<PAGE>
As filed with the Securities and Exchange Commission on July 22, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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TIVO INC.
(Exact name of registrant as specified in its charter)
Delaware 4841 77-0463167
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
894 Ross Drive, Suite 100
Sunnyvale, CA 94089
(408) 747-5080
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-----------
Michael Ramsay
President and Chief Executive Officer
TiVo Inc.
894 Ross Drive, Suite 100
Sunnyvale, CA 94089
(408) 747-5080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------
Copies to
Alan C. Mendelson, Esq. Danielle Carbone, Esq.
Cooley Godward LLP Shearman & Sterling
Five Palo Alto Square 599 Lexington Avenue
3000 El Camino Real New York, NY 10022-6069
Palo Alto, CA 94306 (212) 848-4000
(650) 843-5000
-----------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 145 under the Securities Act of
1933, 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, please 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. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Aggregate
Title of Each Class of Securities to be Offering Amount of
Registered Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $.001 par value par share.... $80,000,000 $22,240
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee, in
accordance with Rule 457(o) under the Securities Act of 1933.
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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 of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to such Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 22, 1999
Shares
[LOGO OF TIVO]
Common Stock
---------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price is expected to be between $ and $ per
share. We have applied to list our common stock on The Nasdaq National Market
under the symbol "TIVO."
The underwriters have an option to purchase a maximum of additional shares
of our common stock to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" starting on
page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions TiVo Inc.
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................................... $ $ $
Total........................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Allen & Company Incorporated
BancBoston Robertson Stephens
Thomas Weisel Partners LLC
The date of this prospectus is , 1999.
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 6
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization...................... 19
Dilution............................ 20
Selected Financial Data............. 21
Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations...................... 22
Business............................ 29
Management.......................... 44
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Relationships And Related
Transactions...................... 56
Principal Stockholders............. 59
Description of Capital Stock....... 61
Shares Eligible for Future Sale.... 64
Underwriting....................... 66
Notice to Canadian Residents....... 68
Legal Matters...................... 69
Experts............................ 69
Where You Can Find More
Information....................... 69
Index to Consolidated Financial
Statements........................ F-1
</TABLE>
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is
legal to sell these securities. The information in this document may only be
accurate on the date of this document.
"TiVo," "Personal TV," "Life's too short for bad TV," "The way TV is meant
to be," "Primetime Anytime," "Viewergraphic," "Viewergraphic Profiling
System," "Extensible Timeshifting Architecture" and the TiVo, "Thumbs Up" and
"Thumbs Down" logos are trademarks of TiVo Inc. All other trademarks or
service marks appearing in this prospectus are trademarks or service marks of
the respective companies that use them.
------------
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. The conversion of all outstanding shares of preferred stock into shares
of common stock upon the closing of this offering; and
. No exercise of the underwriters' over-allotment option.
------------
Dealer Prospectus Delivery Obligation
Until , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, 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 and with respect to unsold allotments or subscriptions.
2
<PAGE>
[DESCRIPTION OF ARTWORK TO COME]
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully.
TiVo Inc.
TiVo is a pioneer in the personal television industry. We have created a
unique personal television service that allows viewers to watch what they want
when they want. The TiVo Service creates a richer and more enjoyable television
viewing experience by offering viewers greater control, choice, and
convenience. We believe that the TiVo Service also allows television
programmers and advertisers to reach a broader audience by making shows more
accessible and easier to record and to target their programming and advertising
to specific viewers. The TiVo Service is a subscription-based service enabled
by a personal video recorder that we have designed and developed. The TiVo
Service has many features that distinguish it from traditional television
viewing:
. Locate and Record Multiple Shows Quickly and Easily. Viewers can easily
locate and record a single show or schedule a customized lineup of
several shows. With the Season Pass feature, the TiVo Service
automatically records all episodes of viewers' favorite shows.
. Control Live Television. Viewers can pause or rewind live television
shows, fast forward to the live telecast, and execute any of TiVo's
advanced viewing commands, including slow motion and frame-by-frame.
Prior to the introduction of TiVo, the ability to control live television
in this manner was not available.
. Viewing Preferences and Suggested Programming. Using the Thumbs Up and
Thumbs Down buttons on the TiVo remote control, viewers can enter
preferences for particular types of shows. Based on these preferences,
the TiVo Service suggests programming that viewers are likely to enjoy.
. Specialized Content. The TiVo Service allows television programmers to
create Network Showcases, which are branded areas of the TiVo Service
that feature selected programming, upcoming movies, special events or
mini-series. The TiVo Service also includes TiVolution Magazine, which
features theme-based collections of shows compiled by our editorial
staff.
. Menu Driven Navigation and Viewer Interface. TiVo Central, the main
screen of the TiVo Service, allows viewers to access their customized
lineup of shows, Network Showcases, TiVolution Magazine and other
features. Viewers can quickly and easily browse through an on-air program
guide that includes a schedule of up to two weeks of available television
programming.
The TiVo Service also serves as a new platform for television programmers,
advertisers, and network operators to deliver television programming,
advertising, and in-home commerce. Potential future services include:
. Active Promotions. We anticipate that television programmers will be able
to use the TiVo Service to allow viewers to easily record a variety of
programming such as movies, sports events, television series and other
products and services. For example, we are currently developing iPreview,
a service that allows viewers to schedule and record featured programming
using a "point and click" feature during previews.
. Active Ads. We anticipate that advertisers will be able to use the TiVo
Service to reach a broader base of consumers and offer commercials that
better match viewers' interests. For example, during the same commercial
time slot, an automobile advertiser may feature a sport utility vehicle
in one household and a minivan in another, based on the viewers' stored
preferences. We are currently developing iBuy, a service that allows
viewers to get more information about and possibly purchase featured
products or services using the TiVo remote control.
3
<PAGE>
We have strategic partnerships with a number of industry-leading companies
including DIRECTV, NBC, Philips and Quantum, who are also equity investors in
TiVo. We are working with our partners to establish personal television as a
major category of home entertainment, to create new specialized programming for
viewers and to market the TiVo Service and products that enable the TiVo
Service.
We expect to commence our retail launch in the second half of 1999. Philips
will spearhead this launch by manufacturing and selling the personal video
recorder that enables the TiVo Service, allowing us to focus our resources on
promoting and enhancing the TiVo Service.
In July 1999, we completed a private placement of $32.5 million of our
preferred stock. The following leading programmers, cable network operators and
other content providers participated in this private placement either directly
or through an affiliate:
. Advance/Newhouse . Discovery Communications
. CBS Corporation . Liberty Media
. Comcast Interactive . TV Guide Interactive
. Cox Communications . The Walt Disney Company
We were incorporated in Delaware in August 1997. Our headquarters are located
at 894 Ross Drive, Suite 100, Sunnyvale, California 94089. Our telephone number
is (408) 747-5080. The address of our web site is www.tivo.com. Information
contained on our web site should not be considered a part of this prospectus.
The Offering
<TABLE>
<C> <S>
Common stock offered....................... shares
Common stock to be outstanding after this
offering.................................. shares
Use of proceeds............................ We intend to use the estimated proceeds for
working capital and general corporate
purposes, including advertising and
promotion of the TiVo Service and the TiVo
brand, product development, expansion of
our sales, marketing and service
capabilities. We may also use a portion of
the proceeds for acquisitions of products
and technologies or for strategic
alliances. See "Use of Proceeds."
Proposed Nasdaq National Market symbol..... TIVO
</TABLE>
The number of shares of common stock to be outstanding after the offering is
estimated based on the number of shares outstanding on July 21, 1999. It
excludes 3,721,800 shares subject to outstanding options or reserved for future
grants or purchases pursuant to our employee stock option and purchase plans.
See "Management--Stock Plans."
4
<PAGE>
Summary Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period From Period From
August 4, 1997 Six Months Ended August 4, 1997
(Inception) Year Ended June 30, (Inception)
to December 31, December ----------------- to June 30,
1997 1998 1998 1999 1999
--------------- ---------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Subscription revenues... $ -- $ -- $ -- $ 8 $ 8
Cost of services........ -- -- -- (1,170) (1,170)
Operating expenses...... (625) (9,837) (3,068) (10,376) (20,838)
Other operating income.. -- -- -- 895 895
Other operating
expenses............... -- -- -- (1,084) (1,084)
Net loss................ $ (595) $(9,721) $(3,046) $(11,628) $(21,944)
Net loss per share:
Basic and diluted....... $(0.20) $ (2.21) $ (0.79) $ (1.75) $ (4.74)
Weighted average
shares................. 2,917 4,406 3,839 6,633 4,630
Pro forma net loss per
share (unaudited)(1):
Basic and diluted....... $ (0.80) $ (0.56)
Weighted average
shares................. 12,135 20,745
</TABLE>
- ----------------------
(1) Pro forma net loss per share is calculated as if the convertible preferred
stock outstanding as of June 30, 1999 was converted into shares of common
stock on the date of its issuance on a one-for-one basis and as if all
warrants outstanding as of June 30, 1999 had been exercised and converted
into shares of common stock on the date of issuance on a one-for-one basis.
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....................... $11,967 $46,797
Working capital................................. 18,221 53,051
Total assets.................................... 23,804 58,634
Long-term portion of obligations under capital
lease.......................................... 558 558
Total stockholders' equity...................... 19,105 53,935
</TABLE>
The table above summarizes our balance sheet data as of June 30, 1999:
. on an actual basis;
. on a pro forma basis to reflect (i) the automatic conversion of all
shares of preferred stock outstanding on June 30, 1999 into shares of
common stock on a one-for-one basis, (ii) the exercise and conversion of
all warrants outstanding as of June 30, 1999 into shares of common stock,
(iii) the issuance of 3,121,994 shares of Series I preferred stock at
$10.41 per share in July 1999 and conversion into shares of common stock
on a one-for-one basis; and (iv) the issuance of a Series I preferred
stock warrant with an exercise price of $10.41 per share in July 1999 and
its exercise and conversion into 192,123 shares of common stock.
. on a pro forma as adjusted basis to reflect the sale of shares of
common stock offered by this prospectus assuming an initial public
offering price of $ per share after deducting estimated underwriting
discounts and commissions and estimated offering expenses.
5
<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should carefully
consider the risks and uncertainties described below and the other information
in this prospectus before purchasing our common stock. Additional risks and
uncertainties not presently known to us or that we currently believe are
immaterial also may impair our business operations. If any of the following
risks occur, our business, operating results and financial condition could be
seriously harmed. As a result, we may fail to meet the expectations of the
public market in any given period, and the market price of our common stock
could decline.
Risks Related To Our Business
We have recognized very limited revenue, have incurred significant net losses
and may never achieve profitability.
We have recognized limited revenues, have incurred significant losses and
have had substantial negative cash flow. From our inception in August 1997 to
June 30, 1999, we had $8,000 of subscription revenues and $895,000 of proceeds
resulting from the sale of personal video recorders that enable the TiVo
Service. As of June 30, 1999, we had an accumulated deficit of $21.9 million.
We expect to incur significant operating expenses over the next several years
in connection with the continued development and expansion of our business. As
a result, we expect to continue to lose money for the foreseeable future. The
size of these net losses will depend in part on the growth in our subscriber
base and on our expenses. With increased expenses, we will need to generate
significant additional revenues to achieve profitability. Consequently, it is
possible that we may never achieve profitability, and even if we do, we may
not sustain or increase profitability on a quarterly or annual basis in the
future.
We have a limited operating history which may make it difficult for us or
investors to evaluate trends and other factors that affect our business.
We were incorporated in August 1997 and have been obtaining subscribers and
selling personal video recorders only since March 31, 1999. Prior to that
time, our operations consisted primarily of research and development efforts.
As of June 30, 1999, we had sold only a limited number of personal video
recorders and obtained a limited number of subscribers to the TiVo Service.
Sales and subscriptions to date have been generated through limited marketing
campaigns, word-of-mouth and our web site. As a result of our limited
operating history, our historical financial and operating information is of
limited value in evaluating our future operating results. For example, it may
be difficult to accurately predict our future revenues, costs of revenues,
expenses or results of operations. Personal television is a new product
category for consumers and it may be difficult to predict the future growth
rate, if any, or size of the market for our products and services. We may be
unable to accurately forecast customer behavior and recognize or respond to
emerging trends, changing preferences or competitive factors facing us in the
emerging market for personal television products and services. As a result, we
may be unable to make accurate financial forecasts and adjust our spending in
a timely manner to compensate for any unexpected revenue shortfall. This
inability could cause our net losses in a given quarter to be greater than
expected and could have a material adverse effect on our business, results of
operations and prospects. Any evaluation of our business and prospects must be
made in light of the risks and difficulties encountered by companies offering
products or services in new and rapidly evolving markets.
Our ability to achieve market acceptance of the TiVo Service and products
that enable the TiVo Service depends on a successful retail launch.
Our success is dependent upon a successful retail launch of the TiVo Service
and related personal video recorders, which is scheduled to begin in the
second half of 1999 and continue through the 1999 holiday season. During this
time, we will rely principally on Philips to manufacture, market, sell and
support the personal video recorder that enables the TiVo Service. We also
will rely on the efforts of DIRECTV to market, sell and support the TiVo
Service to DIRECTV subscribers. The launch requires, among other things, that
we:
. undertake an extensive marketing campaign to educate consumers on the
benefits of the TiVo Service and related personal video recorder;
6
<PAGE>
. establish and promote the TiVo brand;
. commit a substantial amount of human and financial resources to achieve
retail distribution;
. adequately train sales and support personnel in the retail channel;
. rely on consumer electronics and other manufacturers to make sufficient
quantities of personal video recorders to satisfy consumer demand; and
. coordinate our own sales, marketing and support activities with those of
Philips, DIRECTV and other strategic partners.
We or our strategic partners may fail to achieve any or all of these
objectives. In addition, the launch may be delayed and we may miss the holiday
buying season, the TiVo Service and related personal video recorder may be
perceived as too expensive or complex and our marketing campaign may prove
ineffective in attracting subscribers. Our partners may be unable or unwilling
to commit sufficient resources to manufacture, market, sell or support
personal video recorders that enable the TiVo Service for a successful 1999
retail launch.
We may encounter other difficulties in the course of the retail launch, such
as:
. manufacturing or design defects;
. software errors;
. shipping and billing errors; and
. interruptions in the TiVo Service.
Competitive offerings or changing preferences may cause consumers to delay
or decline the purchase of the TiVo Service and related personal video
recorder. All of these events would reduce consumer demand and market
acceptance, diminish our brand and impair our ability to attract subscribers
to the TiVo Service.
We depend on a limited number of third parties to manufacture, distribute and
supply critical components and services for the personal video recorders that
enable the TiVo Service.
The TiVo Service is enabled through the use of a personal video recorder
made available by a limited number of third parties. In addition, we rely on
sole suppliers for a number of key components for the personal video
recorders. The time and resources that these third parties devote to our
business is not within our control. We cannot be sure that these parties will
perform their obligations as expected or that any revenue, cost savings or
other benefits will be derived from the efforts of these parties. If any of
these parties breaches or terminates its agreement with us or otherwise fails
to perform their obligations in a timely manner, the commercialization of our
products and services may be delayed or cancelled. Our relationships with
these parties are non-exclusive, and they may also support products and
services that compete directly with us, or offer similar or greater support to
our competitors. If any of these events were to occur, we may be required to
undertake unforeseen additional responsibilities or devote additional
resources to commercialize our products and services. This outcome would harm
our ability to compete effectively and quickly achieve market acceptance and
brand recognition.
In addition, we face the following risks in relying on these third parties:
Manufacturing Risks. To date we have manufactured the personal video
recorders that enable the TiVo Service through a third-party contract
manufacturer. We have entered into an agreement with Philips to manufacture
and distribute the personal video recorders that enable the TiVo Service, and
have begun transitioning manufacture of the personal video recorder from the
third-party contract manufacturer to Philips. Although we anticipate that
Philips will assume manufacturing responsibility in the second half of 1999,
we have no minimum volume commitments from Philips or any other manufacturer.
The transition to using Philips as sole manufacturer, and their ability to
reach sufficient production volume of the personal video recorder to satisfy
anticipated demand, is subject to delays and unforeseen problems such as
defects, shortages of critical
7
<PAGE>
components and cost overruns. Moreover, substantial lead times are required to
manufacture anticipated quantities of the personal video recorders that enable
the TiVo Service. Philips may have very little time to remedy unforeseen
delays or problems that may arise. Such delays and other problems could impair
our retail launch and brand image and make it difficult for us to attract
subscribers. In addition, the loss of Philips would require us to identify and
contract with alternative sources of manufacturing, which we may be unable to
do and which could prove time-consuming and expensive. Although we expect to
contract with additional consumer electronics companies for the manufacture of
personal video recorders in the future, we may be unable to establish
additional relationships on acceptable terms.
Marketing and Distribution Risks. As part of our retail launch, the personal
video recorder that enables the TiVo Service will be distributed by Philips.
We will rely on Philips' sales force, marketing budget and brand image in the
promotion and support of the personal video recorder and the TiVo Service.
After the retail launch we expect to continue to rely on Philips and other
strategic partners to promote and support the personal video recorder and
other devices that enable the TiVo Service. The loss of one or more of these
partners would require us to undertake more of these activities on our own. As
a result, we would need to spend significant resources to support personal
video recorders and other devices that enable the TiVo Service. We also expect
to rely on DIRECTV and other partners to provide marketing support for the
TiVo Service. If one or more of these partners fails to provide anticipated
marketing support, we will be required to divert more of our limited resources
to marketing the TiVo Service. If we are unable to provide adequate marketing
support for the personal video recorder and the TiVo Service, our ability to
attract subscribers to the TiVo Service will be limited.
