; and (iii) has not requested
not to receive the Interactive Wink Programs.
3.2 Wink shall use commercially reasonable efforts to
ensure that each Interactive Wink Program provided by
a Programmer (including the content thereof) is
directly related in content, nature and intended
audience to the video programming and advertising
actually being provided by such Programmer at the
same time that such Interactive Wink Program is
provided and thus has the purpose of enhancing or
providing additional detail or information regarding
such video programming or advertising, as applicable.
Wink shall also ensure that the Interactive Wink
Programs are provided to Affiliate or a Participating
System pursuant to a then current and valid license
agreement between the Programmer and Wink. If these
conditions are not met, Affiliate and Participating
Systems are not obligated to pass such Interactive
Wink Programs, and may immediately terminate carriage
of the Interactive Wink Programs of such Programmer.
The parties further agree that this Master Agreement
in no way creates any obligation on behalf of
Affiliate or Participating Systems to carry or pass
any other form of programming or data of any
Programmer. Affiliate and Participating System agree
to notify Wink in writing as soon as is reasonably
practicable when Affiliate or Participating System
believes that an Interactive Wink Program does not
meet the conditions provided herein or if a
Programmer is not complying with Section 3.3.
Affiliate and Participating System further agree to
resume carriage of Programmer's Interactive Wink
Programs, once the Interactive Wink Programs have
been brought into compliance with this section 3.2 or
a Programmer agrees to comply with Section 3.3 (if
applicable), as determined in Affiliate's or
Participating System's sole discretion, which shall
be reasonable.
3.3 In the event that a Programmer provides, in
connection with video programming (excluding third
party advertising), an Interactive Wink Program that
solicits a Wink STB Subscriber to purchase a product
(i.e., "home shopping"), Affiliate and Participating
System [*] by a Wink STB Subscriber. In the event
that such Programmer [*] then Affiliate and
Participating System shall have no obligation to
carry the Interactive Wink Programs for that
Programmer and may terminate such carriage upon
written notice to Wink.
- -------------
* 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.
Proprietary and Confidential
Execution Copy
4
<PAGE> 5
[*]
3.4 Each Participating System shall use commercially
reasonable efforts to assist Wink in enabling the
reception of nationally or locally inserted
Interactive Wink Programs in cable set top boxes in
which Participating System has agreed to deploy the
Wink Engine, provided that it is understood and
agreed that a Participating System has no obligation
to permit or assist Wink in enabling, or to enable,
the set-top box of any subscriber who elects not to
receive the Interactive Wink Programs. The parties
agree that each Participating System's System
Addendum will provide a mutually agreeable list of
operational obligations for Wink and Participating
System specific to Participating System's enabling of
the Wink Software and the Wink Engine.
3.5 Each Participating System shall provide to Wink up to
a total of 3 VBI lines on one (1) channel provided
that the use by Wink of such VBI lines does not, in
Participating Systems' sole discretion, cause the
degradation of or otherwise interfere with the signal
of such channel and provided that Wink shall use such
VBI lines solely for the purpose of delivering
various full screen Interactive Wink Programs
required for customer-related educational services,
including but not limited to a customer registration
program, a Wink user's guide program, and a Wink
guide to upcoming Interactive Wink Programs related
to scheduled video programming (a "Wink Virtual
Channel"). Wink shall not use the Wink Virtual
Channel for advertising or any purpose other than as
specified herein. A Participating System may elect to
insert Interactive Wink Programs created by such
Participating System and/or third parties using the
Wink Software, subject to the restrictions defined in
Exhibit C, if any. Third party providers of such
additional Interactive Wink Programs accepted for
carriage by individual Participating System shall be
referred to as "Third Party Wink Program Providers".
3.6 Wink shall perform all Wink-related installation work
necessary to ensure proper operation of the Wink
Software and the Wink Engine, and reliable delivery
of Interactive Wink Programs, and shall provide
on-going technical support for the Wink Software and
the Wink Engine during the effective term of each
Participating System's System Addendum.
3.7 Wink and each Participating System will use their
commercially reasonable efforts to complete all
integration work in order to meet the project
deadlines specified in Attachment 1 of the
Participating System's System Addendum. Affiliate and
Participating Systems agree to provide technical
specifications and other reasonable support to enable
Wink to extract the minimum
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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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information necessary from the applicable billing
system to enable transaction routing. This
information, which includes subscriber name, bill-to
and service address, phone number, set top box
serial number, and any other information to be
mutually agreed upon between the parties, shall be
deemed Confidential Information, as defined in
Section 12.1.
3.8 Wink shall keep the Wink Software in good working
order for uninterrupted reception of Interactive Wink
Programs by Wink STB Subscribers. Participating
Systems shall perform daily polls to collect viewer
responses to Interactive Wink Programs and other
routine maintenance of the Wink Software to ensure
regular and reliable Wink response collection, and
shall permit Wink secure remote access to the Wink
Software and associated equipment solely for the
specific purpose of providing the Interactive Wink
Programs and collecting transaction routing and
response information from same. Wink shall specify in
writing the identity of the individuals employed by
Wink who shall be permitted such access, and these
individuals shall be advised of and bound by the
confidentiality obligations set forth in Section 12
herein. Wink further represents and warrants that
such access by Wink will not adversely impact
Participating System's operations.
3.9 Notwithstanding anything to the contrary set forth
herein, Participating System has the right without
prior notice to interrupt the carriage of Interactive
Wink Programs at any time for the purpose of
Emergency Broadcast and other Federal Communications
Commission (FCC) mandated broadcasts in, the
Operating Area, or if the Interactive Wink Programs
or response collection interferes in any way with
transmission of the signal of the applicable channel,
interferes with the operations of Affiliate or any
Participating Systems or causes other technical
problems. Participating System agrees to give notice
to Wink within twenty-four (24) hours of any such
interruption, and Participating System and Wink will
each use their commercially reasonable efforts to
restore the delivery of Interactive Wink Programs and
collection of viewer responses as soon as possible.
Failure by Participating System to give such notice
shall not constitute a breach under this Master
Agreement.
3.10 Affiliate and Participating Systems shall have no
obligation to distribute Interactive Wink Programs
provided with video programming delivered from the
Participating System's head-end(s) to its subscribers
in a digital format.
4. DEPLOYMENT
4.1 Unless otherwise set forth in the respective System
Addendum, each Participating System shall have the
benefit of the terms and conditions of this Master
Agreement and the pricing in Exhibit D if it:
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(a) collects each day the Wink STB Subscriber responses
generated by Interactive Wink Programs;
(b) has agreed to license from the applicable
manufacturer at least 75,000 Wink Engines, and has
agreed to deploy at least 75,000 two-way enabled Wink
Engines in subscriber premises on the Launch Date;
and
(c) agrees to perform any other actions as may reasonably
be required at no additional cost to enable
Participating System's subscribers with Wink-capable
STBs who have not advised Participating Systems that
they do not wish to receive the Interactive Wink
Programs to become Wink STB Subscribers.
Notwithstanding the above, Wink agrees that Affiliate's New
York City system is eligible for the terms and conditions of
this Master Agreement and the pricing in Exhibit D, regardless
of whether it satisfies (a), (b) and (c) in the preceding
sentence.
4.2 Affiliate agrees to use commercially reasonable efforts to
notify all of its systems in North America of the terms and
conditions of this Master Agreement within thirty (30) days of
the execution of the Master Agreement. The failure of
Affiliate to so notify within such thirty (30) day period
shall not constitute a breach of this Master Agreement.