Suppliers of Key Components and Services. We currently rely on sole
suppliers for a number of the key components and services used in the personal
video recorders and the TiVo Service. For example:
. Quantum is the sole supplier of the hard disk drives;
. NEC is the sole supplier of the application specific integrated circuit,
a semiconductor device;
. Sony is the sole supplier of the MPEG2 encoder semiconductor device; and
. Tribune Media Services is the sole supplier of program guide data.
We cannot be sure that alternative sources for these and other key
components and services used in the personal video recorders and the TiVo
Service will be available when needed or, if available, that these components
and services will be available on favorable terms. If our agreements with
Quantum, NEC, Sony or Tribune Media Services were to terminate or expire, or
if we were unable to obtain sufficient quantities of these components or
required program guide data, our search for alternate suppliers could result
in significant delays, added expense or disruption in product availability.
Our ability to generate revenues from subscription fees is unproven and may
fail, and we have entered into agreements to share a portion of these revenues
with some of our strategic partners.
We expect to generate a substantial portion of our revenues from
subscription fees for the TiVo Service. Many of our potential customers
already pay monthly fees for cable or satellite television services. In order
to attract subscribers, we must convince these consumers to pay an additional
subscription fee to receive the TiVo Service. Our ability to do so effectively
could be harmed by current and future competitors in the personal television
market that offer comparable services without charging a subscription fee.
Moreover, we have agreed to share a substantial portion of these subscription
fees with some of our strategic partners in exchange for manufacturing,
distribution and marketing support and discounts on key components for
personal video recorders. If we were required to reduce our subscription fee,
we would remain obligated to pay certain of our partners a fixed portion of
our subscription fees. Our decision to share subscription revenues is based on
our expectation that our partnerships will help us obtain subscribers, broaden
market acceptance of personal television and increase our future revenues. If
these expectations are not met, or if we are forced to reduce our subscription
fees in response to competitive factors, our business will be seriously
harmed.
8
<PAGE>
Our business is expanding rapidly and our failure to manage growth could harm
our business and operating results.
Since we began our business in August 1997, we have significantly expanded
our operations. We anticipate continued expansion in our headcount, facilities
and infrastructure to support potential growth in our subscriber base and to
allow us to pursue market opportunities. This expansion has placed, and will
continue to place, a significant strain on our management, operational and
financial resources and systems. Specific risks we face as our business
expands include:
Attracting and retaining qualified personnel. Our success will depend on our
ability to attract, retain and motivate managerial, technical, marketing and
customer support personnel. Competition for such employees is intense,
especially for engineers in the San Francisco Bay Area, and we may be unable
to successfully attract, integrate or retain sufficiently qualified personnel.
If we are unable to hire, train, retain and manage required personnel, we may
be unable to successfully implement our business strategy.
Maintaining system scalability. Many of the systems we use to run the TiVo
Service and perform other processing functions were developed internally, and
their ability to scale as we rapidly add new subscribers is unproven. We must
continually improve these systems in order to accommodate subscriber growth
and add features and functionality to the TiVo Service. The inability to add
additional software and hardware or to upgrade our technology, systems or
network infrastructure could have adverse consequences on our business or
cause service interruptions or delays in introducing new services.
Providing customer support. Our ability to increase sales, retain current
and future subscribers and strengthen our brand will depend in part upon the
quality of our customer support operations. Some customers may require
significant support when installing the personal video recorder and becoming
acquainted with the features and functionality of the TiVo Service. We have
limited experience with widespread deployment of our products and services to
a diverse customer base, and we may not have adequate personnel to provide the
levels of support that our customers may require. In addition, we expect to
rely on third parties for a substantial portion of our customer support
functions. To date, we have not yet entered into agreements with any third
parties to provide this support. Failure by us or these third parties to
provide adequate customer support for the TiVo Service and personal video
recorder could damage our reputation in the personal television and consumer
electronics marketplace and strain the relationships we may have with our
customers and strategic partners. This could prevent us from gaining new or
retaining existing subscribers and could cause harm to our reputation and
brand.
Improving operational systems. To manage the expected growth of our
operations and personnel, we will need to improve our operational and
financial systems, procedures and controls. Our current and planned systems,
procedures and controls may not be adequate to support our future operations
and expected growth. For example, we expect to replace our accounting and
billing system within the next year. Delays or problems associated with any
improvement or expansion of our operational systems and controls may have a
material adverse effect on our business.
The success of our business model depends on our ability to create multiple
revenue streams.
Although our initial success will depend on building a significant customer
base and generating subscription fees from the TiVo Service, our long-term
success will depend on securing additional revenue streams such as:
. advertising;
. revenues from networks; and
. electronic commerce or couch commerce.
In order to derive substantial revenues from these activities, we will need
to attract and retain a large and growing base of subscribers to the TiVo
Service. We will also need to work closely with television advertisers, cable
and satellite network operators, electronic commerce companies and consumer
electronics manufacturers
9
<PAGE>
and service providers to develop products and services in these areas. We may
not be able to effectively work with these parties to develop products that
result in sufficient revenues to us to justify their costs. In addition, we
are currently obligated to share a portion of these revenues with one of our
strategic partners. If we are unable to attract and retain a large and growing
group of subscribers and strategic partners, our ability to develop new
revenue streams will be seriously harmed.
Risks Related To Establishing A Market For The TiVo Service
It will take a substantial amount of time and resources to achieve broad
market acceptance of the TiVo Service and products that enable the TiVo
Service.
Personal television products and services represent a new, untested consumer
electronics category. The TiVo Service is in an early stage of development and
many consumers are not aware of its benefits. As a result, demand for and
market acceptance of the TiVo Service and products that enable the TiVo
Service is highly uncertain and subject to significant risk. Retailers,
consumers and potential partners may perceive little or no benefit from
personal television products and services. Likewise, consumers may not value,
or be unwilling to pay for, the TiVo Service and products that enable the TiVo
Service. To develop this market and obtain subscribers to the TiVo Service, we
will be required to devote a substantial amount of time and resources to
educating consumers and promoting our products. Our efforts to obtain
subscribers, encourage the development of new devices that enable the TiVo
Service and offer new content and services may fail. There is no way for us to
be sure that a broad base of consumers will ultimately subscribe to the TiVo
Service or purchase the products that enable the TiVo Service.
We face intense competition from a number of sources, which may impair our
revenues and ability to generate subscribers.
The personal television market is new and rapidly evolving and we expect
competition from a number of sources, including:
Internet-related companies and companies offering similar products and
services. We are likely to face intense direct competition from companies
such as WebTV Networks Inc., America Online, Inc., Replay Networks, Inc. and
X-TV. These companies offer, or have announced their intention to offer,
products with one or more of the TiVo Service's functions or features and, in
some instances, combine these features with Internet browsing or traditional
broadcast, cable or satellite television programming. Many of these companies
have greater brand recognition and market presence and access to substantially
greater financial, marketing and distribution resources than we do. For
example, WebTV is controlled by, and has the financial backing of, Microsoft
Corporation. Some of these companies also have established relationships with
third party consumer electronic manufacturers, network operators and
programmers, which could make it difficult for us to establish relationships
and enter into agreements with these third parties. Some of these competitors
also have relationships with our strategic partners. For example, DIRECTV
recently formed an alliance with America Online. Faced with this competition,
we may be unable to expand our market share and attract an increasing number
of subscribers to the TiVo Service.
Established competitors in the consumer electronics market. We compete with
consumer electronic products in the television and home entertainment
industry. The television and home entertainment industry is characterized by
rapid technological innovation, a small number of dominant manufacturers and
intense price competition. As a new product category, personal television
enters a market that is crowded with several established products and
services. The competition for consumer spending in the television and home
entertainment market is intense, and our products and services will compete
with:
. VCRs;
. DVD players;
. digital and traditional cable television systems;
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<PAGE>
. satellite television systems;
. video on demand services; and
. laser disc players.
Most of these technologies or devices have established markets, a broad
subscriber base and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing devices have substantially
greater brand recognition, market presence, distribution channels, advertising
and marketing budgets and promotional and other strategic partners. Faced with
this competition, we may be unable to effectively differentiate the personal
video recorder or the TiVo Service from these devices.
Our initial success will depend not only on consumers making a minimum
investment of $499 for a personal video recorder, but also committing up to
$9.95 per month to subscribe to the TiVo Service. Today's home electronics
market offers consumers an overwhelming number of options to enhance their
television and home entertainment experience. Products introduced in just the
last several years include enhanced VCRs and program guides, DVDs and flat
screen televisions. Each of these products requires a significant financial
investment for the average consumer. Consumers who have purchased any of these
competing products may be reluctant to purchase personal television systems
and services, which would have an adverse effect on our business.
To build market share and attract subscribers, we must effectively compete
with the products described above. Additionally, new technologies may increase
the competitive pressures we face by enabling our competitors to offer
products or services with new features or at a lower cost. In order to respond
to changes in the competitive environment, we may, from time to time, make
pricing, service or marketing decisions or acquisitions that could harm our
operating results for any given period.
Personal television, in general, and TiVo, specifically, also must compete
with traditional advertising media such as print, radio and television for a
share of advertisers' total advertising budgets. To the extent that personal
television is not perceived as an effective advertising medium, advertisers
may be reluctant to devote a significant portion of their advertising budget
to promotions on TiVo's Service.
Our inability to introduce new products or services could prevent us from
increasing subscriber growth and revenues.
To attract and retain subscribers and generate revenues, we must continue to
add functionality and content and introduce products and services which embody
new technologies and, in some instances, new industry standards. This
challenge will require hardware and software improvements, as well as new
collaborations with programmers, advertisers, network operators, hardware
manufacturers and other strategic partners. These activities require
significant time and resources and may require us to develop and promote new
ways of generating revenue with established companies in the television
industry. These companies include television advertisers, cable and satellite
network operators, electronic commerce companies and consumer electronics
manufacturers and service providers. In each of these examples, a small number
of large companies dominate a major portion of the market and may be reluctant
to work with us to develop new products and services for personal television.
If we are unable to further develop and improve the TiVo Service or expand our
operations in a cost-effective or timely manner, our ability to attract and
retain subscribers and generate revenue will suffer.
We must successfully establish and maintain brand identity to achieve
widespread acceptance of our products.
We believe that establishing and strengthening the TiVo brand is critical to
achieving widespread acceptance of our products and services and to
establishing key strategic partnerships. The importance of brand recognition
will increase as current and potential competitors enter the personal
television market with competing products and services. Promoting and
positioning our brand will depend largely on the success of our marketing
efforts and our ability to provide high quality services and customer support.
These activities are expensive and
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<PAGE>
we may not generate a corresponding increase in subscribers or revenues to
justify these costs. If we fail to establish and maintain our brand, or if our
brand value is damaged or diluted, our business could be harmed.
Risks Related To Our Service And Technology
Product defects, system failures or interruptions to the TiVo Service may
have a negative impact on our revenues, damage our reputation and decrease our
ability to attract new subscribers.
Our ability to provide uninterrupted service and high quality customer
support will depend on the efficient and uninterrupted operation of our
computer and communications systems. Our computer hardware and other operating
systems for the TiVo Service are vulnerable to damage or interruption from
earthquakes, floods, fires, power loss, telecommunication failures and similar
events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. Despite any precautions we may take, the
occurrence of a natural disaster or other unanticipated problems could result
in interruptions in the TiVo Service. Such interruptions may reduce our
revenues and profits. Our business will also be harmed if consumers believe
our service is unreliable. In addition to placing increased burdens on our
engineering staff, service outages will create a flood of customer questions
and complaints that must be responded to by our customer support personnel. If
we experience frequent or persistent system failures, our reputation and brand
could be irreparably damaged.
We have detected and may continue to detect errors and product defects.
These problems can affect system uptime, result in significant warranty and
repair costs and cause customer relations problems. Correcting errors in our
software requires significant time and resources, which could delay product
releases and affect market acceptance of the TiVo Service. If we deliver
products or upgrades with undetected material product defects or software
errors, our credibility and market acceptance and sales of our products may be
harmed. To date, product defects have not had a material negative effect on
our results of operations. However, future material product defects may have
significant consequences on our ability to compete effectively and may
seriously harm our business. In addition, we rely on third parties to provide
some of the services and technology used in the TiVo Service. For example, we
rely on Tribune Media Services to provide the program guide data used in the
TiVo Service. We have little control over the quality of these services and
technology, and any errors or defects in these services or technology will
adversely affect consumer perception of the TiVo Service and harm our
reputation and brand.
Our success depends on our ability to secure and protect patents, trademarks
and other proprietary rights.
Our success and ability to compete are substantially dependent upon our
internally developed technology. We rely on patent, trademark and copyright
law, trade secret protection and confidentiality or license agreements with
our employees, customers, partners and others to protect our proprietary
rights. However, the steps we take to protect our proprietary rights may be
inadequate. We have filed patent applications and provisional patent
applications covering substantially all of the technology used to deliver the
TiVo Service and its features and functionality. To date, none of these
patents has been granted, and there can be no assurance that any patents will
ever be granted, that any issued patents will protect our intellectual
property or that any issued patents will not be challenged by third parties.
In addition, other parties may independently develop similar or competing
technologies designed around any patents that may be issued to us. Our failure
to protect our proprietary rights could have a material adverse effect on our
business.
Intellectual property claims against us can be costly and could result in the
loss of significant rights.
While there is currently no intellectual property litigation pending against
us, there can be no assurance that legal actions will not be taken against us
in the future. The emerging enhanced-television industry is highly litigious,
particularly in the area of on-screen program guides. Additionally, many
patents covering interactive television technologies have been granted but
have not been commercialized. For example, we are aware of at least seven
patents for pausing live television. A number of companies in the enhanced-
television industry earn
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<PAGE>
substantial profits from technology licensing, and the introduction of new
technologies such as ours is likely to provoke lawsuits.
A successful claim of patent infringement against us and our inability to
obtain a license from the patent holder on acceptable terms, or to design
around an asserted patent, could materially harm our business. Any claims,
with or without merit, could:
. be time-consuming to defend;
. result in costly litigation;
. divert management's attention and resources;
. cause product shipment delays; or
. require us to pay significant royalties or licensing fees.
Laws or regulations that govern the television industry and the delivery of
programming could expose us to legal action if we fail to comply or could
require us to change our business.
Personal television and the delivery of television programming through the
TiVo Service and a personal video recorder represents a new category in the
television and home entertainment industries. As such, it is difficult to
predict what laws or regulations will govern our business. Changes in the
regulatory climate or the enforcement or interpretation of existing laws could
expose us to additional costs and expenses and could require changes to our
business. For example, copyright laws could be applied to restrict the capture
of television programming, which would adversely affect our business. The
application of existing laws and regulations to the personal television market
is unknown. Therefore, it is difficult to anticipate the impact of current or
future laws and regulations on our business.
The Federal Communications Commission has broad jurisdiction over the
telecommunications and cable industries. The majority of FCC regulations,
while not directly affecting TiVo, do affect many of our strategic partners,
upon which we will significantly rely for the marketing and distribution of
the personal video recorder and the TiVo Service. As such, the indirect effect
of these regulations may adversely affect our business. In addition, the FCC
could promulgate new regulations, or interpret existing regulations in a
manner that would directly affect our business.
If we are unable to safeguard the security and privacy of our subscribers'
confidential data, our business may be harmed.
The personal video recorder collects and stores viewer preference and other
data that many of our subscribers consider confidential. Although this data is
protected with encryption and other security measures, any compromise or
breach of this security could harm our reputation and expose us to potential
liability. Advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments could result in a compromise or
breach of the systems we use to protect our subscribers' confidential
information. We may be required to make significant expenditures to protect
against security breaches or to remedy problems caused by any breaches.
Uncertainty in the marketplace regarding the use of data from subscribers
could reduce demand for the TiVo Service and result in increased expenses.
Consumers may be concerned about the use of personal information gathered by
the TiVo Service and personal video recorder. Our current policy is not to
access this data or release it to third parties, however, privacy concerns
could create uncertainty in the marketplace for personal television and our
products and services. Changes in our privacy policy could also reduce demand
for the TiVo Service, increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or otherwise harm our
reputation and business.
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We would lose revenues and incur significant costs if our systems or those of
our key partners or suppliers are not year 2000 compliant.
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs would not properly recognize the year. This
could result in major system failures or miscalculations that would disrupt
our business. We expect to complete our year 2000 assessment by September 1,
1999 and complete any remediation by November 1, 1999. Our assessment may
identify material non-compliance issues with the TiVo Service or the personal
video recorder, our informational technology systems or the systems of our
partners or suppliers. We may not be able to successfully resolve these
issues, or it may be costly to do so. In addition, we cannot assure you that
governmental agencies, utility companies, third-party service providers and
others outside of our control will be year 2000 compliant. The failure by such
entities to be year 2000 compliant could result in a systemic failure beyond
our control, such as a prolonged telecommunications or electrical failure,
which could prevent us from delivering upgrades and regular downloads to the
personal video recorders that enable the TiVo Service or otherwise impact the
functionality of the personal video recorder. Any of these occurrences would
have a material adverse effect on our business.