4.3. Wink shall ensure that at least ten (10) national Programmers
have agreements with Wink to provide Interactive Wink Programs
during the term of the Master Agreement (each, a
"Participating Programmer"). Each such Participating
Programmer shall be limited to using only three (3) specified
VBI lines for delivery of its Interactive Wink Programs. A
complete list of the Participating Programmers together with
the specific three (3) VBI lines that each such Participating
Programmer shall use and the number of hours of programming
per week for which each such Participating Programmer has
committed in its written agreement with Wink to provide
Interactive Wink Programs shall be set forth on Exhibit F.
Exhibit F shall be amended by Wink from time to time by
providing prompt written notice to Affiliate and Participating
Systems of Participating Programmers that are added or dropped
by Wink and the corresponding three (3) VBI lines utilized by
such Participating Programmer that are added or dropped.
Each Participating Programmer shall deliver its Interactive
Wink Programs within the three (3) VBI lines specified on
Exhibit F, as amended, however Affiliate and each
Participating System may provide such Interactive Wink
Programs to Wink STB Subscribers on any VBI lines it chooses,
in its sole discretion and without notice to the Participating
Programmer. In the case of new Participating Programmers, Wink
shall provide Affiliate and Participating
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Systems such notice at least forty five (45) days before
commencement of national transmission of Interactive Wink
Programs by such Participating Programmers. If the number of
Participating Programmers with whom Wink has written
agreements falls below ten (10), Wink shall promptly notify
Affiliate and Participating Systems in writing that the number
has fallen below ten (10), and Wink shall have sixty (60) days
to get the number of Participating Programmers back to ten
(10) or more. If after sixty (60) days Wink does not have
written agreements with at least ten (10) Participating
Programmers pursuant to which the Participating Programmers
are to provide Interactive Wink Programs, Affiliate shall have
the right to declare that Wink has materially breached this
Master Agreement and Affiliate may then terminate in
accordance with the terms of Section 13.3 and/or exercise its
other rights and remedies hereunder.
4.4 During the Term of this Master Agreement, Wink shall pay to
Participating System a share of the fees on each purchase and
request response that is generated by a Wink STB Subscriber,
(including each response in connection with which a Wink STB
Subscriber provides personal information, such as name and
.address, to a third party) and routed by Wink to the
appropriate Participating Programmer or Fulfillment Entity (as
defined in Section 6.3) (each, a "Wink Transaction"). Wink's
gross revenues from Wink Transactions shall be referred to as
"Gross Transaction Routing Fees". Participating System's share
of Gross Transaction Routing Fees shall be as set forth in
Exhibit A. These payments made by Wink to Participating
Systems shall be defined as "System Transaction Revenue Share"
for purposes of this Master Agreement.
4.5 The parties agree that Participating Systems may charge an
additional fee to a subscriber who wishes to receive the
Interactive Wink Programs but who has not already been
provided with a Wink-capable STB and would not otherwise be
eligible for a Wink-capable STB through subscription to a
premium service or other tier of service under which such
Wink-capable STB would normally be provided to the subscriber.
The parties agree that to the extent Affiliate and
Participating Systems charge such fees, Wink will be paid
fifty percent (50%) of the difference between the gross fees
received from the subscriber attributable solely to the
receipt of the Interactive Wink Programs and the normal rental
fee for a Wink-capable STB, if applicable.
4.6. Affiliate and Participating Systems may choose to utilize
other products and services of Wink from time to time under
this Master Agreement. These products and services will be
offered by Wink to Affiliate and Participating Systems at the
most favorable rate and terms and conditions offered or
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made available to any third party distributor of audio/visual
signals and/or programming.
4.7. Each Participating System agrees to allow Wink to use the Wink
Software installed in the head-end(s) of Participating System
to collect, aggregate, and route responses for Interactive
Wink Programs from the head-end(s) through Wink's National
Data Center in accordance with the terms and conditions of
this Agreement at no charge to Wink and at no charge to
Participating System. Wink agrees to provide weekly reporting
to Participating System of all response traffic generated by
Wink STB Subscribers. Wink represents and warrants to
Affiliate and Participating Systems that all such information
collected from the Wink Response Servers shall be aggregated
such that any reports Wink generates shall be aggregate and
anonymous and shall not personally identify subscribers.
5. FEES AND PAYMENT TERMS
5.1 Affiliate and the Participating Systems acknowledge and accept
Wink's licensing fees, rates for Wink services, and payment
terms for Participating Systems as set forth in Exhibit D. On
or before the forty fifth (45th) day following each month
throughout the term of its applicable System Addendum, each
Participating System shall remit to Wink all fees owed for the
License or for services rendered in such month.
5.2 Past due payments shall bear interest at a rate equal to the
lesser of (i) one percent (1%) per month or (ii) the maximum
legal rate permitted under law.
5.3 Wink shall provide reports of and pay the System Transaction
Revenue Share to Participating Systems on or before the forty
fifth (45th) day following each month throughout the Term.
Wink shall also prepare for Affiliate a consolidated
semi-annual report of aggregate System Transaction Revenue
Shares across all Participating Systems.
5.4 Affiliate and each Participating System acknowledge that each
Participating System must provide quarterly reports on all
Incremental Wink Revenues (as defined herein) generated
through the use of the Wink Software. "Incremental Wink
Revenues" shall be defined as System Transaction Revenue Share
for Participating System Wink STB Subscribers (for the report
of which Participating System may attach the System
Transaction Revenue Share reports provided by Wink pursuant to
Section 5.3), ad sales revenue received from selling
Interactive Wink Program enhancements to local spot ads or any
form of advertising or sponsorship on locally inserted full
screen Interactive Wink Programs, and Participating System
revenue shares or fees received from Third Party Wink Program
Providers. A "Wink
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Subscriber Unit" shall be a subscriber provided with an
activated Wink-capable STB on or before the Launch Date or,
for a subscriber whose Wink-capable STB was activated within
eighteen (18) months of the Launch Date, the number x
determined by the formula below:
x = the number of full months elapsed prior to 18
months following the Launch Date that such subscriber had an
activated Wink capable STB, divided by 18.
If, within eighteen (18) months of the applicable Launch Date,
a Participating System's Incremental Wink Revenues have not
reached a cumulative total of [*] per Wink Subscriber Unit,
Wink shall pay the Participating System(s) within forty five
(45) days, the difference between [*] per Wink Subscriber
Unit and the actual cumulative Incremental Wink Revenues per
Wink Subscriber Unit.
6. PROMOTION AND RESEARCH
6.1 The parties agree to issue a joint press release announcing
this Master Agreement within fourteen (14) days of execution
of this Master Agreement. Wink shall provide Affiliate with a
draft of this release for review and approval within three (3)
business days after the execution of this Master Agreement by
both parties.
6.2 Wink may, from time to time, undertake marketing tests and
surveys, rating polls and other research in connection with
Affiliate or Participating Systems. Wink shall give prior
written notice to Affiliate of the nature and scope of each
such test, survey, poll or project which applies to or
involves Affiliate or a Participating System. Affiliate and a
Participating System may, to the extent permissible under
applicable law, provide Wink, upon reasonable request from
Wink, with reasonable assistance in conducting such research
in connection with undertaking such test, survey, poll or
project. Wink shall reimburse Affiliate and Participating
System for all costs and expenses incurred in connection with
rendering such assistance upon demand. Wink shall promptly
provide Affiliate with the results of all such tests, surveys,
polls and projects. The results of all such tests, surveys,
polls and projects shall be Confidential Information, shall be
in an aggregate form only, and shall not identify any
subscriber, cable television system or cable television
operator. Affiliate and Participating Systems agree that Wink
will have access to any and all research in an aggregate and
anonymous form regarding the deployment, launch, and usage of
the Interactive Wink Programs service by Wink STB Subscribers
that is created or paid for by Affiliate or Participating
Systems. Such research shall be Confidential Information as
defined in Section 12 hereof.