For a preliminary evaluation of the potential impact of these year 2000
issues on us, please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Issue."
Financial Risks
In the future, our revenues and operating results may fluctuate
significantly.
We expect our revenues and operating results to fluctuate significantly due
to a number of factors, many of which are outside of our control. Therefore,
you should not rely on period-to-period comparisons of results of operations
as an indication of our future performance. It is possible that in some future
periods our operating results may fall below the expectations of market
analysts and investors. In this event, the market price of our common stock
would likely fall.
Factors that may affect our quarterly operating results include:
. demand for personal video recorders and the TiVo Service;
. the timing and introduction of new services and features on the TiVo
Service;
. seasonality and other consumer and advertising trends;
. changes in revenue sharing arrangements with our strategic partners;
. entering into new or terminating existing strategic partnerships;
. changes in the subsidy payments we make to certain strategic partners;
. changes in our pricing policies, the pricing policies of our competitors
and general pricing trends in the consumer electronics market;
. loss of subscribers to the TiVo Service; and
. general economic conditions.
Because our expenses precede associated revenues, unanticipated shortfalls
in revenue could adversely effect our results of operations for any given
period.
Seasonal trends may adversely affect our operating results.
Consumer electronic product sales have traditionally been much higher during
the holiday shopping season than during other times of the year. Although
predicting consumer demand for our products will be very difficult, we believe
that sales of personal video recorders and new subscriptions to the TiVo
Service will be disproportionately high during the holiday shopping season
when compared to other times of the year. If we are unable to accurately
forecast and respond to consumer demand for our products, our business will
suffer.
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We expect that a portion of our future revenues will come from targeted
commercials and other forms of television advertising enabled by the TiVo
Service. Expenditures by advertisers tend to be seasonal and cyclical,
reflecting overall economic conditions as well as budgeting and buying
patterns. A decline in the economic prospects of advertisers or the economy
generally, which could alter current or prospective advertisers' spending
priorities or increase the time it takes to close a sale with our advertisers,
could cause our revenues from advertisements to decline significantly in any
given period.
We may be unable to raise additional capital in the future to support our
growth.
We expect that our existing capital resources, combined with the net
proceeds of this offering, will be sufficient to meet our cash requirements
through at least the next 12 months. However, as we continue to grow our
business, we may need to raise additional capital which may not be available
on acceptable terms. If we cannot raise necessary additional capital on
acceptable terms, we may not be able to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, any of which could have a material
adverse effect on our business.
If additional capital is raised through the issuance of equity securities,
the percentage ownership of our existing stockholders will be reduced,
stockholders may experience dilution in net book value per share, or these
equity securities may have rights, preferences or privileges senior to those
of the holders of our common stock. Any debt financing, if available, may
involve covenants limiting, or restricting our operations or future
opportunities.
We have agreed to subsidize the cost of manufacturing personal video
recorders, which may adversely affect our operating results.
We anticipate that Philips will assume manufacturing responsibility for the
personal video recorders in the second half of 1999. We have agreed to pay
Philips a per unit subsidy for each personal video recorder that they
manufacture and sell. A portion of the subsidy amount is paid when the
personal video recorder is shipped. The remaining portion is due when the
subscriber activates the TiVo Service. The amount of the payments can vary
depending upon Philips' manufacturing costs and selling prices. In addition,
in the event Philips is unable to manufacture the personal video recorders at
the costs currently estimated or if selling prices are less than anticipated,
we will owe additional amounts to Philips, which could adversely affect our
operating results. We are obligated to pay a portion of the subsidy when the
personal video recorder is shipped, and we will not receive any revenues
related to the unit until the unit is sold and the purchaser activates the
TiVo Service. We may make additional subsidy payments in the future to
consumer electronic and other manufacturers in an effort to maintain a
commercially viable retail price for the personal video recorders and other
devices that enable the TiVo Service.
We currently offer lifetime subscriptions to the TiVo Service that commit us
to providing services for an indefinite period.
We currently offer subscriptions that commit us to provide service for as
long as the personal video recorder purchased is used by the original
subscriber. The lifetime subscription fee for the TiVo Service is received in
advance and amortized as revenue over four years, which is our estimate of the
service life of the personal video recorder. If these lifetime subscribers use
the personal video recorder for longer than anticipated, we will be obligated
to incur costs without a corresponding revenue stream. In addition, the cash
proceeds from the sale of the lifetime subscriptions are received in advance.
Amounts received from lifetime subscriptions may be spent prior to the end of
the lifetime commitment period, requiring funding of ongoing costs from other
sources.
Risks Related To Key Employees
If we lose key management personnel, we may not be able to successfully
operate our business.
Our future performance will be substantially dependent on the continued
services of our senior management and other key personnel. The loss of any
members of our executive management team and the inability to hire additional
executive management could harm our business and results of operations. In
addition, we do not have employment agreements with, or key man insurance
policies for, any of our key personnel.
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We have recently hired several senior executive officers.
Several members of our executive management team were hired in 1999,
including our Chief Financial Officer and Vice President of Finance, our Vice
President of Business Development, our Vice President of Human Resources, our
Vice President of Sales, our Vice President of Marketing and our Chief
Information Officer. These individuals do not have significant experience
working with the other members of our management team, and therefore may
require time to adequately familiarize themselves with the nature of our
business and operations. We cannot assure you that these individuals will be
able to successfully work together or manage any growth we may experience. The
process of integrating these individuals into our management team may detract
from the operation of our business.
Risks Related To This Offering
Purchasers of our common stock in this offering will suffer immediate and
substantial dilution.
The initial public offering price per share will significantly exceed the
net tangible book value per share. As a result, you will experience immediate
dilution of $ in the pro forma adjusted net tangible book value per share of
common stock at an assumed public offering price of $ per share. This
dilution is in large part because our earlier investors paid substantially
less than the initial public offering price when they purchased their shares.
You will also experience additional dilution upon exercise of outstanding
options and warrants.
Management has broad discretion on how to use the proceeds from this
offering.
We expect to use a substantial portion of the net proceeds we receive in
connection with this offering for advertising and promotion of the TiVo
Service and the TiVo brand, development of new products and services, and
other working capital and general corporate purposes. However, we have not
determined the amounts we plan to spend in any of these areas or the timing of
these expenditures. Consequently, management will have broad discretion with
respect to the use of the net proceeds from this offering. Because of the
number and variability of factors that determine our use of proceeds from this
offering, we cannot assure you that the uses will not vary from our current
intentions.
Our certificate of incorporation, bylaws and Delaware law contain provisions
that could discourage a third party from acquiring us and consequently
decrease the market value of your investment.
Some provisions of our certificate of incorporation and bylaws and of
Delaware law could have the effect of delaying or preventing a change of
control or changes in our management that a stockholder might consider
favorable. If a change of control or change in management is delayed or
prevented, the market price of our common stock could decline. For more
information about particular anti-takeover provisions, see "Description of
Capital Stock."
We expect to experience volatility in our stock price that could adversely
affect your investment.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiations
between the representatives of the underwriters and us and may not be
indicative of the market price for the common stock that may develop after
this offering. We do not know the extent to which investor interest will lead
to the development of an active public market. Investors may not be able to
resell our common stock at or above the initial public offering price. In
addition, many factors could cause the market price of our common stock to
fluctuate substantially, including:
. changes in estimates of our financial performance or changes in
recommendations by securities analysts;
. release of new or enhanced products or introduction of new marketing
initiatives by us or our competitors;
. announcements by us or our competitors of the creation or termination of
significant strategic partnerships, joint ventures, significant
contracts, or acquisitions;
. the market price generally for technology-related stocks;
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. fluctuations in general economic conditions;
. market conditions affecting the television and home entertainment
industry;
. fluctuations in operating results; and
. additions or departures of key personnel.
The stock market has experienced significant price and volume fluctuations
and the market prices of securities of technology-related companies in
particular have been highly volatile. These fluctuations may or may not be
based upon actual business or operating results. Our common stock may
experience similar or even more dramatic price and volume fluctuations that
may continue indefinitely. These fluctuations, as well as general economic and
market conditions, may have a material adverse effect on the market price of
our common stock.
In the past, securities class action litigation has often been brought
against a company following price declines. We may be the target of similar
litigation in the future. Securities litigation could result in substantial
costs and diversion of management attention and resources, all of which could
materially harm our business.
An aggregate of 27,011,031 shares, or %, of our outstanding stock will
become eligible for resale in the public market between 180 days and one year
after this offering, and future sales of such stock may cause our stock price
to decline.
The market price of our common stock could drop as a result of sales of a
large number of shares of common stock in the market after this offering or in
response to the perception that sales of a large number of shares could occur.
No prediction can be made about the effect that future sales of common stock
will have on the market price of our common stock. Of the shares of our
common stock to be outstanding upon completion of the offering, the
shares offered hereby (plus any shares issued upon exercise of the
underwriters' over-allotment option) will be freely tradable. All of the
shares outstanding prior to the offering will be "restricted securities" as
the term is defined under Rule 144 promulgated under the Securities Act.
Unless sold pursuant to Rule 144, which provides for minimum holding periods,
public availability of information, and volume and manner restrictions on
sales, "restricted securities" cannot be sold without an effective
registration statement on file with the SEC. These shares will be available
for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of Shares/
Percent Outstanding Date When Shares Become Available for Resale in the
After the Offering Public Market
------------------- ---------------------------------------------------------
<C> <S>
/ % 180 days after the date of this prospectus pursuant to
agreements between the stockholders and the underwriters
or TiVo, provided that Credit Suisse First Boston can
waive this restriction at any time. of these shares
will also be subject to sales volume restrictions under
Rule 144 under the Securities Act
/ % Upon expiration of applicable one-year holding periods
under Rule 144, which will expire between , 2000 and
, 2000, subject to sales volume restrictions under
Rule 144
</TABLE>
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act approximately 90 days after the date of this offering to
register an aggregate of 9.3 million shares of common stock issued or reserved
for issuance under our various stock plans.
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USE OF PROCEEDS
We expect to receive net proceeds of approximately $ from the sale of
shares of common stock in this offering, and an additional $ from the sale of
shares if the underwriters' over-allotment option is exercised in full, at
an assumed initial public offering price of $ per share.
We intend to use the net proceeds of this offering primarily for advertising
and promotion of the TiVo Service and the TiVo brand, development of new
products and services and other working capital and general corporate
purposes. The amounts and timing of these expenditures will vary depending on
a number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We may also use a portion of the net proceeds to acquire
additional businesses, products or technologies, to lease additional
facilities, or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific plans, agreements or
commitments to do so and are not currently engaged in any negotiations for any
of these types of transactions.
We will retain broad discretion in the allocation of the net proceeds of
this offering. Pending the uses described above, we will invest the net
proceeds in short-term, interest bearing, investment-grade securities. We
cannot predict whether the proceeds will be invested to yield a favorable
return.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. In
addition, under our bank credit facility, we cannot pay dividends without our
bank's consent, with limited exceptions. We currently intend to retain any
future earnings to fund the development and growth of our business and do not
anticipate paying any cash dividends in the foreseeable future.
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
. on an actual basis;
. on a pro forma basis to reflect (i) the automatic conversion of all
shares of preferred stock outstanding on June 30, 1999 into shares of
common stock on a one-for-one basis, (ii) the exercise and conversion of
all warrants outstanding as of June 30, 1999 into shares of common stock,
(iii) the issuance of 3,121,994 shares of Series I preferred stock at
$10.41 per share in July 1999 and conversion into shares of common stock
on a one-for-one basis; and (iv) the issuance of a Series I preferred
stock warrant with an exercise price of $10.41 per share in July 1999 and
its exercise and conversion into 192,123 shares of common stock.
. on a pro forma as adjusted basis to reflect the sale of shares of
common stock offered by this prospectus assuming an initial public
offering price of $ per share after deducting estimated underwriting
discounts and commissions and estimated offering expenses.
The capitalization information set forth in the table below is qualified by,
and you should read it in conjunction with, more detailed financial statements
and related notes and the information included under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(unaudited, in thousands,
except per share data )
<S> <C> <C> <C>
Long-term portion of obligations under capital
lease......................................... $ 558 $ 558
-------- --------
Stockholders' equity
Convertible preferred stock par value $0.001;
20,100,000 shares authorized, 15,573,661
shares issued and outstanding actual;
23,415,000 shares authorized, no shares
issued and outstanding pro forma; 2,000,000
shares authorized, no shares issued and
outstanding pro forma as adjusted........... 39,580 --
Common stock, par value $0.001; 40,000,000
shares authorized, 8,291,876 shares issued
and outstanding actual; 50,000,000 shares
authorized, 28,243,125 shares issued and
outstanding pro forma, 75,000,000
authorized, shares issued and outstanding
pro forma as adjusted....................... 8 28
Additional paid-in capital................... 22,727 97,117
Deferred compensation........................ (2,746) (2,746)
Prepaid marketing expenses................... (15,698) (15,698)
Note receivable from stockholder............. (2,822) (2,822)
Losses accumulated during the development
stage....................................... (21,944) (21,944)
-------- --------
Total stockholders' equity .................. 19,105 53,935
-------- --------
Total capitalization....................... $ 19,663 $ 54,493
======== ========
</TABLE>
This table excludes the following shares as of June 30, 1999:
. 3,161,512 shares of common stock issuable upon the exercise of stock
options outstanding under our stock option plans at a weighted average
exercise price of $3.65 per share; and
. 560,288 shares of common stock available for issuance under our stock
option plans.
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DILUTION
The pro forma net tangible book value of our common stock on June 30, 1999
was approximately $53.9 million, or approximately $1.91 per share. Pro forma
net tangible book value per share represents our pro forma stockholders'
equity divided by the pro forma number of shares of our common stock
outstanding of 28,243,125. Pro forma common shares outstanding are calculated
after giving effect to the issuance of 19,951,249 shares of common stock upon:
(i) the automatic conversion of all outstanding shares of preferred stock into
shares of common stock on a one-for-one basis, (ii) the exercise and
conversion of all warrants outstanding as of June 30, 1999 into shares of
common stock, (iii) the issuance of 3,121,994 shares of Series I preferred
stock at $10.41 per share in July 1999 and conversion into shares of common
stock on a one-for-one basis, and (iv) the issuance of a Series I preferred
stock warrant with an exercise price of $10.41 per share in July 1999 and its
exercise and conversion into 192,123 shares of common stock. Dilution in pro
forma net tangible book value per share represents the difference between the
amount per share paid by purchasers of shares of common stock in this offering
and the net tangible book value per share of our common stock immediately
afterwards. Assuming our sale of shares of common stock offered by this
prospectus at an assumed initial public offering price of $ per share, and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, our pro forma net tangible book value at June 30, 1999
would have been approximately $ million or $ per share. This represents an
immediate increase in net tangible book value of $ per share to new investors
purchasing shares of common stock in this offering. The following table
illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share at June 30, 1999.. $1.91
Increase per share attributable to new investors..............
-----
Pro forma net tangible book value per share after this
offering.......................................................
----
Dilution per share to new investors............................. $
====
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1999 the
differences between existing stockholders and the new investors with respect
to the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid. We have assumed an
initial public offering price of $ per share, and we have not deducted
estimated underwriting discounts and commissions and estimated offering
expenses in our calculations.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 28,243,125 % $75,879,000 % $2.69
New investors...............
---------- --- ----------- ---
Total..................... % $ %
========== === =========== ===
</TABLE>
The foregoing discussion and tables assume no exercise of any outstanding
stock options. To the extent that any shares reserved for issuance under our
stock plans are issued, there will be further dilution to new investors. See
"Capitalization" and "Management--Stock Plans."
If the underwriters exercise their over-allotment in full, the following
will occur:
. the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our common
stock outstanding; and
. the number of shares held by new public investors will increase to , or
approximately % of the total number of our common stock outstanding
after this offering.
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The statement of operations data for the period from
inception to December 31, 1997 and for the year ended December 31, 1998, and
the balance sheet data as of December 31, 1997 and 1998, are derived from the
audited financial statements included elsewhere in this prospectus. The
selected statement of operations data for the six months ended June 30, 1998
and 1999 and from the period from inception to June 30, 1999, and the selected
balance sheet data as of June 30, 1999 are derived from our unaudited
financial statements included elsewhere in this prospectus. These unaudited
financial statements have been prepared on the same basis as our audited
financial statements and, in our opinion include all material adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
this unaudited financial information. The historical results are not
necessarily indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
Period From Period From
August 4, 1997 Six Months Ended August 4, 1997
(Inception) to Year Ended June 30, (Inception) to
December 31, December 31, ----------------- June 30,
1997 1998 1998 1999 1999
-------------- ------------ ------- -------- --------------
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Subscription revenues... $ -- $ -- $ -- $ 8 $ 8
Costs and expenses:
Cost of services...... -- -- -- (1,170) (1,170)
Research and
development.......... (356) (5,614) (1,809) (2,999) (8,969)
Sales and marketing... (28) (1,277) (356) (3,784) (5,089)
Sales and marketing --
related parties...... -- -- -- (382) (382)
General and
administrative
expenses............. (241) (2,946) (903) (3,024) (6,211)
Stock-based
compensation......... -- -- -- (187) (187)
Other operating
income............... -- -- -- 895 895
Other operating
expenses............. -- -- -- (1,084) (1,084)
------ ------- ------- -------- --------
Loss from
operations......... (625) (9,837) (3,068) (11,727) (22,189)
Interest income....... 49 116 35 277 442
Interest expense and
other................ (19) -- (13) (178) (197)
------ ------- ------- -------- --------
Net loss............ $ (595) $(9,721) $(3,046) $(11,628) $(21,944)
====== ======= ======= ======== ========
Net loss per share:
Basic and diluted..... $(0.20) $ (2.21) $ (0.79) $ (1.75) $ (4.74)
Weighted average
shares............... 2,917 4,406 3,839 6,633 4,630
Pro forma net loss per
share (unaudited)(1):
Basic and diluted..... $ (0.80) $ (0.56)
Weighted average
shares............... 12,135 20,745
</TABLE>
<TABLE>
<CAPTION>
As of
As of June
December 31, 30,
------------- -------
1997 1998 1999(2)
------ ------ -------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................ $2,110 $2,248 $11,967
Working capital.......................................... 2,044 1,329 18,221
Total assets............................................. 2,548 3,543 23,804
Long-term portion of obligations under capital lease..... -- -- 558
Total stockholders' equity............................... 2,405 2,121 19,105
</TABLE>
- ---------------------
(1) Pro forma net loss per share is calculated as if the convertible preferred
stock outstanding as of June 30, 1999 was converted into shares of common
stock on the date of its issuance on a one-for-one basis and as if all
warrants outstanding as of June 30, 1999 had been exercised and converted
into shares of common stock on the date of issuance on a for-one basis.
(2) Subsequent to June 30, 1999, we issued 3,121,994 shares of Series I
preferred stock at $10.41 per share. These accounts do not include the
proceeds from this issuance.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in the
following discussion relating to markets for our products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect" and "intend" and other similar expressions constitute
forward-looking statements. These forward-looking statements are subject to
business and economic risks and uncertainties, and our actual results of
operations may differ materially from those contained in the forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors" as well as
other risks and uncertainties referenced in this prospectus.
Overview
We were incorporated as Teleworld Inc. in August 1997 and changed our name
to TiVo Inc. in July 1998. The TiVo Service is a subscription-based television
service that provides viewers with greater control, easier navigation and a
wider range of viewing options when watching television. The TiVo Service also
provides television content providers and advertisers with a new platform for
content delivery, interactive viewing options and in-home commerce. The TiVo
Service is enabled through a personal video recorder designed and developed by
TiVo.
We are a development-stage company. We have generated only limited amount of
revenues to date and expect to incur significant operating expenses over the
next several years in connection with the continued development and expansion
of our business. In particular, we expect our sales and marketing expenses to
increase significantly as we initiate the retail launch of the TiVo Service
and the related personal video recorder, attempt to establish the TiVo brand
and attract subscribers. The retail launch is scheduled to begin in the third
quarter of 1999. As a result, we will lose money in 1999. We expect to
continue to lose money for the foreseeable future. As of June 30, 1999, we had
an accumulated deficit of $21.9 million.
We currently generate revenues from subscriptions to the TiVo Service and
other income from the sale of personal video recorders. We began selling
personal video recorders and subscriptions to the TiVo Service on March 31,
1999. For the six months ended June 30, 1999, we generated revenues of $8,000
from subscriptions to the TiVo Service. Subscriptions to the TiVo Service are
available on a monthly, annual or lifetime basis. A monthly subscription
currently costs $9.95 per month, an annual subscription costs $99 per year and
a lifetime subscription costs $199. A lifetime subscription allows access to
the TiVo Service as long as the viewer uses the personal video recorder that
activates the TiVo Service. Subscription fees are paid by the viewer prior to
activation of the TiVo Service. Subscription revenues from lifetime
subscriptions are recognized ratably over a four year period. Our current plan
is to stop selling personal video recorders in connection with the transition
of manufacturing and distribution to Philips. We expect that Philips will
begin the manufacture and distribution of personal video recorders in the
second half of 1999. The sales of personal video recorders are not expected to
be recurring, and are therefore considered incidental to our business. The
proceeds from the sale of personal video recorders for the six months ended
June 30, 1999 of $895,000 are recorded as other income. The cost of these
personal video recorders was $1.1 million.
We anticipate that the sources of our revenues will change over time. In the
future, we may generate revenue from other sources such as (1) advertising
shown on the TiVo Service, (2) revenues from networks, and (3) electronic
commerce or couch commerce.
We have agreed to make payments to some of our strategic partners in order
to promote the TiVo Service and encourage the manufacture and distribution of
the personal video recorders that enable the TiVo Service. We have agreed to
make monthly, formula-based payments to Philips, DIRECTV and Quantum in
exchange for manufacturing, marketing support and a discount from Quantum on
hard disk drives used in the personal video
22
<PAGE>
recorders. We have also agreed to pay to Philips a per unit subsidy for each
personal video recorder that they manufacture and sell. A portion of the
subsidy amount paid to Philips is due when the personal video recorder is
shipped. The remaining portion is due when the subscriber activates the TiVo
Service. The amount of the payments can vary depending upon Philips'
manufacturing costs and selling prices. We may make additional subsidy
payments in the future to consumer electronic and other manufacturers in an
effort to maintain a commercially viable retail price for the personal video
recorders and other devices that enable the TiVo Service. Payments made to our
strategic partners in exchange for these services are recognized as sales and
marketing expenses--related parties. Subsidy payments are renegotiated on an
annual basis.
In the past, we have issued stock in exchange for services by our strategic
partners. For example, we issued shares of our common stock to DIRECTV in
exchange for marketing support and a note which will be reduced as bandwidth
capacity is made available to TiVo on DIRECTV's satellite television system.
We also issued warrants exercisable for shares of our common stock to Quantum
in exchange for a discount on hard disk drives used in personal video
recorders that enable the TiVo Service. As of June 30, 1999, we had recorded
prepaid marketing expenses resulting from the issuance of this equity to
DIRECTV and Quantum in the amount of $15.7 million. This amount represents the
estimated fair value of the common stock at the date of issuance and the
estimated fair value of the 324,325 warrant shares which were vested as of
that date out of the total of 867,803 shares issuable upon exercise of the
warrants. Of this amount, zero was amortized in 1998 and $276,000 was
amortized for the six months ended June 30, 1999. These prepaid marketing
expenses are amortized as services are provided to us and charged to sales and
marketing expense--related parties.
From time to time, we have also granted stock options to employees,
consultants and directors and expect to continue to do so in the future. As of
June 30, 1999, we had recorded deferred compensation related to these options
in the total amount of $2.9 million, representing the difference between the
estimated fair value of our common stock, as determined for accounting
purposes, and the exercise price of options on the date of grant. Of this
amount, zero was amortized in 1998 and $187,000 was amortized for the six
months ended June 30, 1999. Deferred compensation is amortized over the
vesting period of each option.
Results of Operations
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30, 1998
Subscription revenues. Subscription revenues for the six months ended June
30, 1999 increased to $8,000 from zero for the six months ended June 30, 1998.
This increase is attributable to customer subscriptions to the TiVo Service
which began in March 1999. As of June 30, 1999, we had approximately 1,000
subscribers.
Cost of services. Cost of services consists primarily of employee salaries
and expenses related to providing the TiVo Service to subscribers. Cost of
services for the six months ended June 30, 1999 increased to $1.2 million from
zero for the six months ended June 30, 1998. This increase was primarily
attributable to the hiring of content programming and service operation
personnel in connection with the commercial release of the TiVo Service and
the personal video recorder that enables the TiVo Service.
Research and development expenses. The Company's research and development
expenses consist primarily of employee salaries and related expenses and
consulting fees relating to the design of the personal video recorder that
enables the TiVo Service. Research and development expenses for the six months
ended June 30, 1999 increased to $3.0 million from $1.8 million for the six
months ended June 30, 1998. This increase was primarily attributable to the
hiring of additional engineering personnel and related costs.
Sales and marketing expenses. Sales and marketing expenses consist primarily
of employee salaries and related expenses, development of media advertising,
public relations tours and special promotions, trade shows and the production
of product related items, including packaging, manuals and videos. Sales and
marketing expenses for the six months ended June 30, 1999 increased to $3.8
million from $356,000 for the six months ended June 30, 1998. This increase
was primarily attributable to an increase in expenditures for trade shows,
public relations and advertising in connection with the commercial release of
the TiVo Service and the personal
23
<PAGE>
video recorder that enables the TiVo Service. We expect our marketing expenses
to increase significantly in connection with the retail launch of the TiVo
Service and the personal video recorder that enables the TiVo Service. The
retail launch is expected to occur in the second half of 1999.
Sales and marketing expenses--related parties. Sales and marketing
expenses--related parties consist of cash and non-cash charges related to
agreements with DIRECTV, Philips and Quantum, all of whom hold stock or
warrants in the Company. Sales and marketing--related parties for the six
months ended June 30, 1999 increased to $382,000 from zero for the six months
ended June 30, 1998 as services began to be rendered.
General and administrative expenses. General and administrative expenses
consist primarily of employee salaries and related expenses for executive,
administrative, accounting, information systems, customer service personnel,
facility costs, professional fees and recruiting. General and administrative
expenses for the six months ended June 30, 1999 increased to $3.0 million from
$903,000 for the six months ended June 30, 1998. This increase was primarily
attributable to an increase in salaries and related expenses and costs of
establishing Information Services and Service Operations departments which did
not exist in the six months ended June 30, 1998.
Stock-based compensation. During 1999, we granted stock options with
exercise prices that were less than the estimated fair market value of the
underlying shares of common stock for accounting purposes on the date of
grant. This will result in stock-based compensation expense over the period
that these options vest. The stock- based compensation expense was
approximately $187,000 for the six months ended June 30, 1999.
Other operating income. Other operating income consists of proceeds from the
sale of personal video recorders. We plan to stop selling personal video
recorders by the end of 1999 in connection with the transition of
manufacturing to Philips. The sales proceeds received through June 30, 1999
are considered incidental to our business and have been classified as other
operating income.
Other operating expenses. Other operating expenses consist of the cost of
the personal video recorders sold for the six months ended June 30, 1999.
Year Ended December 31, 1998 Compared to the Period from Inception to
December 31, 1997
Research and development expenses. Research and development expenses for the
year ended December 31, 1998 increased to $5.6 million from $356,000 for the
period of inception through December 31, 1997. This increase was primarily
attributable to the hiring of additional engineering personnel and
expenditures on product design, development consulting and prototype
manufacturing.
Sales and marketing expenses. Sales and marketing expenses for the year
ended December 31, 1998 increased to $1.3 million from $28,000 for the period
of inception through December 31, 1997. This increase was primarily
attributable to the hiring of additional sales and marketing personnel,
corporate identity development, retention of a public relations firm and
professional web site development.
General and administrative expenses. General and administrative expenses for
the year ended December 31, 1998 increased to $2.9 million from $241,000 for
the period of inception through December 31, 1997. This increase was primarily
attributable to hiring additional personnel, moving to a larger facility and
recruiting, travel, consulting, legal and other overhead costs to support the
growth of the business.
24
<PAGE>
Quarterly Results of Operations
The following table represents certain unaudited statement of operations
data for our six most recent quarters ended June 30, 1999. In management's
opinion, this unaudited information has been prepared on the same basis as the
audited annual financial statements and includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair representation of
the unaudited information for the quarters presented. This information should
be read in conjunction with our financial statements, including the notes
thereto, included elsewhere in this prospectus. The results of operations for
any quarter are not necessarily indicative of results that may be expected for
any future period.
<TABLE>
<CAPTION>
Three
Months
Ended
-----------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(unaudited, in thousands)
<S> <C> <C> <C> <C> <C> <C>
Subscription
revenues......... $ -- $ -- $ -- $ -- $ -- $ 8
Costs and expenses
Cost of
services....... -- -- -- -- (618) (552)
Research and
development.... (793) (1,016) (1,659) (2,146) (1,369) (1,630)
Sales and
marketing...... (134) (222) (354) (567) (2,056) (1,728)
Sales and
marketing--
related
parties........ -- -- -- -- -- (382)
General and
administrative.. (293) (610) (706) (1,337) (1,535) (1,489)
Stock based
compensation... -- -- -- -- -- (187)
Other operating
expense, net... -- -- -- -- 12 (201)
------- ------- ------- ------- ------- -------
Loss from
operations... (1,220) (1,848) (2,719) (4,050) (5,566) (6,161)
Interest income... 18 17 46 55 53 224
Interest expense
and other........ (2) (11) (7) -- (2) (176)
------- ------- ------- ------- ------- -------
Net loss...... $(1,204) $(1,842) $(2,680) $(3,995) $(5,515) $(6,113)
======= ======= ======= ======= ======= =======
</TABLE>
We expect sales and marketing expenses to increase substantially in
connection with the retail launch of the TiVo Service in the second half of
1999. To launch the TiVo Service in retail channels, we intend to initiate an
extensive advertising campaign. We intend to hire additional sales and
marketing personnel and to begin a marketing campaign through television,
print and Internet-based advertising and direct mail. We further expect to
commit a significant amount of human and financial resources to supplement the
sales and marketing efforts of our strategic partners, to participate in trade
shows, produce commercials and infomercials and create other marketing
collateral. We expect to spend increasing amounts on sales and marketing to
attract subscribers and retailers.
The TiVo Service is enabled through a personal video recorder that is sold
in retail channels like other consumer electronic devices. As a result, we
anticipate that our business will be seasonal and we expect to generate a
significant number of our annual new subscribers during the holiday shopping
season. We also expect to generate a portion of future revenues from
television advertising which tends to be seasonal and cyclical, reflecting
overall economic conditions as well as budgeting and buying patterns.
Liquidity and Capital Resources
Since inception through June 30, 1999, we have financed our operations and
met our capital expenditure requirements primarily from proceeds of the
private sale of equity securities totaling approximately $39.9 million. At
June 30, 1999, we had $12.0 million of cash and cash equivalents along with
$7.6 million of short term investments. On July 21, 1999, we issued Series I
preferred stock for a total of $32.5 million with terms comparable to prior
series of preferred stock. The expansion of our business will require
significant additional capital to fund operating losses, capital expenditures
and working capital needs.
25
<PAGE>
Net cash used in operating activities was $494,000 from inception to
December 31, 1997, $8.8 million for the year ended December 31, 1998, and
$10.7 million for the six months ended June 30, 1999. Net cash used during
these periods was primarily a result of the research and development, sales
and marketing and general and administrative costs to support the development
of the TiVo Service and the personal video recorder that enables the TiVo
Service. For the six months ended June 30, 1999 we began providing the TiVo
Service, incurring costs of $1.2 million.
Net cash used in investing activities was $396,000 from inception to
December 31, 1997, $817,000 for the year ended December 31, 1998, and $7.6
million for the six months ended June 30, 1999. Net cash used during these
periods was for the acquisition of property and equipment and for the purchase
of $7.6 million of short term investments with proceeds primarily from the
sale of preferred stock in 1999.
Net cash provided by financing activities was $3.0 million from inception to
December 31, 1997, $9.8 million for the year ended December 31, 1998 and $28.0
million for the six months ended June 30, 1999. All of these amounts arose
from the net sales of stock except for a bank overdraft of $442,000 in 1998,
which increased to $989,000 in the six months ended June 30, 1999.
In December 1997, we established a $750,000 line of credit with a financial
institution. The line bears interest at the bank's prime rate plus 0.75% and
expires on August 15, 1999. Substantially all of our assets are pledged as
collateral under the line. Borrowings of $610,000 were made under this line
between February and July 1998, at which time the line was repaid. The line is
partially utilized to secure a letter of credit in the amount of $600,000. No
amounts were outstanding at December 31, 1998 and June 30, 1999.
We have commitments under operating leases of $901,000 and obligations under
capital leases of $670,000 as of June 30, 1999. We also have an unused lease
line of $1.8 million which expires February 2000. The annual interest rate on
the used portion of the line is 7.25% plus the amortization of the value
assigned to a warrant to purchase 60,814 shares of Series B preferred stock at
$1.26 per share issued in connection with the lease line.
We have also entered into various supply and service agreements and purchase
commitments with a number of vendors. As of June 30, 1999, our commitment
under these agreements is approximately $7.5 million.
On April 8, 1999, we entered into a secured convertible debenture purchase
agreement with certain of our stockholders. Under the terms of this agreement,
we received a commitment allowing us to borrow up to $3,000,000 at an interest
rate of 4.67%. The debentures are secured by substantially all of our assets,
excluding intellectual property, and are due June 30, 2000. In connection with
the agreement, we issued warrants to purchase a total of 81,522 shares of
common stock at a price of $2.50 per share. The value assigned to these
warrants is being amortized over the term of the commitment. As of June 30,
1999, we had no outstanding amounts under this agreement. All of the warrants
issued under the terms of this agreement expire upon the completion of an
initial public offering and are being exercised prior to the completion of
this offering.
Our future capital requirements will depend on a variety of factors,
including market acceptance of personal television and the TiVo Service, the
resources we devote to developing, marketing, selling and supporting our
products and other factors. We expect to devote substantial capital resources
to hire and expand our engineering, sales and marketing and customer support
organizations, to prepare for and execute the retail launch of the TiVo
Service and personal video recorder and for general corporate purposes. We
believe that our cash and cash equivalents, the net proceeds from the sale of
our Series I preferred stock and the net proceeds from this offering will be
sufficient to fund our operations for at least the next 12 months. Despite our
expectations, we may need to raise additional capital before the end of the
next 12 months. See "Risk Factors--We may be unable to raise additional
capital in the future to support our growth."