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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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6.3 Affiliate acknowledges that Wink will be providing to
Participating Programmers and Third Party Wink Program
Providers aggregate reports on Participating System Wink STB
Subscriber usage, vote and poll responses to the Interactive
Wink Programs that originate from such Participating
Programmer's video programming and advertising or from such
Third Party Wink Program Provider's Interactive Wink Programs,
respectively. Affiliate acknowledges that Wink will be
providing to Participating Programmers, Third Party Wink
Program Providers, advertisers, or parties designated by such
entities to fulfill Wink Transactions ("Fulfillment Entities")
both (a) aggregate reports on Participating System Wink STB
Subscriber responses and (b) reports on individual Wink
Transactions that are generated as a result of a Wink STB
Subscriber's deliberate interaction with the Interactive Wink
Program to which the report relates. Wink represents and
warrants to Affiliate and Participating Systems that: (i),
except as set forth herein, it shall not collect, use or
provide to any third party any information related to a Wink
STB Subscriber including, but not limited to, name, address,
phone number and credit card number, (collectively, "Wink STB
Subscriber Data"); (ii) each Participating Programmer, Third
Party Wink Program Provider, advertiser providing Interactive
Wink Programs and Fulfillment Entity shall be expressly
prohibited pursuant to executed written agreements with Wink
from (x) collecting or using any Wink STB Subscriber Data for
purposes other than fulfilling orders and requests from the
Wink STB Subscriber, and (y) selling or providing any Wink STB
Subscriber Data to third parties, except that, notwithstanding
the foregoing (x) and (y), advertisers may be permitted to use
or provide to third parties the Wink STB Subscriber Data
related to a particular Wink STB Subscriber if such Wink STB
Subscriber has purchased a product through an Interactive Wink
Program and has expressly consented, during the registration
and education process on the Wink Virtual Channel, to the use
of or provision of such data by an advertiser; and (iii) each
Affiliate and Participating System subscriber who wishes to
receive the Interactive Wink Programs and become a Wink STB
Subscriber shall be required, during the registration and
education process on the Wink Virtual Channel, to: (x)
expressly acknowledge and agree that he or she may, in
connection with receipt and use of the Interactive Wink
Programs, provide personally identifiable information
(including name, address, phone number, e-mail address and
credit card number) to Wink, Participating Programmers,
advertisers, Third Party Wink Program Providers and
Fulfillment Entities; (y) expressly consent to the providing
of such personally identifiable information and the use of
such information by advertisers for additional promotion of
products; and (z) choose whether to consent to the sale of
such personally identifiable information to third parties by
advertisers from whom such subscriber purchases products or
whether to "opt-out" of permitting the sale of such personally
identifiable information. Notwithstanding the foregoing,
Participating Programmers, Third Party Wink Program Providers
advertisers and Fulfillment Entities may use any data
regarding a Wink STB Subscriber
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that is collected other than in connection with the
Interactive Wink Programs and without Wink's assistance.
6.4 Participating System agrees to promote and market the
availability of the Interactive Wink Programs to Wink STB
Subscribers within the Operating Area. Advertising,
promotional, marketing and/or sales materials concerning the
Interactive Wink Programs or the Wink Software provided by
Wink may be used at the discretion of Participating System.
Wink agrees to use commercially reasonable efforts to obtain
prior approvals from all Participating Programmers and Third
Party Wink Program Providers featured in marketing materials
provided by Wink such that no further approvals from
Participating Programmers and Third Party Wink Program
Providers for minor customization of the materials, including
the name and logo of Participating System.
6.5 Participating System agrees that any marketing materials
separately developed by Participating System intended to
promote Wink or the Interactive Wink Programs must be approved
in writing by Wink prior to distribution, which approval shall
not be unreasonably withheld. Notwithstanding the foregoing,
use of the names and marks of Wink and separately
Wink-developed marketing and promotional materials regarding
Wink and the Interactive Wink Programs in routine promotional
materials, such as program guides, program listings and bill
stuffers, shall be deemed approved unless Wink specifically
gives written notice to Affiliate and Participating Systems to
the contrary. Nothing contained herein shall limit or restrict
the right of Affiliate or Participating Systems to use such
names and marks (i) in connection with the exercise of its or
their rights hereunder or (ii) as permitted under any other
contract or agreement, in connection with any local
advertising inserted in any cable television service or
programming if the sponsor of such advertisement had the right
to use such names and marks therein or otherwise than under
this Master Agreement.
6.6 Each Participating System is eligible for matching promotional
funds from Wink of [*]. All promotional and marketing expenses
deemed eligible for matching promotional funds by
Participating System must be submitted to Wink for approval
prior to commitment to such expenses, which approval shall not
be unreasonably withheld, and payment will be made by Wink
within thirty (30) days of presentation of evidence of
expenditure of such amounts Marketing and promotional expenses
eligible for matching promotional funds include events, print
or outdoor advertising, public relations expenditures, direct
mail campaigns and other marketing communications specifically
aimed at improving subscriber awareness or usage of
Interactive Wink Programs. The parties agree that each party
may contribute "in-kind" products and services in place of
cash outlays on the
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with the Securities and Exchange Commission. Omitted portions have been filed
with the Commission.
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approval of the other party. "In-kind" products and services
include, but are not limited to, local cable advertising
avails and templates for various forms of advertising and
promotion that can be tailored to the Participating System.
6.7 [*]
7. REPRESENTATIONS, WARRANTIES AND LIABILITY LIMITATION
7.1 WINK'S WARRANTIES.
7.1.1 General Warranties. Wink hereby represents and warrants
to Affiliate and Participating Systems that: (i) Wink is a
corporation duly organized, validly existing and in good
standing under the laws of the State of California; (ii) Wink
has the requisite power and authority to execute and deliver
this Master Agreement and to fully perform its obligations
hereunder; (iii) Wink has the right to furnish the Wink
Software, the Interactive Wink Programs, the Wink Virtual
Channels and all content contained therein and the services
related thereto as provided in this Master Agreement and any
System Addendum; (iv) the execution, delivery and performance
of this Master Agreement and any System Addendum has been duly
authorized by all corporate actions necessary on the part of
Wink; (v) Wink is not subject to any contractual or other
legal obligation which will in any way interfere with its full
performance of this Master Agreement and any System Addendum;
(vi) the individual executing this Master Agreement on behalf
of Wink has the authority to do so; (vii) the Wink Software
(and subsequent revisions and upgrades to same provided by
Wink to Affiliate and the Participating Systems) will operate
and perform in accordance with all published specifications
with respect thereto as set forth in Exhibit E; (viii) the use
or carriage by Affiliate and the Participating Systems of the
Wink Software, the Wink Engine, the Wink Virtual Channels or
any other rights granted by Wink hereunder will not infringe
upon the patent, copyright, trademark, or other proprietary
right of any third party and (ix) Wink will perform all
obligations and render all services hereunder in a
professional and workmanlike manner to the best of its
abilities.