Year 2000 Issue
Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs would not properly recognize
26
<PAGE>
the year format. This could result in major system failures or miscalculations
that could disrupt our business. We have formulated a year 2000 plan to assess
and address any year 2000 issues and have created a year 2000 task force
headed by our chief information officer to implement the plan.
State of Readiness
The TiVo Service and the personal video recorder that enables the TiVo
Service have been tested for Year 2000 compliance and, at this time, there are
no known issues. We intend to test the TiVo Service and personal video
recorder for year 2000 issues again before the end of 1999.
We have completed an initial assessment of the criticality of our suppliers'
technology being year 2000 compliant. We intend to internally test and prove
the year 2000 compliance of any vendors' and suppliers' technology that has a
high impact on our business. Those third-party technologies with moderate
impact on our business will be assessed by a review of these third parties'
web sites or by requesting a letter from such parties to prove compliance. We
do not intend to conduct further investigation on those third-party
technologies that have a low impact on our business other than reviewing these
parties' web sites.
As we have added strategic partners, we have inquired as to the year 2000
compliance of their systems. To date, all critical partners we are working
with have indicated that their systems are, or will be prior to the end of
1999, year 2000 compliant. We have not required any formal paperwork from, or
conducted any tests with, these partners.
We have completed a preliminary assessment of our information technology
systems, which includes but is not limited to, hardware and software required
to support our broadcast service center as well as our internal business
systems. We are also in the process of assessing our non-information
technology systems, which include facility date sensitive systems. Most
information technology systems have been purchased in the last year with most
systems purchased in the last six months. Year 2000 compliance has always been
a major part of the selection criteria. To date our assessment has consisted
of the following steps:
. identification of categories of hardware and software that need to be
evaluated;
. listing of all hardware and software by category and rated by
criticality;
. determination of any known year 2000 issues;
. adoption of a proof assessment approach based on criticality to our
business;
. creation of a high level plan for assessment and remediation by item;
and
. implementation of the plan.
At this stage in our assessment, we are not aware of any year 2000 issues
that would have a material effect on our business. We plan to complete the
year 2000 assessment by September 1, 1999 and complete any remediation by
November 1, 1999.
Cost
As of July 1, 1999, we have incurred costs of approximately $20,000 and we
expect to incur an additional $50,000 in connection with identifying,
evaluating and addressing year 2000 compliance issues. All of the expenses to
date have related to, and are expected to continue to relate to, operating
costs associated with time spent by our employees in the evaluation process.
There may be some charges related to upgrades if any issues are identified
during our vendor communications or testing. If such expenses are higher than
anticipated, our business could suffer.
Risks
Our assesment of year 2000 issues may identify material non-compliance
issues with the TiVo Service or the personal video recorder, our informational
technology systems or the systems of our partners or suppliers. We may not be
able to successfully resolve these issues, or it may be costly to do so. In
addition, we cannot
27
<PAGE>
assure you that governmental agencies, utility companies, third-party service
providers and others outside of our control will be year 2000 compliant. The
failure by such entities to be year 2000 compliant could result in a systemic
failure beyond our control, such as a prolonged telecommunications or
electrical failure, which could prevent us from delivering upgrades and
regular downloads to the personal video recorders that enable the TiVo Service
or otherwise impact the functionality of the personal video recorder. Any of
these occurences would have a material adverse effect on our business.
Contingency Plans
The results of our further assessment and testing will be taken into account
in determining the nature and extent of any contingency plans. To address
potential facility-related year 2000 issues on our most critical systems, we
are moving the TiVo Broadcast Center into co-location at UUnet by October
1999. The UUnet co-location is equipped with generators that can provide
several weeks of back-up power.
Impact of Inflation
We believe that inflation has not had a significant impact on our operating
results.
Recently Issued Accounting Standards
We have adopted SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information" in 1998. SFAS No. 131 established standards for the
way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS No.131 also establishes standards for
related disclosure about products and services, geographic areas, and major
customers. The adoption of SFAS No. 131 required no additional disclosures in
our consolidated financial statements as we operate in a single reportable
segment.
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BUSINESS
Overview
TiVo is a pioneer in the personal television industry. TiVo has created a
unique personal television service that allows viewers to watch what they want
when they want. The TiVo Service creates a richer and more enjoyable
television experience by offering viewers greater control, choice, and
convenience. TiVo believes that the TiVo Service also allows television
programmers and advertisers to reach a broader audience by making shows more
accessible and easier to record and to target their programming and
advertising to specific viewers. The TiVo Service is a subscription-based
service enabled by a personal video recorder designed and developed by TiVo.
TiVo intends to commence its retail launch in the second half of 1999.
Philips will manufacture, market and sell the personal video recorder enabling
the TiVo Service and spearhead the retail launch, allowing TiVo to focus its
resources on promoting and enhancing the TiVo Service. As part of the launch,
DIRECTV will provide marketing resources that will allow TiVo to target
DIRECTV subscribers. DIRECTV will also provide sales support in the retail
channel.
Industry Background
The television is a truly ubiquitous consumer product. According to the
market research firm Nielsen Media Research, 98.0 million, or more than 98% of
all U.S. households, owned at least one television at the end of 1998. Nielsen
also reports that in 1998, U.S. households owned, on average, 2.4 televisions
and spent an average of 7 hours and 15 minutes per day viewing television.
The reach and popularity of television has been facilitated by the emergence
of new technologies and delivery systems for television programming. These new
technologies have enhanced the clarity, color and sound of television and, as
a result, have increased the entertainment value of watching television. In
addition, new delivery systems, including cable and satellite systems, now
offer a large number of programming choices and specialized programming such
as pay-per-view promotions. According to Paul Kagan Associates, 66.1 million
U.S. households spent $30.9 billion to receive subscription-based cable
television services in 1998. In addition, according to the Satellite Industry
Association, 10.6 million U.S. households spent $5.3 billion to receive
subscription-based satellite television services in 1998.
These statistics have not been lost on advertisers, who have made television
their largest, most popular medium for reaching consumers. McCann-Erickson,
Inc., a market research firm, estimates that $47.4 billion was spent on
television advertising in 1998. This represents over 23% of total advertising
spending.
As the reach and popularity of television has grown, so too has the amount
of programming available to viewers. Cable and home satellite television
systems have dramatically increased the number of networks and channels
available to today's television viewer. According to the Television & Cable
Fact Book, in 1998, over 60% of U.S. cable subscribers had access to more than
53 channels, compared to less than 10% in 1985. The explosive growth in
available channels has led to an overwhelmingly diverse selection of
programming and content. This is due in large part to the emergence of
specialized television channels and networks which are formed around a given
subject, theme or category of interest. For example, channels have been
created to deliver programming to targeted groups, such as women or children,
or to deliver specialized content, such as news, cartoons, classic movies,
golf, comedy or educational programming. Subscription-based premium channels,
such as HBO and Showtime, also offer specialized programming including major
motion pictures, made-for-television movies and sporting events. Clearly,
there is more television programming to choose from now than ever before.
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The Need For Personal Television
From the introduction of color television and remote controls to the
proliferation of cable and satellite programming and home theater systems,
improvements in the television experience have been aimed at meeting viewer
demand for richer programming and a more enjoyable viewing experience.
However, the dramatic increase in the volume and diversity of television
programming has fragmented viewing audiences and created new challenges for
viewers, television programmers, network operators and advertisers.
Challenges Faced by Viewers. TiVo believes that today's television viewer
wants greater control, choice and convenience when watching television.
Today's television viewers:
. are unable to easily navigate through hundreds of channels and thousands
of programs;
. are unable to easily identify programs of interest;
. are limited to either watching shows at the time they are broadcast or
recording shows by using a VCR; and
. are often forced to miss portions of shows due to interruptions.
Challenges Faced by Television Programmers. Although the television has
become a ubiquitous product, the dramatic increase in the volume and diversity
of channels and programming has drawbacks for networks and other television
programmers. The major networks have been particularly affected by the
proliferation of channels and specialized programming, and are suffering from:
. brand dilution and declining viewer loyalty;
. greater fragmentation of their audience base; and
. the inability to effectively evaluate viewing habits, preferences and
demand.
The TV International Sourcebook for 1999 reports that networks have steadily
lost market share to other content providers, from 60% market share in 1993 to
approximately 45% in 1998. As television becomes more fragmented and the
competition for viewers increases, networks and other television programmers
must find new ways to attract viewers and increase viewer loyalty.
Challenges Faced by Advertisers. Similarly, TiVo believes that today's
television advertisers face new challenges as they seek greater effectiveness
and efficiency in targeting specific viewers and establishing brand identity
and loyalty. For example, advertisers must:
. spend increasing amounts of time and money to target desired demographic
groups;
. spread their advertising budgets over an ever-expanding number of
channels and programs; and
. find new ways to identify, monitor and respond to viewers' programming
and advertising preferences.
As viewer fragmentation has increased, so too has the cost of advertising.
Prime time advertisements on the major television networks are more expensive
today than ever before, yet ratings and market share for these networks are
declining. According to the Television Bureau of Advertising and Nielsen Media
Research, the average cost of a 30-second nighttime commercial has increased
from $92,700 in 1993 to $121,300 in 1998. Like television programmers,
advertisers must find new ways to reach their targeted audience and to
establish brand identity and loyalty among viewers.
Challenges Faced by Cable and Satellite Network Operators. As a result of
increased competition, cable and satellite network operators have begun
placing greater emphasis on acquiring and retaining subscribers and finding
ways to increase the monthly revenue they receive from these subscribers. In
order to successfully accomplish this, they must:
. improve customer satisfaction;
. enhance programming choice; and
. provide new features and functionality, such as electronic commerce.
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TiVo Solution
TiVo has created a personal television service that it believes meets the
challenges faced by viewers, television programmers, advertisers and network
operators. The TiVo Service provides viewers with greater control, easier
navigation and a wider range of viewing options when watching television than
what is currently available. The TiVo Service creates a richer and more
enjoyable viewing experience by allowing viewers to watch what they want when
they want. The TiVo Service also creates a new platform that enables
television programmers, advertisers, and network operators to deliver
television programming, advertising, and in-home commerce. TiVo believes that
its service allows television programmers and advertisers to reach a broader
audience by making shows more accessible and easier to record and to target
their programming and advertising to specific viewers. The TiVo Service is a
subscription-based service enabled by a personal video recorder designed and
developed by TiVo. The personal video recorder is a device that includes a
hard disk drive for recording shows and accessing the content available on the
TiVo Service.
The TiVo Service has many features that distinguish it from traditional
television viewing:
Locate and Record Multiple Shows Quickly and Easily. The TiVo Service offers
a variety of easy-to-use navigation and recording features that allow viewers
to easily locate and record their favorite shows. Viewers can record and play
back a single show or schedule a customized line-up of several shows to be
recorded without entering specialized codes, setting a timer or using a video
tape. With the Season Pass feature, the TiVo Service automatically records all
episodes of viewers' favorite shows.
Control Live Television. Using the TiVo Service and the personal video
recorder, viewers have more control over live television. For example, viewers
can utilize advanced viewing commands, such as pause, rewind, fast forward and
frame-by-frame. When a viewer pauses live television, the personal video
recorder continues to record the program that the viewer is watching. The
viewer can then resume viewing in normal mode, fast forward to catch up to the
live telecast, or execute any of the other advanced viewing commands. Prior to
the introduction of TiVo, the ability to control live television in this
manner was not available.
Viewing Preferences and Suggested Programming. The TiVo Service allows
viewers to create viewing preferences around particular shows or categories of
interest. Using the Thumbs Up and Thumbs Down buttons on the TiVo remote,
viewers can express their preferences for a particular type of show. These
preferences accumulate over time and are stored locally on the personal video
recorder. Based on these preferences, TiVo recommends programming that viewers
are likely to enjoy and, when storage space is available, TiVo will
automatically record shows that are most likely to match viewers' individual
preferences.
Specialized Content. The TiVo Service also includes a variety of specialized
content. For example, the TiVo Service allows television programmers to
develop Network Showcases that feature selected programming, such as an
upcoming movie, special event or mini-series, on easy-to-use interactive
screens. Currently, Network Showcases are branded areas on the TiVo Service
that include directories of simplified recording options for groups of related
shows. In the future, television programmers could use the TiVo Service to
directly offer viewers special programming packages and pay-per-view
promotions such as movies, sporting events, news headlines and other
programming. Subscribers to the TiVo Service also have access to TiVolution
Magazine, which features theme-based collections of shows compiled by TiVo's
editorial staff.
Menu-Driven Navigation and Viewer Interface. The TiVo Service employs a
menu-driven interface and easy-to-use navigation system. TiVo Central, the
main screen of the TiVo Service, allows viewers to access their customized
lineup of shows, Network Showcases, TiVolution Magazine and other TiVo
services and features. The Pick Programs to Record feature, located on the
TiVo Central screen, allows viewers to search for shows to record by subject,
title, channel or time of showing. Using the on-air guide, viewers can quickly
and efficiently browse through a schedule of up to two weeks of available
television programming and descriptions for each show.
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Benefits of the TiVo Service
For viewers, television programmers, advertisers and network operators, the
TiVo Service offers several benefits over traditional television viewing.
Benefits to Viewers. TiVo believes that its service offers an enhanced
television viewing experience. Key benefits offered to viewers include the
following:
Greater Control, Choice and Convenience. The TiVo Service provides
viewers with greater control, choice and convenience in watching
television. Using the search and navigation features and variety of
recording options, viewers can:
. automatically record all episodes of their favorite shows;
. quickly and easily create a customized lineup of shows to be
recorded up to two weeks in advance;
. pause, rewind and fast forward live television; and
. immediately access their customized lineup of recorded shows and
other specialized content.
Making Sense of Available Content. The TiVo Service assists viewers in
navigating through the hundreds of channels and thousands of programs
available for viewing. Using the TiVo Service, viewers can browse pre-set
categories of programming, such as sports or action/adventure, and select a
desired show for viewing or recording simply by entering the title, channel
or time. With the TiVo Service, viewers can easily organize their
television viewing around shows they want to watch and receive suggestions
for programming that they are likely to enjoy.
Programming that Matches Viewers' Preferences. The TiVo Service ranks and
recommends programming according to viewers' preferences. This
functionality gives viewers access to programming that meets their personal
tastes but that they might otherwise never have known was being broadcast.
Benefits to Television Programmers. TiVo believes its TiVo Service offers
television programmers a new and exciting way to reach the viewing audience.
Key benefits offered to television programmers include the following:
Enhanced Viewer Loyalty and Retention. By making it easy for viewers to
find and record the shows they want to watch, the TiVo Service enables
programmers to make their shows accessible to a broader audience. TiVo
believes that these easy to use features, especially the Season Pass
feature, will increase the likelihood that viewers will continue viewing
new episodes of a particular series or show. Viewers also can easily play
back the shows they have recorded long after they have aired, enhancing
viewer retention and loyalty.
More Effective Promotions and Previews. The TiVo Service provides
television programmers with an opportunity to create more effective
promotions and previews such as Network Showcases for selected programming
and pay-per-view events. TiVo is also currently developing a service,
called iPreview, that consists of "active" previews and promotions that
allow a viewer to easily record featured programming at the touch of a
button. TiVo believes these promotions will be very effective in attracting
viewers and increasing a network's brand presence because they allow
viewers to "impulse record" featured programming and to watch these
programs at a more convenient time. TiVo also believes that by taking
advantage of these features, television programmers have a greater
opportunity to reach a larger viewing audience.
New Platform for Content Delivery. TiVo anticipates that television
programmers will embrace the TiVo Service as a new way to reach audiences
with programming, products and services and enable couch commerce. For
example, the TiVo Service can enable television programmers to allow
viewers to order and automatically record special programming packages,
including bundled episodes of previously run shows and pay-per-view
promotions. TiVo anticipates that viewers would be able to simply "point
and click" to order movies, sports events, programming packages, games and
other products and services.
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Benefits to Advertisers. TiVo believes that its TiVo Service will offer
advertisers a new platform with more efficient and effective ways to reach
their targeted audience. Key benefits offered to advertisers include the
following:
Targeting Consumers. In the future, the TiVo Service will allow
advertisers to offer advertising that is related to the viewing preferences
stored on the personal video recorder. For example, working with its
network partners TiVo could download and store several commercials on the
personal video recorder and select which of these commercials to show based
on the viewer's preferences. For example, an automobile advertiser may want
to advertise one of several models during the airing of a particular
program, depending on each viewer's preferences. If the viewer's
preferences suggest that the viewer is an outdoor enthusiast, the
commercial might feature a sport utility vehicle.
Platform for New Advertising Opportunities. The TiVo Service provides
advertisers with a new platform to offer advertisements to viewers. For
example, advertisers may be able to combine new advertising with recorded
shows and special promotions to reach new and existing viewers. TiVo also
intends to offer advertisers a new service, called iBuy, that will allow
viewers to get more information about and possibly purchase a featured
product or service using the TiVo remote. In this way, TiVo expects to
create an interactive on-air shopping experience for the viewer.
Benefits to Cable and Satellite Network Operators. The TiVo Service provides
a unique platform for network operators to reduce subscriber turnover and
create new sources of revenue. Key benefits offered to cable and satellite
network operators include the following:
Ability to Differentiate Services. The TiVo Service allows network
operators to differentiate and enhance their service offerings by making
available programming more accessible to viewers, and enhancing viewer
loyalty by offering subscribers the ability to customize their viewing
experience.
Platform for New Service Opportunities. The TiVo Service can also provide
new sources of revenue for network operators. For example, the TiVo Service
provides a platform upon which network operators can record a number of
pay-per-view movies onto the personal video recorder from which subscribers
can choose to purchase and view at their convenience, with the added
ability to pause rewind, skip and fast forward.
TiVo Strategy
TiVo's objective is to establish the TiVo Service as a new platform for
delivering richer television programming, advertising and in-home commerce. To
achieve this objective, TiVo intends to:
Establish the TiVo Service as the Market Leader in Personal Television. TiVo
is a pioneer in the personal television industry. As the personal television
industry develops, TiVo intends to aggressively grow its subscriber base,
create specialized content to enhance the value of the TiVo Service, and
develop new ways to deliver effective targeted advertising. TiVo also intends
to augment these efforts through strategic partnerships with cable and
satellite network operators, television programmers, advertisers and consumer
electronics manufacturers. TiVo believes that establishing and maintaining a
market leadership position in personal television is critical to establishing
new sources of revenues and the overall growth of its business.
Establish and Promote the TiVo Brand. TiVo believes that establishing the
TiVo brand is critical to attracting subscribers, advertisers and strategic
partners. TiVo intends to dedicate substantial resources to promoting its
brand through multiple advertising and marketing channels, participating in
trade shows, sponsoring events, merchandising and by leveraging existing and
future strategic partnerships.
Leverage Partnerships to Accelerate Market Acceptance. TiVo believes that
leveraging the market presence, brand recognition and distribution resources
of established television industry participants will help it establish broad
consumer awareness and acceptance of the TiVo Service and personal television.
TiVo intends
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to continue to establish partnerships with leading television industry
participants to expand its subscriber base, provide content and develop and
distribute a wide variety of devices that enable the TiVo Service.
. Network Operators and Other Content Distributors. TiVo intends to
establish partnerships with an increasing number of network operators,
including cable and satellite operators. TiVo believes that agreements
with these companies will provide access to a large and established base
of viewers who are likely to purchase the TiVo Service. Relationships
with these companies will also provide opportunities to develop
additional devices that enable the TiVo Service and provide specialized
programming to viewers. For example, TiVo's agreement with DIRECTV
provides for a variety of assisted and joint marketing activities
targeting DIRECTV's installed base of subscribers.
. Networks and Other Television Programmers. TiVo intends to establish
partnerships with an increasing number of television programmers,
including broadcast and premium-service providers. TiVo believes that
partnerships with these companies can increase the amount and diversity
of customized content available on the TiVo Service and provide a
significant opportunity to offer specialized programming to viewers.
Partnerships with these companies also provide TiVo with opportunities
to develop new interactive services for viewers, such as iPreview and
iBuy. Currently, TiVo has relationships with NBC, HBO, Showtime, FliX,
E! Entertainment and The Movie Channel. Many of these relationships
provide for the delivery of Network Showcases and other specialized
programming to viewers.
. Consumer Electronic Manufacturers. TiVo intends to establish
partnerships with consumer electronic and other device manufacturers for
the development, manufacture and marketing of devices that enable the
TiVo Service. TiVo believes this strategy will accelerate the growth of
the market for personal television. TiVo currently has a strategic
relationship with Philips, who will manufacture the personal video
recorder, assist in developing a TiVo/DIRECTV combination receiver and
spearhead our retail launch.
. Advertisers. TiVo intends to pursue partnerships with advertisers in an
effort to generate new revenue streams. TiVo believes that garnering
advertiser support for the TiVo Service will accelerate the market
acceptance for personal television. TiVo also believes that its
proprietary software and other technology embedded in the personal video
recorder and the TiVo Service will enable advertisers to reach desired
viewers more effectively. Not only will advertisers be better equipped
to reach consumers with specific tastes or preferences, viewers will
receive more information about products in which they are likely to be
interested.
Offer an Increasing Range of Programming and Features. TiVo intends to offer
new programming and features in order to enhance the value of the TiVo Service
and create new sources of revenue. TiVo's technology allows for frequent
updates and improvements to the programming and features offered on the TiVo
Service. This enables TiVo to quickly develop and market new features and
services such as iBuy and iPreview. TiVo intends to develop other features,
such as sports highlights, condensed news programs and other specialized
programming.
Encourage the Development of New Devices Enabling the TiVo Service. TiVo
intends to work in partnership with consumer electronics manufacturers and
others in developing new and complementary products that enable the TiVo
Service, such as televisions, DVD players or satellite television receivers.
This strategy is based on TiVo's belief that the TiVo Service enhances the
value of other television, entertainment and home theater products and
services. In pursuing these relationships, TiVo expects to continue to grant
broad licensing rights to its technology and intends to create a set of
standards that will allow consumer electronics manufacturers to embed the
technology that enables the TiVo Service in home entertainment products. TiVo
anticipates that the broad licensing of its technology will accelerate its
subscriber growth, enhance its market position and strengthen the TiVo brand.
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What Viewers Experience Using the TiVo Service
The TiVo Service is designed to appeal to a broad consumer base by being
easy-to-use and intuitive. The TiVo Service gives viewers the ability to
control and personalize television by letting them watch what they want when
they want. Navigation through the TiVo Service's menu-driven interface starts
from the TiVo Central screen.
TiVo Central. TiVo Central is the main screen on the TiVo Service and is the
first screen seen by the viewer when the television is turned on. TiVo Central
can also be accessed from anywhere in the TiVo Service by pushing the TiVo
button on the TiVo remote. Most of the recording and viewing features
available on the TiVo Service can be accessed through this screen. An example
of TiVo Central is shown below:
[Screen shot of TiVo Central appears here.]
Now Showing. The Now Showing screen allows viewers to easily choose from
their customized lineup of shows, which have been recorded and are stored on
the personal video recorder. For each show, viewers can get detailed
information, including a description of the show and its recorded time.
Viewers can also see when the program will be deleted from the personal video
recorder and can change the deletion time if desired.
[Screen shot of Now Showing appears here.]
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Network Showcases Screen. The Network Showcases screen can be used by
television programmers and advertisers to feature selected programming and
products. Network Showcases are separately categorized by each programmer.
Within their own Network Showcase, programmers can customize the manner in
which they highlight and package shows. In the future, we believe that
programmers will create a unique look and feel for their Network Showcases and
may include promotional video clips and trailers. Network Showcases screens
are shown below:
[Screen shots of the main Network Showcases screens appear here.]
Pick Programs to Record. Pick Programs to Record allows viewers to easily
select shows to be recorded. Viewers can choose to select shows by name,
channel or time. In addition, viewers can choose from a list of shows
recommended by the TiVo Service based upon their individual preferences.
Examples of Pick Programs to Record screens are shown below:
[Screen shot of the Pick Programs to Record screens appear here.]
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On-Air Program Guide. The TiVo Service includes an easy-to-use on-air
program guide that allows viewers to browse through available programming and
receive information about upcoming shows. The on-air program guide includes a
brief description of the program, the personalities featured and time and
channel for viewing.
[Screen shot of the Watch Live TV screen appears here.]
TiVolution Magazine. TiVolution Magazine features theme-based collections of
shows and other content compiled by TiVo's editorial staff.
[Screen shot of the main Network Showcase screen appears here.]
How TiVo Works
The TiVo Service relies on three key components: the personal video
recorder, the TiVo remote control and the TiVo Broadcast Center. Individually,
each of these components serves a vital function in the TiVo Service.
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The Personal Video Recorder. The personal video recorder was initially
designed and developed by TiVo, and enables the basic functionality of the
TiVo Service. The personal video recorder automatically records live
television while the viewer is watching, which allows the viewer to control
live television. The current version of the personal video recorder, however,
cannot record a different show while concurrently watching live television.
Two models of the personal video recorder are currently available, one
supporting up to 14 hours of recorded programming and one supporting up to 30
hours of recorded programming. The personal video recorder works with analog
broadcast, cable and digital satellite systems. TiVo expects that future
versions of the personal video recorder will be incorporated with cable or
satellite receivers into a single device.
After the initial set-up, the TiVo personal video receiver will
automatically dial into the TiVo Broadcast Center via telephone on a nightly
basis to download the program guide data and other elements of the TiVo
Service, such as Network Showcases and other programs or features. Software
upgrades to the personal video recorder are also delivered directly via the
phone line at no charge.
When enabled with the TiVo Service, the personal video recorder also stores
the subscribers' viewing preferences. Based on these preferences, the TiVo
Service ranks every show listed in the on-air program guide and then
recommends the highest ranked shows to the viewer. If there is available
storage capacity in the personal video recorder, the personal video recorder
may automatically record the show or shows with the highest ranking.
The TiVo Service uses an advanced disk scheduling technique, which manages
the recording and deletion of programs on the system. This allows viewers to
select programming to record well in advance of airing and receive
confirmation that the selected program will be recorded, even if the length of
the programming selected for recording exceeds the then available storage
capacity on the recorder.
TiVo expects that the vast majority of purchasers of the personal video
recorder will activate the TiVo Service. However, if the TiVo Service is not
enabled or is subsequently cancelled, the personal video recorder provides
viewers basic capabilities, including pause, rewind and fast forward
navigation of live or recorded television, and the ability to record selected
programs by manually programming the personal video recorder without the aid
of the TiVo Service.
The TiVo Remote Control. The TiVo remote control can operate both the
personal video recorder and the viewer's television. Using the TiVo remote
control, a viewer is able to take advantage of the functionality of the TiVo
Service, including navigation of programming, selection of shows to be
recorded and advanced viewing features. The TiVo remote control also enables
viewers to indicate personal preferences through the use of the Thumbs Up or
Thumbs Down buttons. As the TiVo Service is expanded, the TiVo remote control
will accommodate expanded functionality associated with new features,
services, promotions and programming options.
The TiVo Broadcast Center. The TiVo Broadcast Center is a series of computer
servers that manage all of TiVo's programming and service data. The TiVo
Broadcast Center distributes proprietary services and specialized content such
as TiVo's on-air program guides, Network Showcases, TiVolution Magazine and
other content provided by TiVo and its partners. The TiVo Broadcast Center is
designed to be a platform for future services, such as iPreview, iBuy and
other interactive services. Presently, the data contained in the TiVo
Broadcast Center is communicated to each personal video recorder automatically
on a nightly basis through the subscriber's phone line. Upgrades to the
software that runs the TiVo Service are also provided automatically over this
phone line. In the future, TiVo expects to utilize satellite and cable
bandwidth to transmit data and communicate information from the TiVo Broadcast
Center to the personal video recorder.
Strategic Partnerships
TiVo's success depends on its ability to quickly build a large subscriber
base, integrate TiVo functionality into a broad range of consumer electronic
products, and develop new services and programming to enhance the
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TiVo Service. In order to better achieve these goals, TiVo has chosen to
aggressively pursue strategic partnerships with:
. cable and satellite network operators;
. television programmers;
. consumer electronics manufacturers; and
. suppliers of key components of the TiVo technology.
By working with strategic partners to develop a business model that
complements the businesses of other industry stakeholders, TiVo is seeking to
aggressively develop personal television as a major category of home
entertainment.
Through its partnerships, TiVo's personal video recorders and other devices
will be manufactured and distributed through retail and other channels. These
partners will also provide access to a large number of potential subscribers
and the resources to effectively market and promote the TiVo Service. In
addition, these partnerships will allow TiVo to provide its subscribers with
richer content, including Network Showcases, previews and promotions of
upcoming shows and other specialized viewing options on the TiVo Service. Some
of TiVo's major partnerships include:
DIRECTV. DIRECTV has agreed to promote TiVo and the TiVo
[DIRECTV logo] Service to its seven million subscribers. DIRECTV will
provide a variety of marketing and sales support,
including commercial air time on the DIRECTV system,
access to DIRECTV subscribers for targeted mailings and
placement on its web site and in its on-air magazine.
DIRECTV will also make a portion of the high bandwidth
capacity of DIRECTV's satellite network available to
TiVo. TiVo intends to use this capacity to expand and
enrich the TiVo Service offered to DIRECTV subscribers.
DIRECTV has taken an equity position in TiVo. In
addition, DIRECTV will share in specified revenues TiVo
receives that relate to subscribers to the TiVo Service
who also subscribe to the DIRECTV satellite service.
[NBC logo] NBC Multimedia. TiVo will work with NBC to produce weekly
Network Showcases and other programming packages that
highlight current and upcoming NBC programs. These NBC
programming packages and specials will also be featured
in TiVolution Magazine. TiVo also granted NBC
preferential placement on its Network Showcases screen.
TiVo and NBC have agreed to feature each other as
partners on their respective web sites.
NBC has taken an equity position in TiVo and will receive
certain rights with respect to TiVo's couch commerce and
Internet services if such services are enabled on the
TiVo Service.
[Philips logo] Philips. Philips has agreed to manufacture, market and
distribute personal video recorders that enable the TiVo
Service. Philips will market co-branded personal video
recorders with TiVo and support the TiVo Service in
retail channels. Philips also has a license to TiVo's
technology for developing, marketing and promoting other
products that enable the TiVo Service. For example,
Philips has agreed to work with TiVo and DIRECTV to
develop and release an integrated device that enables the
TiVo Service and the DIRECTV satellite service.
Philips has taken an equity position in TiVo. TiVo has
agreed to offset certain of Philips' manufacturing costs
by paying a subsidy to Philips for each personal
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video recorder that Philips manufactures and sells. TiVo
has also agreed to share a portion of the TiVo Service
subscription revenues it receives from purchasers of the
personal video recorders and other devices manufactured
by Philips that enables the TiVo Service.
Quantum. Quantum has agreed to develop and supply the
[Quantum logo] hard disk drives used in personal video recorders that
enable the TiVo Service. Under the agreement, TiVo or a
designated third-party buyer may purchase from Quantum up
to an agreed number of hard disk drives at a discount. In
addition, Quantum has agreed to work with TiVo to
customize its hard disk drives for devices that enable
the TiVo Service. Quantum and TiVo have also agreed to
work together in advertising and promoting TiVo and the
TiVo Service.
Quantum received warrants to purchase TiVo's preferred
stock in connection with this agreement. TiVo has also
agreed to share a portion of the TiVo Service
subscription revenues it receives from the personal video
recorders and other devices equipped with Quantum hard
disk drives on which TiVo received a discount from
Quantum.
Sales and Marketing
TiVo is building a team of sales and marketing professionals whose efforts
are focused on establishing the TiVo brand, educating consumers on the
features and benefits of the TiVo Service and personal television, and
promoting sales of personal video recorders and other devices that enable the
TiVo Service. TiVo anticipates that retail stores will be the dominant
distribution channel for its products and services and is establishing direct
relationships with potential retail partners. TiVo's marketing team maintains
an on-going dialogue with viewers via research and other consumer response
vehicles to ensure that TiVo continues to deliver services that match viewers'
needs.
TiVo began selling personal video recorders and subscriptions to the TiVo
Service on March 31, 1999. To date, these sales have been made directly to
consumers, principally through TiVo's web site, www.tivo.com, and its toll-
free number, 1-877-FOR-TIVO. Philips plans to begin distributing co-branded
personal video recorders at national and regional retail chains in the second
half of 1999, in time for the 1999 holiday selling season.
Philips will take primary responsibility for selling personal video
recorders to retailers and supporting the retail channel through marketing
efforts, in-store display materials and sales force training. TiVo, with the
assistance of DIRECTV, will support Philips' efforts by educating retailers
about personal video recorders and the TiVo Service and providing training
where necessary. In addition, DIRECTV plans to incorporate the TiVo logo in
certain of its in-store promotional materials starting in the first quarter of
2000. DIRECTV may also encourage its existing and prospective customers to
subscribe to the TiVo Service by offering promotional incentives such as
coupons or discounts on DIRECTV's service.
In support of its expected retail launch, TiVo intends to initiate a
marketing campaign that utilizes print, outdoor, web and television
advertising. TiVo also intends to target certain DIRECTV subscribers with
direct mail and bill inserts. The goal of these efforts is to increase
awareness of the personal television category and to promote the TiVo brand as
the leader in this category. TiVo's marketing campaign will be augmented by a
significant advertising effort by Philips.
Privacy Policy
TiVo has adopted a privacy policy which it makes available on its web site
and delivers to each new subscriber to the TiVo Service. This policy provides
that all information that identifies a viewer as a specific person, including
a viewer's name and address, will not be disclosed to anyone without the
viewer's consent.
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All information about viewers' preferences and how they use the TiVo Service
is separated from information that identifies a viewer personally, so that the
information becomes anonymous. TiVo may be able to use this anonymous
information to tell a broadcaster the percentage of TiVo viewers who recorded
a particular program, but TiVo will not know, nor be able tell the
broadcaster, which of its viewers did so, unless a viewer decides to provide
that information. No one at TiVo or anywhere else will ever know the kinds of
programs a viewer specifically watches or how they use the TiVo Service unless
the viewer chooses to provide that information. If a viewer does not want the
way in which they use their personal video recorder to be part of the
anonymous information that TiVo gathers and shares with other companies, they
can ask for a block on the release of this anonymous data.
TiVo is able to send information to viewers' personal video recorders that
allows TiVo and other companies to customize viewers' television experience.