7.1.2 Year 2000 Warranty. Wink represents and warrants to
Affiliate and Participating Systems that the Wink Software is
designed and developed, to be and will continue to be Year
2000 Compliant. "Year 2000 Compliant" shall mean that (a) the
Wink Software is fully functional and performs in accordance
with Wink's published specifications and the specific
warranties set forth elsewhere in this Master Agreement
(together, the "Standards") prior to, during, and after the
calendar year 2000 A.D., and that the Wink Software shall
perform during each such period of time without any error
relating to date functionality and/or data, which, by way of
illustration
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with the Securities and Exchange Commission. Omitted portions have been filed
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and not limitation, represents or references different
centuries or more than one century or leap years; (b) without
limiting the generality of the foregoing, that the Wink
Software (i) shall not cease to perform or provide or cause
any software and/or system with which the Wink Software
operates] to provide invalid or incorrect results as a result
of date functionality and/or data, or otherwise experience any
degradation of performance or functionality with respect to
the Standards as a result of such interfacing specifically
arising from, relating to or including date functionality
and/or data which represents or references different centuries
or more than one century or leap years, (ii) shall be tested
by Wink with any software and/or system with which the Wink
Software interfaces to ensure that the Wink Software does not
provide invalid or incorrect results as a result of date
functionality and/or data, or otherwise experience any
degradation of performance or functionality with respect to
the Standards specifically arising from, relating to or
including date functionality and/or data which represents or
references different centuries or more than one century or
leap years, (iii) has been developed and designed to be fully
interoperable with year 2000 compliant software, hardware, and
data and to ensure year 2000 compatibility, including, but not
limited to, date data century recognition and calculations
which accommodate same century and multi-century and leap year
formulas and date values; (iv) shall effectively and
accurately manage and manipulate data derived from, involving
or relating in any way to dates including single century
formulas and multi-century or leap year formulas, and will not
cause an abnormally ending scenario within the Wink Software
or in any software and/or system with which the Wink Software
operates or interfaces, or generate incorrect values or
invalid results involving such dates, and (v) provides that
all date-related user interface functionalities and data
fields include an indication of century.
7.2 AFFILIATE'S WARRANTIES. Affiliate represents and warrants to
Wink that (i) Affiliate is a division of a limited partnership
duly organized and validly existing under the laws of the
State of Delaware; (ii) Affiliate has the requisite power and
authority to enter in this Master Agreement and to fully
perform its obligations hereunder; (iii) as to each
Participating System, a valid franchise will then be held by
the appropriate franchisee or the appropriate franchisee will
have held a valid franchise and will then be continuing to
operate under a claim of right or will otherwise be lawfully
continuing to operate while diligently pursuing, in good
faith, its available judicial remedies or negotiating, in good
faith, for franchise renewal; and (iv) Affiliate is under no
contractual or other legal obligation which in any way
interferes with its ability to fully, promptly and completely
perform hereunder.
7.3 LIMITATION OF LIABILITY. NEITHER WINK, ON THE ONE HAND, NOR
AFFILIATE, ANY TIME WARNER COMPANY, ANY AFFILIATE SYSTEM, OR
ANY PARTICIPATING SYSTEM, ON THE OTHER HAND, SHALL, FOR ANY
REASON OR UNDER ANY LEGAL THEORY, BE LIABLE TO THE OTHER OR
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ANY THIRD PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR FOR LOSS OF PROFITS, REVENUES, DATA
OR SERVICES, REGARDLESS OF WHETHER SUCH DAMAGES OR LOSS WAS
FORESEEABLE AND REGARDLESS OF WHETHER IT WAS INFORMED OR HAD
DIRECT OR IMPUTED KNOWLEDGE OF THE POSSIBILITY OF SUCH DAMAGES
OR LOSS IN ADVANCE.
8. INDEMNIFICATION
8.1. Wink shall indemnify, defend and hold harmless any Time Warner
Company, Affiliate, its parents, subsidiaries, Affiliate
Systems, Participating Systems and their respective
affiliates, officers, directors, employees and agents from and
against any and all losses, settlements, claims, actions,
suits, proceedings, investigation, judgments, awards, damages,
liabilities, costs and expenses including, without limitation,
reasonable attorneys' fees (collectively "Losses" and,
individually, a "Loss") which arise out of or as a result of:
(i) any breach of this Master Agreement by Wink;
(ii) any, claim, demand, action, suit or proceeding in
which it is alleged that the Wink Software, the Wink
Engine, the Wink Virtual Channels or any other
content or software provided by Wink or any part
thereof violates or infringes any patent or copyright
or other proprietary right of any third party or
constitutes a misappropriation of any third party's
trade secrets;
(iii) any improper disclosure by Wink, a Programmer, a
Third Party Wink Program Provider or an advertiser of
any Confidential Information as defined herein
("Confidential Information Disclosures"); and
(iv) any claim, demand, action, suit or proceeding in
which it is alleged that an Interactive Wink Program
(provided by any entity other than a Third Party Wink
Program Provider) violates the rights of any third
party including but not limited to any claim of
libel, slander, defamation, indecency, obscenity,
invasion of right of privacy or infringement or
violation of copyrights, music synchronization or
performance rights, dramatic or non-dramatic music
rights, trademark rights, patent rights or any other
proprietary right of any third party (collectively,
"Proprietary Rights Claims")
and shall reimburse them for any and all legal, accounting and
other fees, costs and expenses (collectively, "Expenses")
reasonably incurred by any of them in connection with
investigating, mitigating or defending any such Loss;
provided, however, that Wink will not have any obligation or
liability under this Section 8.1 to the extent that Affiliate
has an obligation or liability with
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respect to the same Loss under Section 8.2. In addition, the
parties agree that Wink's total cumulative liability for
indemnification under this Master Agreement and any System
Addendum for claims arising from Confidential Information
Disclosures and Proprietary Rights Claims shall not exceed
[*].
8.2. Affiliate shall indemnify Wink and its affiliates (including
controlling persons and related companies), officers,
directors, shareholders, employees and agents for, and shall
hold them harmless from and against, any and all Losses which
are sustained or incurred by or asserted against any of them
and which arise out of any breach of this Master Agreement by
Affiliate and shall reimburse them for any and all Expenses
reasonably incurred by any of them in connection with
investigating, mitigating or defending any such Loss.
8.3 Promptly after receipt by a party of notice of the
commencement of any action, suit, proceeding or investigation
in respect of which such party may make a claim for
indemnification hereunder, such party will give written notice
thereof to the other party; but the failure to so notify the
other party will not relieve the other party from any
liability or obligation which the other party may have to any
indemnified person (i) otherwise than under this Master
Agreement or (ii) under this Master Agreement except to the
extent of any material prejudice to the other party resulting
from such failure. If any such action, suit, proceeding or
investigation is brought against an indemnified person, the
indemnifying party will be entitled to participate therein
and, if it wishes to assume the defense thereof and gives
written notice to the indemnified person of its election so to
assume the defense thereof within 15 days after notice shall
have been given to it by the indemnified person pursuant to
the preceding sentence, will be entitled to assume the defense
thereof. Each indemnified person will be obligated to
cooperate reasonably with the indemnifying party, at the
expense of the indemnifying party, in connection with such
defense and the compromise or settlement of any such action,
suit, proceeding or investigation. If Wink is the indemnifying
party, Wink shall make no compromise or settlement of any
claim that involves the imposition of liability on Affiliate
or payment of money by Affiliate without the prior written
consent of Affiliate.