Neither TiVo nor the company supplying the customizing options will know which
options viewers' personal video recorders select to show. If a viewer does not
want this customizing information sent to their personal video recorder, they
can simply ask for a block on such customized information.
Competition
The market for home entertainment goods and services is intensely
competitive, rapidly evolving and subject to rapid technological change. The
delivery of video and television programming is particularly competitive as
new products and services continue to be introduced and marketed. TiVo
believes that the principal competitive factors in these markets are name
recognition, performance, pricing, ease of use and functionality. Because the
personal television market is new and rapidly evolving, TiVo expects it will
face significant barriers in its efforts to secure broad market acceptance,
and intense competition at several different levels.
Established competitors in the consumer electronics market. Personal
television competes in a consumer electronics market that is crowded with
several established products and services, especially products delivering
television programming and other home video entertainment. Personal video
recorders and the TiVo Service compete with products and technologies that
have established markets and proven consumer support, such as VCRs, DVD
players and cable and satellite television systems. To be successful, TiVo
believes it will need to spend significant resources to develop consumer
awareness of TiVo and the personal television product category.
Internet-related companies and companies offering similar products and
services. TiVo faces competition from Internet service providers and other
Internet companies such as WebTV, America Online and X-TV. These competitors
are seeking to meld Internet browsing and traditional broadcast, cable or
satellite television programming into a single medium. For example, WebTV and
EchoStar Communications have released the DishPlayer, which is a product that
combines Internet access with a program guide and the ability to pause live
television. TiVo's primary competitor in the personal television market is
Replay Networks, Inc. Replay manufactures and markets a personal television
recorder that includes a hard disk drive and functionality similar to that of
the TiVo-enabled personal video receiver.
Research and Product Development
From TiVo's inception until March 1999, TiVo's research and development
efforts were focused on designing and developing the personal video recorder
and the TiVo remote control, the TiVo Service and the TiVo Broadcast Center.
These activities included both hardware and software development. TiVo's
engineering staff is now focused on research and development in the following
three areas:
Performance engineering. TiVo will continue to devote considerable
engineering resources to improving TiVo's essential technologies. TiVo's
engineers and customer support personnel work together to quickly identify and
correct potential performance errors. TiVo also continually works to identify,
develop and implement features and functionality that improve performance in
areas such as video and audio quality, speed, and ease of use.
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Platform engineering. Although TiVo does not intend to manufacture the
personal video recorder or other hardware products, the evolution of hardware
technology that enables the TiVo Service is a crucial element of TiVo's future
success. TiVo's hardware engineers are working with consumer electronics
manufacturers, component suppliers, and data storage suppliers to reduce the
manufacturing cost of the personal video recorder and integrate TiVo
functionality into other consumer electronics goods. For example, TiVo is
currently working with DIRECTV and Phillips to develop a DIRECTV satellite
receiver that enables the TiVo Service. Similarly, TiVo intends to integrate
the TiVo Service into components such as cable set-top boxes, televisions and
other consumer electronics products. TiVo intends to work with a broad range
of partners to develop its technology platform and establish TiVo as a de
facto standard for delivering personal television services.
Service engineering. TiVo intends to continue to develop the TiVo Service,
offering new features and programming. TiVo has assembled a group of
experienced television and multimedia professionals to create specialized
programming for the TiVo Service. As part of this effort, the programming team
is currently in the process of building software and video development tools
that will enable networks and other content providers to create specialized
programming for the TiVo Service.
TiVo's research and development expenses were $356,000 and $5.6 million for
the period from inception to December 31, 1997 and the year ended December 31,
1998, respectively, and $3.0 million for the six months ended June 30, 1999.
As of June 30, 1999, TiVo had 40 employees engaged in research and product
development activities.
Patents and Intellectual Property
TiVo has adopted a proactive patent and trademark strategy designed to
protect all important aspects of its technology and intellectual property.
TiVo has filed nine patent applications and six provisional patents. TiVo has
also jointly filed a patent application with Quantum. The patent applications
that TiVo has filed are broad in nature and are tied to fundamental inventions
rather than small, unrelated features or applications. These patent
applications cover substantially all of TiVo's technology, including hardware,
software, the TiVo Service functionality and appearance, network architecture,
manufacturing and international patent rights. TiVo has also filed patent
applications that cover technologies it intends to incorporate in future
versions of the TiVo Service and hardware. To date, none of these patents have
been granted, and there can be no assurance that any of these patents will
ever be granted.
TiVo has filed trademark applications covering substantially all of its
trade dress, logos and slogans, including:
. TiVo logo
. Life's too short for bad TV
. The way TV is meant to be
. Viewergraphic
. Viewergraphic Profiling System
. Extensible Timeshifting Architecture
. Thumbs Up logo
. Thumbs Down logo
These applications are currently pending with the U.S. Patent and Trademark
Office. Additionally, TiVo has international trademark applications pending
for its TiVo logo. TiVo has licensed the use of its name and logo to some of
its strategic partners. See "Risk Factors--Our success depends on our ability
to secure and protect patents, trademarks and other proprietary rights."
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Employees
As of June 30, 1999, TiVo had 98 full-time employees and 2 part-time
employees. TiVo expects its workforce to increase substantially over the next
12 months. See "Risk Factors--Our business is expanding rapidly and our
failure to manage growth could harm our business and operating results."
Facilities
TiVo has 29,122 square feet of space in a facility located in Sunnyvale,
California, under a lease that expires in March 2000. Beginning in July 1999,
TiVo will lease an additional 3,854 square feet of space in the same facility.
TiVo's lease to this additional space will expire in June 2000. TiVo is
currently searching for a larger facility and expects to move its operations
by the end of the year.
Legal Matters
TiVo is not currently engaged in any legal proceedings.
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MANAGEMENT
Executive Officers, Directors and Key Employees
Our executive officers, directors and key employees and their ages as of
July 15, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Executive Officers and Directors
Michael Ramsay (1).................. 49 Chairman of the Board, Chief Executive Officer
and President
James Barton (1).................... 41 Vice President of Research and Development,
Chief Technical Officer and Director
David H. Courtney................... 40 Vice President of Finance and Chief Financial
Officer
Geoffrey Y. Yang (1) (2) (3)........ 40 Director
Stewart Alsop (1) (3)............... 47 Director
Randy Komisar (1) (3)............... 44 Director
Larry N. Chapman (2)................ 44 Director
Thomas S. Rogers.................... 44 Director
Michael J. Homer (2)................ 41 Director
Key Employees
Ta-Wei Chien........................ 44 Vice President of Engineering and Operations
Morgan P. Guenther.................. 45 Vice President of Business Development
Stacy Jolna......................... 47 Vice President of Programming and Network
Relations
Michael A. Mutz..................... 47 Vice President of Sales
Karrin Nicol........................ 39 Vice President of Human Resources
Mark Roberts........................ 39 Chief Information Officer
Geof Rochester...................... 39 Vice President of Marketing
Robert P. Vallone................... 41 Vice President of Service Operations and
Customer Service
</TABLE>
- -----------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Michael Ramsay is a co-founder of TiVo and has served as TiVo's Chairman of
the Board of Directors, Chief Executive Officer and President since its
inception in August 1997. From April 1996 to July 1997, Mr. Ramsay was the
Senior Vice President of the Silicon Desktop Group for SGI, a manufacturer of
advanced graphics computers. From August 1994 to April 1996, Mr. Ramsay was
President of Silicon Studio, Inc., a wholly owned subsidiary of SGI focused on
enabling applications development for emerging interactive media markets. From
July 1991 to August 1994, Mr. Ramsay served as the Senior Vice President and
General Manager of SGI's Visual Systems Group. Mr. Ramsay also held the
positions of vice president and general manager for the Entry Systems Division
of SGI. Prior to 1986, Mr. Ramsay held research & development and engineering
management positions at Hewlett-Packard and Convergent Technologies.
Mr. Ramsay holds a B.S. degree in Electrical Engineering from the University
of Edinburgh, Scotland.
James Barton is a co-founder of TiVo and has served as TiVo's Vice President
of Research and Development, Chief Technical Officer and director since its
inception. From June 1996 to August 1997, Mr. Barton was President and Chief
Executive Officer of Network Age Software, Inc., a company that he founded to
develop software products targeted at managed electronic distribution. From
November 1994 to May 1996, Mr. Barton served as Chief Technical Officer of
Interactive Digital Solutions Company, a joint venture of SGI and AT&T Network
Systems created to develop interactive television systems. From June 1993 to
November 1994, Mr. Barton served as Vice President and General Manager of the
Media Systems Division of SGI. From January 1990 to May 1991, Mr. Barton
served as Vice President and General Manager of the Systems Software
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Division of SGI. Prior to joining SGI, Mr. Barton held technical and
management positions with Hewlett-Packard and Bell Laboratories. Mr. Barton
holds a B.S. degree in Electrical Engineering and an M.S. degree in Computer
Science from the University of Colorado at Boulder.
David H. Courtney joined TiVo in March 1999 as its Chief Financial Officer.
From May 1995 to July 1998, Mr. Courtney served as a Managing Director at J.P.
Morgan, an investment banking firm, where he was responsible for building and
expanding the firm's high technology investment banking business in the United
States. From 1986 to 1995, Mr. Courtney was a member of the high technology
investment banking group at Goldman, Sachs & Co., most recently serving as a
Vice President. Mr. Courtney holds a B.A. degree in Economics from Dartmouth
College and an M.B.A. degree from Stanford University.
Geoffrey Y. Yang has served as a director of TiVo since October 1997. Since
1989, Mr. Yang has been a general partner of Institutional Venture Partners, a
venture capital firm. Mr. Yang is a director of MMC Networks, Inc., a
developer of network processors, and Ask Jeeves, Inc., a provider of natural-
language question answering services on the Internet. Mr. Yang holds a B.A.
degree in economics from Princeton University, a B.S.E. degree in Engineering
and Management Systems from Princeton University and an M.B.A. degree from
Stanford University.
Stewart Alsop has served as a director of TiVo since October 1997. Since
1998, Mr. Alsop has served as a general partner at New Enterprise Associates,
a venture capital investment firm. Mr. Alsop was a Venture Partner at New
Enterprise Associates from 1996 to 1998. From June 1991 to 1996, Mr. Alsop
served as Senior Vice President and Editor-in-Chief of InfoWorld Media Group,
Inc., which publishes InfoWorld, a weekly newspaper for information-technology
professionals. Mr. Alsop also serves on the board of directors of Macromedia
Inc., an Internet software company. He holds a B.A. degree in English from
Occidental College.
Randy Komisar has served as a director of TiVo since March 1998. Since 1996,
Mr. Komisar has been "virtual CEO" and advisor to various startup companies.
Since November 1997, Mr. Komisar has served as Chairman of IQ.commerce Corp.,
an online promotions and merchandising services company. Mr. Komisar was
President and Chief Executive Officer of Crystal Dynamics Inc., a video game
development and publishing company, between May 1995 and June 1996. He served
as President and Chief Executive Officer of LucasArts Entertainment Company, a
film production company, between January 1994 and May 1995. Mr. Komisar holds
a B.A. degree in Economics from Brown University and a J.D. degree from
Harvard Law School.
Larry N. Chapman has served as a director of TiVo since April 1999. Since
1998, Mr. Chapman has been the Executive Vice President of DIRECTV, Inc., a
leading digital television service provider and a unit of Hughes Electronics
Corporation. Prior to serving as Executive Vice President of DIRECTV,
Mr. Chapman served in a number of capacities for DIRECTV since its inception
in 1990, including Senior Vice President of Special Markets and Distribution,
Senior Vice President of Programming, and Vice President of Business Affairs
and Development. Mr. Chapman holds a B.S. degree and M.S. degree in Electrical
Engineering from the University of Florida.
Thomas S. Rogers has served as a director of TiVo since April 1999. Since
November 1992, he has been President of NBC Cable and since 1988, Executive
Vice President of National Broadcasting Company, Inc. Mr. Rogers founded NBC's
major cable networks, CNBC and MSNBC, and international operations and is
responsible for overseeing and coordinating NBC's interests in cable and new
media. Prior to joining NBC in 1987, Mr. Rogers served as Senior Counsel to
the House Subcommittee on Telecommunications, Consumer Protection and Finance.
Mr. Rogers is a member of the board of managers of SNAP! LLC and the board of
directors of NBC Multimedia, Inc., Rainbow Media Holdings Inc. and A&E
Television Network, and has been nominated to serve on the board of directors
of NBC Internet, Inc. Mr. Rogers is Chairman of the International Council of
the National Academy of Television Arts and Sciences. He also serves on the
board of directors of the International Radio & Television Society. Mr. Rogers
graduated from Wesleyan University and received a J.D. degree from Columbia
Law School.
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Michael J. Homer has served as a director of TiVo since July 1999. Mr. Homer
has been employed with Netscape Communications Corporation, an Internet
software company, since October 1994 and has served as Netscape's Executive
Vice President and General Manager, Web Site Division, since March 1998. From
July 1997 to March 1998, he was Executive Vice President of Sales and
Marketing for Netscape, and from October 1994 to July 1997, he served as
Netscape's Vice President of Marketing. Prior to joining Netscape, Mr. Homer
served as Vice President of Engineering for GO Corporation. Mr. Homer holds a
B.S. degree in Finance from the University of California at Berkeley.
Ta-Wei Chien has served as Vice President of Engineering and Operations
since February 1999. From December 1996 to February 1998, Mr. Chien served as
Vice President of Engineering in the Desktop Workstations group at SGI, where
he managed engineering projects for desktop workstations. From April 1991 to
December 1996, Mr. Chien was a director of digital media and VLSI engineering
at SGI. Mr. Chien holds a B.S. degree in Electrical Engineering from National
Taiwan University and an M.S. degree in Electrical Engineering from the
University of California, Los Angeles.
Morgan P. Guenther has served as Vice President of Business Development
since June 1999. Since March 1998, Mr. Guenther was a partner of the law firm
of Paul, Hastings, Janofsky & Walker LLP. From 1990 to March 1998, Mr.
Guenther was a partner at the law firm of Farella, Brawn & Martel. Mr.
Guenther holds J.D. and B.A. degrees from the University of Colorado and an
M.B.A. degree from the University of San Francisco.
Stacy Jolna has served as Vice President of Programming and Network
Relations since May 1998. Prior to joining TiVo, Mr. Jolna had served as a
Vice President at WebTV Networks Inc., an Internet services company and
subsidiary of Microsoft Corp. since May 1997. From December 1981 to February
1996, Mr. Jolna was employed by Cable News Network, most recently serving as a
Vice President. Mr. Jolna holds a B.S. degree from State University of New
York and an M.S. degree in Journalism from Boston University.
Michael A. Mutz has served as Vice President of Sales since June 1999. Prior
to joining TiVo, Mr. Mutz served as Vice President of Operations at U.S.
Cellular Corporation, a wireless services provider, since January 1995. From
1983 to December 1994, Mr. Mutz was employed with AT&T Corporation. Mr. Mutz
holds a B.S. degree in Electrical Engineering from the United States Military
Academy and a Master of Management degree from J.L. Kellogg Graduate School of
Management.
Karrin Nicol joined TiVo in July 1999 as Vice President of Human Resources.
From 1987 to 1999, Ms. Nicol was employed with SGI, most recently as Director
of Human Resources. Prior to that, Ms. Nicol served in various positions at
Fairchild Semiconductor Corporation. Ms. Nicol holds a B.S. degree in Food and
Nutrition from California State University, Chico.
Geof Rochester joined TiVo in July 1999 as Vice President of Marketing.
Prior to joining TiVo, Mr. Rochester served as Senior Vice President of Sales
and Marketing at Comcast Cable Communications, Inc., from 1995 to 1998.
Previously, Mr. Rochester had served as Senior Vice President and Vice
President of Marketing at Radisson Hotels Worldwide from 1990 to 1995. Mr.
Rochester holds a B.S. degree in Business Administration from Georgetown
University and an M.B.A. degree from the Wharton School at the University of
Pennsylvania.
Mark Roberts has served as Chief Information Officer since March 1999. Prior
to joining TiVo, he served as Vice President of Information Technology at
Acuson Corporation, a medical ultrasound company, from March 1996 to March
1999. From July 1990 to March 1996, Mr. Roberts was Director of Information
Systems at SGI. Mr. Roberts holds a B.S. degree in Economics from Santa Clara
University.
Robert P. Vallone has served as Vice President of Service Operations and
Customer Service since March 1999. From November 1998 to April 1999, Mr.
Vallone served as Director of Operations for TiVo. Prior to joining TiVo, Mr.
Vallone served as Director of Engineering at SGI since October 1993. Mr.
Vallone holds a B.S. degree in Experimental Psychology from Cornell
University. From 1980 to 1985, Mr. Vallone worked on a Ph.D. in Experimental
Psychology at Stanford University.
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Board Composition
The number of directors is fixed by resolution of the board of directors.