8.4. The parties agree that Programmers are responsible for the
Interactive Wink Programs provided with their respective video
signals. Wink shall consistently support this position in any
claims, demands, actions, suits or proceedings brought against
any Time Warner Company, Affiliate, its parents, subsidiaries,
Participating Systems and affiliates and their respective
officers, directors, employees and agents in which it is
alleged
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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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that the Interactive Wink Programs or any part thereof violate
the proprietary rights of a third party or otherwise create a
liability for Affiliate.
9. NOTICES
All notices, statements, and other communications given
hereunder shall be in writing and shall be delivered by
personal delivery, certified mail, return receipt requested,
or by next day express delivery. Such notices must be
addressed as follows:
If to WINK COMMUNICATIONS:
Attn.: Vice President - Affiliate Sales
1001 Marina Village Parkway
Alameda, CA 94501
If to AFFILIATE:
Attn.: Senior Vice President, Programming
Time Warner Cable
290 Harbor Drive
Stamford, CT 06902
With a copy to:
Time Warner Cable
290 Harbor Drive
Stamford, Connecticut 06902
Attn: Senior Vice President and General Counsel
The date of such telegraphing, personal or express delivery, or the
date of receipt of a certified notice, if applicable, shall be deemed
the date on which such notice is given and effective. Notices,
statements, and other communications regarding individual System
Addenda shall also provided to the applicable Participating System at
the same time such notices are provided to Affiliate and Wink.
10. TRADEMARKS
All right, title and interest in and to the service or other rights, of
whatever nature, related thereto shall remain the property of Wink.
Further, Affiliate acknowledges and agrees that all names, logos,
marks, copyright notices or designations utilized by Wink in connection
with the service are the sole and exclusive property of Wink, and no
rights or ownership are intended to be or shall be transferred to
Affiliate or its Participating Systems. Wink shall not use, and no
right or license is herein granted to Wink to use, any of the trade
names, trademarks, copyrights, styles, slogans, titles, logos or
service marks
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of any Time Warner Company, Affiliate or any Participating System,
Notwithstanding the foregoing, Affiliate permits Wink to include
Affiliate's trade name and logo for Wink's industry marketing
materials, subject to prior written approval by Affiliate.
11. FORCE MAJEURE
Neither party shall have any liability to the other party for any
failure to perform hereunder, if such failure is due to: an act of God;
inevitable accident; fire; lockout; strike or other labor dispute; riot
or civil commotion; act of government or governmental instrumentality
(whether federal, state or local); act of terrorism; failure of
performance by a common carrier; failure in whole or in part of
technical facilities; or other cause (excluding financial inability or
difficulty of any kind) beyond such party's reasonable control.
12. CONFIDENTIALITY
As used herein, "Confidential Information" shall include: (x) the terms
and conditions, other than the existence and duration, of this Master
Agreement; (y) any information marked "confidential;" and (z) all
personally identifiable information related to Wink STB Subscribers or
any other subscriber of Affiliate or an Affiliate System, excluding
such information which Wink STB Subscribers have actively provided to
Wink, a Participating Programmer or a Third Party Wink Program Provider
with the express permission that Wink could provide such information to
advertisers and other third parties. Neither party shall disclose
Confidential Information to any third party (other than as necessary to
its respective employees, in their capacity as such) except: (i) as
expressly provided herein; (ii) as may be required by any court of
competent jurisdiction, governmental agency, law or regulation (in such
event the disclosing party shall notify the other party a reasonable
time prior to disclosure so that the non-disclosing party may take
steps to protect the confidentiality of such information); (iii) as
part of the normal reporting or review procedure to a party's
accountants, auditors, agents, legal counsel and employees of parent
and subsidiary companies, provided such accountants, auditors, agents,
investors and potential investment partners, legal counsel, and
employees of parent and subsidiary companies agree to be bound by this
Section; and (iv) to enforce any of a party's rights pursuant to this
Master Agreement.
13. TERMINATION
13.1 Breach. Notwithstanding any other provision herein, either party shall
have the right to terminate this Master Agreement or any System
Addendum and
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any licenses granted herein or therein by giving written notice to the
other party if the other breaches any of its material obligations under
this Master Agreement and such breach is not cured within thirty (30)
days of receipt of written notification specifically setting forth
those items of nonperformance. The termination of this Master Agreement
by either party shall be without prejudice to any other remedies that
party may have. In the event of such uncured misrepresentation or
breach, the terminating party may chose to terminate the entire Master
Agreement, affecting all Participating Systems, or to terminate the
Licenses granted to one or several individual Participating Systems.
13.2 Bankruptcy. If a party (i) becomes bankrupt or insolvent, however
evidenced, (ii) admits in writing its inability to pay its debts when
due, (iii) makes a general assignment for the benefit of creditors,
(iv) has appointed, voluntarily or involuntarily, any trustee,
receiver, custodian or conservator with respect to it or a substantial
part of its property, (v) files, or has filed against it, a voluntary
or involuntary petition in bankruptcy or (vi) makes any arrangement or
otherwise becomes subject to any proceedings under the bankruptcy,
insolvency, reorganization or similar laws of the United States or any
state, then the other party shall have the right at any time thereafter
to terminate this Master Agreement and any System Addendum by giving
written notice to such party.
13.3 Rights Upon Termination. Upon expiration of the Term (including any
extensions thereof) or upon the termination of this Master Agreement or
any System Addendum or of any License granted hereunder for any reason,
all rights of Affiliate to use the Wink Software will cease and
Affiliate will immediately (i) purge all copies of all Wink Software
from all computer processors or storage media on which Affiliate has
installed or permitted others to install such Wink Software, (ii)
within ninety (90) days of such expiration or termination return all
equipment provided by Wink or allow Wink to retrieve the equipment at
Affiliate's and Participating System's premises on notice during
regular business hours and without interrupting Affiliate or
Participating System's operations and (iii) within ninety (90) days of
such expiration or termination, certify to Wink in writing, signed by
an officer of Affiliate, that all copies of the Wink Software have
been returned to Wink or destroyed and that no copy of any Wink
Software remains in Affiliate's possession or under its control.
14. GENERAL
14.1 Binding Effect; Assignment Neither party shall assign any of its rights
or delegate any of its duties under this Master Agreement (by operation
of law or otherwise) without the prior written consent of the other
party; provided, however, that no such consent shall be required in
connection with any such
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assignment or delegation by Affiliate to any Time Warner Company or any
person which controls, is controlled by or is under common control with
Affiliate or any Time Warner Company or any partner of Paragon
Communications. Any assignment of rights or delegation of duties under
this Master Agreement by a party without the prior written consent of
the other party, if such consent is required hereby, shall be void.
Except as otherwise provided herein, no person shall be a third party
beneficiary of this Master Agreement.
14.2 Amendments, Modifications, Cancellations. Except as otherwise
contemplated herein, no addition to, and no cancellation, renewal,
extension, modification or amendment of, this Master Agreement shall be
binding upon a party unless such addition, cancellation, renewal,
extension, modification or amendment is set forth in a written
instrument which states that it adds to, amends, cancels, renews,
extends or modifies this Master Agreement and which is executed and
delivered on behalf of each party by, in the case of Wink, an officer
of Wink and, in the case of Affiliate, by its Senior Vice President of
Programming or, if no person holds such title, another officer of
Affiliate performing substantially similar functions; provided however,
that Affiliate's Senior Vice President of Programming (or, if
applicable, another officer of Affiliate performing substantially
similar functions) may, by written authorization, designate another
person to execute and deliver such an instrument. Without in any way
limiting Affiliate's right to withhold any such consent or waiver or to
reject any such modification or amendment, Wink agrees that Affiliate
shall have the right to condition its grant of any requested consent
hereunder, its grant of any requested waiver of any provision hereof or
its acceptance of any requested modification hereof or amendment hereto
on receipt of such commissions, compensation or other financial
accommodation or consideration as it may, in its sole discretion,
determine.
14.3 Waivers Limited. No waiver of any provision of this Master Agreement
shall be binding upon a party unless such waiver is set forth in a
written instrument which is executed and delivered on behalf of such
party by an officer of such party. Such waiver shall be effective only
to the extent specifically set forth in such written instrument.
Neither the exercise (from time to time and at any time) by a party of,
nor the delay or failure (at any time or for any period of time) to
exercise, any right, power or remedy shall constitute a waiver of the
right to exercise, or impair, limit or restrict the exercise of, such
right, power or remedy or any other right, power or remedy at any time
and from time to time thereafter. No waiver of any right, power or
remedy of a party shall be deemed to be a waiver of any other right,
power or remedy of such party or shall, except to the extent so waived,
impair, limit or restrict the exercise of such right, power or remedy.
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14.4 Relationship. Neither party shall be or hold itself out as the agent of
the other party under this Master Agreement. Nothing contained herein
shall be deemed to create, and the parties do not intend to create, any
relationship of partners or joint venturers as between Affiliate and
Wink, and neither party is authorized to or shall act toward third
parties or the public in any manner which would indicate any such
relationship. Likewise, no supplier of advertising or programming or
anything else included in connection with the Interactive Wink Programs
shall be deemed to have any privity of contract or direct contractual
or other relationship with Affiliate by virtue of this Master Agreement
or Affiliate's License hereunder. Wink disclaims any present or future
right, interest or estate in or to the transmission facilities of
Affiliate and any affiliate of Affiliate and the parents, subsidiaries,
partnerships or joint venturers controlling the Participating Systems,
such disclaimer being to acknowledge that neither Affiliate nor the
transmission facilities of the Participating Systems (nor the owners
thereof) are common carriers.
14.5 Governing Law. The validity, interpretation, performance and
enforcement of this Master Agreement shall be governed by the law of
the State of New York, without regard to its principles of conflicts of
laws. The respective obligations of the parties under this Master
Agreement are subject to all applicable federal, state and local laws,
rules and regulations (including, without limitation, the
Communications Act of 1934, as amended, the Cable Communications Policy
Act of 1984, as amended, and the rules and regulations of the Federal
Communications Commission thereunder).
14.6 Forum; Jury Trial. Each party agrees that any proceeding arising out of
or relating to this Master Agreement or the breach or threatened breach
of this Master Agreement shall be commenced and prosecuted in the
appropriate federal or state court in the State of New York. Each party
consents and submits to the non-exclusive personal jurisdiction of any
court in the State of New York in respect of any such proceeding. Each
party waives any objection that it may now or hereafter have to the
laying of venue of any such proceeding in any court in the State of New
York and any claim that it may now or hereafter have that any such
proceeding in any court in the State of New York has been brought in an
inconvenient forum.
14.7 Entire Agreement. This Master Agreement together with the Schedules and
Exhibits attached hereto constitutes the entire contract between the
parties with respect to the subject matter hereof and cancels and
supersedes all of the previous or contemporaneous contracts,
representations, warranties and understandings (whether oral or
written) by, between or among the parties with respect to the subject
matter hereof.
14.8 Severability. If any provision of this Master Agreement shall hereafter
be held to be invalid, unenforceable or illegal, in whole or in part,
in any
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jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such
provision to be valid, enforceable and legal while preserving the
intent of the parties as expressed in, and the benefits to the parties
provided by, this Master Agreement or (ii) if such provision cannot be
so reformed, such provision shall be severed from this Master Agreement
and an equitable adjustment shall be made to this Master Agreement
(including, without limitation, addition of necessary further
provisions to this Master Agreement) so as to give effect to the intent
so expressed and the benefits so provided. Such holding shall not
affect or impair the validity, enforceability or legality of such
provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or
impair the legality, validity or enforceability of any other provision
of this Master Agreement.
14.9 Headings. The headings set forth in this Master Agreement have been
inserted for convenience of reference only, shall not be considered a
part of this Master Agreement and shall not limit, modify or affect in
any way the meaning or interpretation of this Master Agreement.
14.10 Survival of Representations. All representations and warranties set
forth herein shall survive the termination or expiration of this Master
Agreement and the consummation of the transactions contemplated hereby.
In addition, Sections 8, 10, 12 and 14 shall survive any termination or
expiration of this Master Agreement.
14.11 No Inference Against Author. Each party acknowledges that this Master
Agreement was fully negotiated by the parties and agrees, therefore,
that no provision of this Master Agreement shall be interpreted against
any party because such party or its counsel drafted such provision.
14.12 Counterparts. This Master Agreement may be signed in any number of
counterparts, each of which (when executed and delivered) shall
constitute an original instrument, but all of which together shall
constitute one and the same instrument. This Master Agreement shall
become effective and be deemed to have been executed and delivered by
both of the parties at such time as counterparts shall have been
executed and delivered by each of the parties, regardless of whether
each of the parties has executed the same counterpart. It shall not be
necessary when making proof of this Master Agreement to account for any
counterparts other than a sufficient number of counterparts which, when
taken together, contain signatures of both of the parties.
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14.13 Most Favored Nations; Audit Rights
14.13.1 Most Favored Nations. If Wink has agreed to provide,
at any time agrees to provide or at any time provides a license to
deliver Interactive Wink Programs to any third party, directly or
indirectly, pursuant to any agreement, understanding or arrangement
(whether oral or written, whether formal or informal, whether now or
hereafter effective, whether on a long term, short term basis) (a
"Third Party Agreement") to any distributor, on any day during the term
hereof under terms, provisions, conditions, covenants, commitments,
concessions, commissions, rebates, allowances, fees or rates
(collectively, "Provisions") which are more favorable to such other
distributor than those set forth in this Agreement, Wink shall give
written notice thereof to Affiliate and, at Affiliate's election, this
Agreement shall be deemed to have been modified so that, from the date
on which such more favorable Provision is first so provided (or, if
such more favorable Provision is now being provided, from the date
hereof) and thereafter for so long as such more favorable Provision
continues to be so provided, Affiliate (and Participating Systems, as
applicable) shall receive such more favorable Provision, subject only
to the following: If such more favorable Provision is a Financial
Provision (as hereinafter defined), Wink shall offer to Affiliate in
writing such more favorable Financial Provision together with all other
Financial Provision(s) contained in such Third Party Agreement, it
being agreed that in order to receive the more favorable Financial
Provision, Affiliate (or any participating System, as applicable) must
also accept the other Financial Provisions contained in such Third
Party Agreement. For purposes hereof, "Financial Provision" shall mean
the software licensing fees and rates for Wink services as set forth in
Sections A and B of Exhibit D and the System Transaction Revenue Share
described in Section 4.4 of this Agreement. The determination of
whether a Provision in a Third Party Agreement is more favorable shall
focus on such Provision individually for each moment of time during
which such Provision is effective rather than on the Third Party
Agreement as a whole or the effect of such Provision thereon.
14.13.2 Audit Right; Damages. During the term of this
Agreement and for one (1) year thereafter, Wink shall maintain accurate
and complete documents and information, as well as books and records in
accordance with generally accepted accounting principles and practices
which, at a minimum, shall contain sufficient information to enable an
auditor to verify compliance with this Agreement. Upon not less than 30
days' prior written notice, Affiliate shall have the right, during the
term of this Agreement and for one (1) year thereafter to examine
during normal business hours all of the documents, information, books
and records of Wink to the extent necessary to verify compliance with
this Agreement; provided, however, that such examinations shall not be
conducted more frequently than once annually.
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If any such examination reveals a discrepancy in the amount paid by or
to Affiliate (or Participating System) and the amount which should have
been paid by or to Affiliate (or Participating System), Wink shall
immediately pay to Affiliate (or Participating System) an amount equal
to the cost of such examination, plus twice the amount of such
discrepancy, plus interest on the amount of such discrepancy at the
rate of 1.5% per month (or, if lower, the maximum rate permitted by
law) from the date on which such amount was paid by or should have'
been paid to Affiliate (or Participating System) through the date on
which payment is made to Affiliate (or Participating System).
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
entered into this Master Agreement as of the Effective
WINK COMMUNICATIONS, INC. TIME WARNER CABLE
By: By:
Name: Name:
Title: Title:
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EXHIBIT A.:WINK/AFFILIATE REVENUE SHARE
WINK RESPONSE SERVICE TRANSACTION FEES
All System Transaction Revenue Shares are calculated as a percentage of
Wink's gross revenues on the applicable Gross Transaction Routing Fees,
based on the schedule below. The volume breaks are based on the number
of transactions originating from Wink Engines deployed in North America
and routed monthly for the applicable entity contracting with Wink's
Data Center for routing of Wink transactions:
<TABLE>
<CAPTION>
Transaction Revenue Shares Participating System
(% of Wink gross revenues) Revenue Share
(Name, address, optional credit card) National Program or Ad Local
Program or Ads(*)
<S> <C> <C>
1-5,000 transactions/mo. [*] [*]
5,001 - 25,000 transactions/mo. [*] [*]
25,001 - 100,000 transactions/mo. [*] [*]
100,001 - 250,000 transactions/mo. [*] [*]
250,001 - 500,000 transactions/mo. [*] [*]
500,001 - up transactions/mo. [*] [*]
</TABLE>
(*) A local program or ad response is defined as a response generated
from an Interactive Wink Program inserted by Participating System,
Affiliate or an entity which Affiliate or Participating System has
contracted for the insertion of advertisements during Participating
System's "local avails" on cable or broadcast networks, or from a Third
Party Wink Program Provider. All other responses shall be deemed
National Programs or Ads.
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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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EXHIBIT B.:WINK SOFTWARE
STANDARD ITEMS:
WINK BROADCAST SERVER VERSION 2.X WITH ALL VBI INSERTER INTERFACES
WINK SERVER MODULE ENGINE VERSION 1.X WINK RESPONSE SERVER (STORE AND FORWARD
RETURN PATH) VERSION 1.X
WINK BILLING SYSTEM INTERFACE VERSION 1.X
OPTIONAL ITEMS:
WINK STUDIO VERSION 2.X (5-SEAT LICENSE)
WINK SERVER STUDIO 1.X (5-SEAT LICENSE)
WINK AD INSERTION SERVER MODULE, DIFFERENT INTERFACES AVAILABLE
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EXHIBIT C.: ADDENDUM TO BE EXECUTED BY AFFILIATE'S PARTICIPATING SYSTEMS SYSTEM
ADDENDUM
This System Addendum is made as of the day of (the "Effective Date"), by and
between WINK COMMUNICATIONS, INC., a California corporation ("Wink"), whose
address is 1001 Marina Village Parkway, Alameda, CA 94501 and
, a corporation ("Participating System"),
whose address is
1. RECITALS
Whereas, on , 1998, Wink and Time Warner Cable, a
division of Time Warner Entertainment Co., L.P. (Affiliate) executed a
Master Cable Affiliation Agreement (the "Master Agreement") Whereas,
pursuant to the Master Agreement, Participating System is duly
authorized to execute this System Addendum; Whereas, the parties wish
to incorporate fully herein the terms and conditions of the Master
Agreement; The parties now agree to be bound by the following
additional or amended terms and conditions;
2. GENERAL
2.1 The parties agree that all terms defined in the Master Agreement shall
have the same meaning and definition in this System Addendum as set
forth in the Master Agreement;
2.2 Participating System accepts a License and agrees to assume all the
rights and obligations of a Participating System in connection
therewith as defined in the Master Agreement (except for amendments in
section 3 of this Addendum, if any), and Wink agrees to assume all the
rights and obligations of Wink as defined in the Master Agreement
(excepts for amendments in section 4 of this Addendum, if any).
2.3 The parties agree that all terms and conditions set forth in the Master
Agreement, including, but not limited to, representations and
warranties and indemnification obligations that obligate Wink and
Affiliate shall apply in this
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System Addendum to obligate Wink and Participating System as if set
forth fully herein.
2.4 The parties agree that this System Addendum shall not be effective
unless and until executed by Affiliate's Senior Vice President of
Programming (or another person designated in writing by him or her),
Participating System and Wink.
3. ADDITIONAL TERMS AND CONDITIONS
3.1 Participating System agrees to deploy the Wink Engine in the set top
box equipment described in Attachment 1, and to perform any other
actions necessary to enable such set top equipment to receive
Interactive Wink Programs in the time frame required by Attachment 1.
The parties agree that Participating System may choose to deploy the
Wink Engine in additional Wink-capable STBs at any time.
3.2 Wink shall provide the following services at or before the Launch Date
in addition to those specified in the Master Agreement: (to be
determined between Affiliate, Participating System and Wink)
3.3 Wink shall provide the following services on an on-going basis
following the Launch Date in addition to those specified in the Master
Agreement: (to be determined between Affiliate, Participating System
and Wink) Participating System shall provide operational support for
the deployment of the Wink Engine and the Wink Software as follows in
addition to the support specified in the Master Agreement: (to be
determined between Affiliate, Participating System and Wink)
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4. AMENDED TERMS AND CONDITIONS
[IF ANY]
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
entered into this System Addendum as of the Effective Date.
WINK AFFILIATE
By: By:
Name: Name:
Title: Title:
PARTICIPATING SYSTEM
By:
Name:
Title:
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EXHIBIT C, ATTACHMENT 1: DEPLOYMENT REQUIREMENTS
In order to ensure eligibility for the pricing and other terms defined in the
Master Agreement (as amended in the System Addendum), Participating System
agrees to the following deployments and schedule
STB Quantity Deadline for Wink download
Example:
GI CFT 2200 xx, xxx
To Be Completed by the Parties prior to Execution
GI CFT 2200
SA 8600X
PIONEER BAV-2000
GI DCT 1000
SA EXPLORER
Pioneer DIGITAL STB
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EXHIBIT D.:PRICING AND PAYMENT TERMS FOR PARTICIPATING SYSTEMS
(A) Wink Software provided free of charge for 18 months following the
Launch Date:
- - License for one Wink Broadcast Server 2.x with all VBI Inserter
Interfaces
- - License for one Wink Response Server 1.x
- - License for one Wink Billing System Interface 1.x
- - License for one Wink Server Module Engine 1.x
If a Participating System has multiple headends, Wink shall provide, at no
additional charge, any additional licenses of the Wink Software that may be
necessary to enable all Wink STB Subscribers to receive Interactive Wink
Programs. After 18 months following the Launch Date, the monthly license fee for
all the Wink Software listed in this section A is $3,000 per month.
(B) Wink services provided free of charge:
- - Site survey, installation and configuration of all Wink Software and
other products provided by Wink
- - A two-day training session for operating and maintaining the Wink
Broadcast Server Technical Support for the Wink Software during the
term of the Master Agreement
(C) Third party products provided free of charge:
- - CFT-2200 Wink Engines for Wink STB Subscribers enabled to receive
Interactive Wink Programs on or before the Launch Date (available
through December 31, 1998, through General instrument Corp.)
- - Sun Ultra server hardware, configured to support Wink Broadcast Server
and Wink Response Server
- - 1 Norpak TES-3 data insertion units with software modules for 3 VBI
lines (or equivalent inserter for SA-8600x systems)
- - 1 Windows NT or Windows 95 Pentium PC for Wink Studio, Broadcast Server
GUI
- - Cables, hubs, etc. necessary to connect all Wink related equipment
All hardware products provided must be returned to Wink upon termination or
expiration of the Master Agreement, or upon termination or expiration of
Participating System's System Addendum.
(D) Required third party products to be licensed by Participating System or
Affiliate
- - Wink Engine software for all Wink-capable STBs on which Participating
System wishes to provide Interactive Wink Programs.
(E) Optional Wink Software and services:
- - License for Wink Ad Insertion Server Module (delivery dependent on
vendor/interface) Existing interfaces $750/mo + $0.01/Wink STB
Subscriber/mo.
<TABLE>
<CAPTION>
New interfaces Quoted
<S> <C>
- - 5-seat license for Wink Studio 2.x $3,000
- - 5 seat license for Wink Server Studio 2.x $5,000
- - Custom interface work $1,000/day
- - Phone training and consulting beyond bundled services $125/hr
- - Application development $2,500 min., $125/hr
</TABLE>
All products and services are billed Net/45.
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EXHIBIT E.:WINK SPECIFICATIONS
ICAP 1.0 specification - is Confidential Information under this Master Agreement
Manuals for Wink Software
Developer Guidelines for Interactive Wink Programs
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EXHIBIT F.:PARTICIPATING PROGRAMMERS
<TABLE>
<CAPTION>
Weekly hours of programming
Programmer with Interactive Wink Programs Designated VBI lines
<S> <C> <C>
NBC 6 13, 15
CNN 20
CNN/HN all except local avails
ESPN 1 4 (6 together with ESPN2)
ESPN 2 see ESPN1
TNT 5
TBS 5
TNN 10
TWC all except local avails
VH-1 10 19
Nick/Nick-at-N 5 19
Showtime event and promotion specific
CourtTV all except local avails locally inserted
CNBC all NYSE market hours + 10
EI 10
</TABLE>
Wink VBI lines usage will be completed within 14 days of execution of this
Master Agreement.
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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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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. Section 4 shall survive
expiration or termination of this Agreement, provided
that in the event this Agreement is terminated as a
result of a material breach by Microsoft, the license
granted to Microsoft under Section 4 with respect to the
Wink ICAP Engine shall be deemed non-exclusive [*]
Section 5 shall survive expiration or termination of
this Agreement for such time as any Microsoft Video
Platform is enabled for Wink.
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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> 15
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-
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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.
-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.
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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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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>
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<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
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<PAGE> 19
EXHIBIT A
ANNUAL REVENUE GUARANTY
<TABLE>
<S> <C>
[*]
</TABLE>
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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.
<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 10.45
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, there shall be no charge to Wink for
such UDP for GEIS-developed applications and a
maximum of [*], charged on a time and materials
basis for the deployment of any non-GEIS developed
applications.
(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:
(a) For Server Unavailability exceeding the warranted levels contained in
Section 5.1 and 5.2 [*], no discount shall be given to Wink.
(b) For Server Unavailability exceeding the warranted levels contained in
Section 5.1 and 5.2 [*], the fees for the Services for the month
during which the Server Unavailability commenced shall be equal [*],
multiplied by the fees for the Services for the calendar month during
which the Server Unavailability commenced.
(c) For Server Unavailability exceeding the warranted levels contained in
Section 5.1 and 5.2 [*], GEIS shall [*] for the Services for the
calendar month during which the Server Unavailability commenced and
may terminate this Agreement upon notice to Wink.
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. If GEIS fails to restore warranted performance within a
reasonable time, GEIS shall refund any charges paid for individual services
which did not perform as warranted. [*]
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 Upon termination of this Agreement by GEIS for non-payment or
failure of Wink to abide by applicable laws, GEIS will be under
no obligation to provide 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.
8.4 Upon termination of this Agreement by GEIS for cause other than
non-payment, GEIS will provide to Wink [*] of personnel
services, upon request, under the applicable terms and
conditions of the PSA, 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. Any such
personnel services will be provided to Wink over a two (2) month
period at GEIS's commercial list rates therefor in effect at the
time of utilization.
8.5 Upon the expiration of this Agreement, GEIS will provide to Wink
up to one hundred days 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. Any such
personnel services will be provided to Wink over a two (2) month
period at GEIS's commercial list rates therefor in effect at the
time of utilization.
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
- ---------------
[*] 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
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 12
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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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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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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<PAGE> 15
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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<PAGE> 17
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.
Page 17
<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 10.46
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 JULY 26, 2004
WINK COMMUNICATIONS, INC.
WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK
----------
THIS CERTIFIES THAT, for value received, Fox Broadcasting Company, Inc.
(the "HOLDER") is entitled to subscribe for and purchase 75,000 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, on July 26, 2004, for the full or any partial number of
Shares for which this Warrant is then exercisable. This Warrant shall be
immediately exercisable in full upon (i) the filing of a registration statement
for an initial public offering by the Company registered under the Securities
Act of 1933 (an "IPO") or (ii) the execution of a definitive agreement for (A)
the 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 (B) the sale of all or substantially all of the assets of
the Company.
(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,
<PAGE> 2
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.
(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
-2-
<PAGE> 3
authorized and reserved for issuance sufficient shares of its Common Stock to
provide for the full exercise of this Warrant.
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.
-3-
<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 securities not exercised, converted or exchanged prior
to such change or (y) the options or rights
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<PAGE> 5
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, 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;
(3) all shares of Common or Preferred Stock issuable
pursuant to options, warrants or other rights outstanding on the date hereof;
(4) 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 Subsection (a)(i).
(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
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<PAGE> 6
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) 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
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<PAGE> 7
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.
(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.
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<PAGE> 8
(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.
(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).
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<PAGE> 9
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 Fourth Amended and Restated Investor Rights Agreement dated as
of June 30, 1999 (the "Rights Agreement"), including the waiver by each holder
of the subordination rights in paragraph 2.7 contained in the Rights Agreement,
and the Fourth Amended and Restated Founder's Co-Sale Agreement dated as of June
30, 1999. 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, the
holder of this Warrant shall not 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 July 26, 2004.
(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
(d) The closing of an IPO.
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.
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<PAGE> 10
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 26th day of July, 1999.
WINK COMMUNICATIONS, INC.
By:
-------------------------------------
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 JULY 26, 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 Fourth Amended and Restated Investor Rights
Agreement dated June 30, 1999 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 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 2 to the Registration
Statement on Form S-1 (Registration No. 333-80221) of our report dated February
23, 1999, except for Note 9 which is as of August 13, 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
August 13, 1999