Upon the closing of this offering, the number of directors will remain set at
eleven. In accordance with the terms of our Amended and Restated Certificate
of Incorporation, the terms of office of the members of the board of directors
will be divided into three classes, with each class holding office for
staggered three year terms: the Class I directors' term will expire at the
annual meeting of stockholders to be held in 2000, the Class II directors'
terms will expire at the annual meeting of stockholders to be held in 2001,
and the Class III directors' terms will expire at the annual meeting of
stockholders to be held in 2002. We anticipate that the Class I directors will
include Messrs. Ramsay, Yang and Komisar, the Class II directors will include
Messrs. Barton, Homer and Alsop, and the Class III directors will include
Messrs. Rogers and Chapman, the Series H nominee and the Series I nominee. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each class will consist of one-third of the directors. This classification of
the board of directors may have the effect of delaying or preventing changes
in control or management. Under Delaware law, directors may be removed for
cause by the affirmative vote of the holders of a majority of the common
stock. Messrs. Alsop and Yang were elected to the board of directors pursuant
to a voting agreement by and among TiVo and some of its principal
stockholders. Messrs. Chapman, and Rogers were elected to the board of
directors pursuant to preferred stock rights held by some of TiVo's
stockholders. In addition, the Series H and Series I nominees are to be
elected to the board pursuant to preferred stock rights held by some of TiVo's
stockholders. These voting agreements and these rights will terminate upon the
completion of this offering. Each of our current directors will continue to
serve on the board of directors upon completion of this offering.
Board Compensation
Directors who are also our executive officers do not receive any additional
compensation for serving as members of the board of directors or any committee
of the board. Under our 1999 Non-Employee Directors' Stock Option Plan, non-
employee directors are granted a nonstatutory option to purchase 20,000 shares
of common stock under the directors' plan on the date on which such person is
first elected or appointed a director. Options initially granted under our
directors' plan vest over a two year period at a rate of 1/24th per month. In
addition, on the day after each of our annual meetings of stockholders,
starting with the annual meeting in 2001, each non-employee director will
automatically receive an option for 10,000 shares if the director has been a
non-employee director for at least the prior eighteen months. This option will
be fully vested. The exercise price of options under the directors' plan will
be equal to the fair market value of the common stock on the date of grant.
For more information, please see "1999 Non-Employee Directors' Stock Option
Plan."
Board Committees
Executive Committee. The executive committee has broad discretionary
authority to take most actions which may be taken by the board of directors,
including acting upon recommendations of other committees of the board of
directors, declaring a dividend, authorizing the issuance of stock and
administering our stock plans. Actions the executive committee is not
authorized to take include amending our certificate of incorporation or
bylaws, adopting an agreement of merger or consolidation or appointing members
to committees of our board of directors. The executive committee typically
meets once per month and reports to the board of directors on a quarterly
basis. The executive committee consists of Messrs. Ramsay, Barton, Yang, Alsop
and Komisar.
Audit Committee. The audit committee is responsible for, among other things,
making recommendations to the board of directors regarding the engagement of
our independent public accountants, reviewing with the independent public
accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants, and
reviewing the adequacy of our internal accounting controls. The audit
committee consists of Messrs. Yang, Chapman and Homer.
Compensation Committee. The compensation committee is responsible for
determining salaries and incentives compensation for our directors, officers,
employees and consultants and administering our stock option incentive plans.
The compensation committee consists of Messrs. Alsop, Komisar and Yang.
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Compensation Committee Interlocks and Insider Participation
The members of our compensation committee are Messrs. Alsop, Komisar and
Yang. None of the members of our compensation committee of the board of
directors is currently or has been, at any time since our formation, an
officer or employee. Prior to the formation of the compensation committee, all
decisions regarding compensation for directors, officers, employees and
consultants and administration of stock and incentive plans were made solely
by the board of directors.
Executive Compensation
The following table sets forth information for the year ended December 31,
1998, regarding the compensation of our chief executive officer and our other
most highly compensated executive officer whose salary and bonus for such year
was in excess of $100,000 on an annualized basis. We refer to these
individuals as our named executive officers. There were no other executive
officers of TiVo whose salary and bonus for that year were in excess of
$100,000 on an annualized basis.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------
Name and Principal Long-Term All Other
Position Salary($) Bonus($) Compensation Awards Compensation($)
- ------------------------ ----------- --------- ------------------- ---------------
<S> <C> <C> <C> <C>
Michael Ramsay.......... $ 150,000 $ -- -- $ --
Chairman of the Board,
Chief Executive Officer
and President --
James Barton............ 148,764 -- --
Vice President of
Research and
Development and Chief
Technical Officer
</TABLE>
Option Grants in Last Fiscal Year
There were no stock option grants to our named executive officers during the
fiscal year ended December 31, 1998. In June 1999 we granted options to
purchase 650,000 shares of common stock to Michael Ramsay and 100,000 shares
of common stock to James Barton. The exercise price per share for each of
these option grants was $6.50.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
There were no option exercises by the named executive officers during the
fiscal year ended December 31, 1998. There were no options held by the named
executive officers at December 31, 1998.
Stock Plans
Amended and Restated 1997 Equity Incentive Plan
The board adopted, and the stockholders approved, the 1997 Equity Incentive
Plan in October 1997. The board amended and restated the 1997 incentive plan
as the Amended and Restated 1997 Equity Incentive Plan on March 16, 1999, and
our stockholders approved the amendments on April 9, 1999.
Share Reserve. We have reserved 4,000,000 shares for issuance under the 1997
equity incentive plan. If stock awards granted under the 1997 equity incentive
plan expire or otherwise terminate without being exercised, the shares not
acquired pursuant to such stock awards again become available for issuance
under the 1997 equity incentive plan.
Administration. The board administers the 1997 equity incentive plan unless
it delegates administration to a committee. The board has the authority to
construe, interpret and amend the 1997 equity incentive plan as well as to
determine:
. the grant recipients;
. the grant dates;
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<PAGE>
. the number of shares subject to the award;
. the exercisability of the award;
. the exercise price;
. the type of consideration; and
. the other terms of the award.
Eligibility. The board may grant incentive stock options that qualify under
Section 422 of the Internal Revenue Code to employees of TiVo or its
affiliates. The board may grant nonstatutory stock options, stock bonuses and
restricted stock purchase awards to employees, directors and consultants of
TiVo or its affiliates.
. A stock option is a contractual right to purchase a specified number of
our shares at a specified price (exercise price) for a specified period
of time.
. An incentive stock option is a stock option that has met the requirements
of Section 422 of the Internal Revenue Code. Such an option is free from
regular income tax at both the date of grant and the date of exercise. If
two holding period tests are met, two years between grant date and sale
date and one year between exercise date and sale date, the profit on the
option is long-term capital gain income. If the holding periods are not
met, there has been a disqualifying disposition, and the difference
between the exercise price and the fair market value of the shares on the
exercise date will be taxed at ordinary income rates. The difference
between the fair market value on date of exercise and the exercise price
is an item of alternative minimum tax unless there is a disqualifying
disposition in the year of exercise.
. A nonstatutory stock option is a stock option not meeting the Internal
Revenue Code criteria for qualifying incentive stock options and,
therefore, triggering a tax upon exercise. This type of option requires
payment of state and federal income tax and, if applicable, FICA/FUTA on
the difference between the exercise price and the fair market value on
the exercise date.
. A restricted stock purchase award is an offer to purchase shares at a
price either at or near the fair market value of the shares. A stock
bonus, on the other hand, is a grant of our shares at no cost to the
recipient in consideration for past services rendered. However, we may
reacquire the shares under either type of award at the original purchase
price, which is zero in the case of a stock bonus, if the recipient's
service to TiVo and its affiliates is terminated before the shares vest.
The board may not grant an incentive stock option to any person who, at the
time of the grant, owns, or is deemed to own, stock possessing more than 10%
of the total combined voting power of TiVo or any affiliate of TiVo, unless
the exercise price is at least 110% of the fair market value of the stock on
the grant date and the option term is five years or less. In addition, the
aggregate fair market value, determined at the grant date, of incentive stock
option shares that are exercisable for the first time during a calendar year
under the 1997 equity incentive plan and all other stock plans of TiVo and its
affiliates may not exceed $100,000.
Section 162(m) of the Internal Revenue Code, among other things, denies a
deduction to publicly held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation
exceeds $1,000,000. When we become subject to Section 162(m), the board may
not grant options under the 1997 equity incentive plan to a person covering an
aggregate of more than 500,000 shares in any 12 month period.
Option Terms. The board may grant options with an exercise price of 100% or
more of the fair market value of a share of our common stock on the grant
date. The maximum option term is 10 years. The board may provide for exercise
periods of any length in individual option grants, subject to certain
limitations. However, generally an option terminates three months after the
optionholder's service to TiVo and its affiliates terminates. If such
termination is due to the optionholder's disability, the exercise period
generally is extended to 12 months. If such termination is due to the
optionholder's death or if the optionholder dies within three months after his
or her service terminates, the exercise period generally is extended to 18
months following death.
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The board can provide that a nonstatutory stock option (but not an incentive
stock option) will be transferable. The optionholder may designate a
beneficiary to exercise the option following the optionholder's death.
Otherwise, the option exercise rights will pass by the optionholder's will or
by the laws of descent and distribution.
Terms of Other Stock Awards. The board determines the purchase price of
other stock awards but it may not be less than the fair market value of our
common stock on the grant date. The board may award stock bonuses in
consideration of past services without a purchase payment. Shares sold or
awarded under the 1997 equity incentive plan may, but need not be, restricted
and subject to a repurchase option in favor of TiVo in accordance with a
vesting schedule that the board determines. The board, however, may accelerate
the vesting of such restricted stock.
Other Provisions. Transactions not involving receipt of consideration by
TiVo, such as a merger, consolidation, reorganization, stock dividend, or
stock split, may change the class and number of shares subject to the 1997
equity incentive plan and to outstanding awards. In that event, the board will
appropriately adjust the 1997 equity incentive plan as to the class and the
maximum number of shares subject to the 1997 equity incentive plan and subject
to the Section 162(m) limit. It also will adjust outstanding awards as to the
class, number of shares and price per share subject to such awards.
Upon certain changes in control of TiVo as provided under the 1997 equity
incentive plan, the surviving entity may either assume or replace outstanding
awards under the 1997 equity incentive plan. Otherwise, the vesting and
exercisability of the awards generally will accelerate. In addition, depending
upon the status of the participant, an award will ordinarily become vested as
to 25% or 50% of the shares, even if it was assumed or replaced, if, within 13
months after the change in control, the participant is discharged other than
for cause or voluntarily resigns for good reason, as specified in the 1997
equity incentive plan.
Awards Granted. As of June 30, 1999, we had issued 2,471,958 shares upon the
exercise of options under the 1997 equity incentive plan, 399,937 of which
have been repurchased and 1,423,727 of which are subject to repurchase;
options to purchase 1,215,907 shares at a weighted average exercise price of
$0.46 were outstanding; and 116,902 shares remained available for future
grant. As of June 30, 1999, the board had granted 195,233 shares as part of
stock awards under the 1997 equity incentive plan.
Plan Termination. The 1997 equity incentive plan will terminate in 2007
unless the board terminates it sooner.
1999 Equity Incentive Plan
Our board adopted the 1999 Equity Incentive Plan on March 16, 1999, and our
stockholders approved it on April 9, 1999. Our board and stockholders amended
the 1999 equity incentive plan on July 14, 1999.
Share Reserve. We have reserved 4,200,000 shares for issuance under the 1999
equity incentive plan, subject to adjustment in the event of certain capital
changes. On December 31 of each year, for 10 years, beginning in 1999, the
number of shares in the reserve automatically will be increased by the greater
of:
. 7% of our outstanding shares on a fully-diluted basis; or
. 4,000,000 shares.
However, no more than 40,000,000 shares will be available for incentive stock
options. If stock awards granted under the equity incentive plan expire or
otherwise terminate without being exercised, the shares not acquired pursuant
to such stock awards again become available for issuance under the 1999 equity
incentive plan.
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Administration. The board administers the 1999 equity incentive plan unless
it delegates administration to a committee. The board has the authority to
construe, interpret and amend the 1999 equity incentive plan as well as to
determine:
. the grant recipients;
. the grant dates;
. the number of shares subject to the award;
. the exercisability of the award;
. the exercise price;
. the type of consideration; and
. the other terms of the award.
Eligibility. The board may grant incentive stock options that qualify under
Section 422 of the Internal Revenue Code to employees of TiVo or its
affiliates. The board may grant nonstatutory stock options, stock bonuses and
restricted stock purchase awards to employees, directors and consultants of
TiVo or its affiliates.
The board may not grant an incentive stock option to any person who, at the
time of the grant, owns, or is deemed to own, stock possessing more than 10%
of the total combined voting power of TiVo or any affiliate of TiVo, unless
the exercise price is at least 110% of the fair market value of the stock on
the grant date and the option term is five years or less. In addition, the
aggregate fair market value, determined at the grant date, of incentive stock
option shares that are exercisable for the first time during a calendar year
under the 1999 equity incentive plan and all other stock plans of TiVo and its
affiliates may not exceed $100,000.
Section 162(m) of the Internal Revenue Code, among other things, denies a
deduction to publicly held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation
exceeds $1,000,000. When we become subject to Section 162(m), the board may
not grant options under the 1999 equity incentive plan to an employee covering
an aggregate of more than 1,000,000 shares in any calendar year.
Option Terms. The board may grant options with an exercise price of 100% or
more of the fair market value of a share of our common stock on the grant
date. The maximum option term is 10 years. The board may provide for exercise
periods of any length in individual option grants, subject to certain
limitations. However, generally an option terminates three months after the
optionholder's service to TiVo and its affiliates terminates. If such
termination is due to the optionholder's disability, the exercise period
generally is extended to 12 months. If such termination is due to the
optionholder's death or if the optionholder dies within three months after his
or her service terminates, the exercise period generally is extended to 18
months following death.
The board can provide that a nonstatutory stock option, but not an incentive
stock option, will be transferable. The optionholder may designate a
beneficiary to exercise the option following the optionholder's death.
Otherwise, the option exercise rights will pass by the optionholder's will or
by the laws of descent and distribution.
Terms of Other Stock Awards. The board determines the purchase price of
other stock awards but it may not be less than 100% of the fair market value
of our common stock on the grant date. The board may award stock bonuses in
consideration of past services without a purchase payment. Shares sold or
awarded under the 1999 equity incentive plan may, but need not be, restricted
and subject to a repurchase option in favor of TiVo in accordance with a
vesting schedule that the board determines. The board, however, may accelerate
the vesting of such restricted stock.
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Other Provisions. Transactions not involving receipt of consideration by
TiVo, such as a merger, consolidation, reorganization, stock dividend, or
stock split, may change the class and number of shares subject to the 1999
equity incentive plan and to outstanding awards. In that event, the board will
appropriately adjust the 1999 equity incentive plan as to the class and the
maximum number of shares subject to the 1999 equity incentive plan, subject to
the incentive stock option limitation and subject to the Section 162(m)
limitation. It also will adjust outstanding awards as to the class, number of
shares and price per share subject to such awards.
Upon a change in control, the surviving entity may either assume or replace
outstanding awards under the 1999 equity incentive plan. Otherwise, the
vesting and exercisability of the awards generally will accelerate. In
addition, depending upon the status of the participant, an award will
ordinarily become vested as to 25% or 50% of the shares, even if it was
assumed or replaced, if, within 13 months after the change in control, the
participant is discharged other than for cause or voluntarily resigns for good
reason, as specified in the 1999 equity incentive plan.
Awards Granted. As of June 30, 1999, we had issued 17,000 shares upon the
exercise of options under the 1999 equity incentive plan, none of which have
been repurchased and 17,000 of which are subject to repurchase; options to
purchase 1,945,605 shares at a weighted average exercise price of $5.65 were
outstanding; and 443,386 shares remained available for future grant. As of
June 30, 1999, the board had granted 94,009 shares as part of stock awards
under the 1999 equity incentive plan.
Termination. The 1999 Equity Incentive Plan will terminate in 2009 unless
the board terminates it sooner.
1999 Non-Employee Directors' Stock Option Plan
Our board and the stockholders adopted the 1999 Non-Employee Directors'
Stock Option Plan on July 14, 1999. The plan became effective upon adoption by
the board. The directors' plan provides for the automatic grant to our non-
employee directors of options to purchase shares of our common stock.
Share Reserve. We have reserved 500,000 shares of common stock for issuance
under the directors' plan, subject to adjustment in the event of certain
capital changes. Every year, on December 31, the number of shares in the
reserve automatically will increase by 100,000 shares. If options granted
under the directors' plan expire or otherwise terminate without being
exercised, the shares not acquired pursuant to such options again become
available for issuance under the directors' plan.
Eligibility. Each person who was a non-employee director on July 14, 1999,
or is elected or appointed for the first time to be a non-employee director
after July 14, 1999, automatically received or will receive an initial option
to purchase 20,000 shares of common stock. The initial option will vest
monthly over two years at a rate of 1/24th per month. In addition, on the day
after each of our annual meetings of the stockholders, starting with the
annual meeting in 2001, each non-employee director will automatically receive
an option for 10,000 shares if the director has been a non-employee director
for at least the prior six months. However, with respect to the first annual
grant made to any non-employee director at least 18 months must have elapsed
between the initial grant to such person and the first annual grant to such
person. The annual grant will be fully vested.
Administration. The board administers the directors' plan unless it
delegates administration to a committee. The board has the authority to
construe, interpret and amend the directors' plan, but the directors' plan
specifies the essential terms of the options.
Option Terms. Options generally have an exercise price equal to 100% of the
fair market value of the common stock on the grant date. Prior to this initial
public offering, however, the exercise price of an option granted to a non-
employee director who owns (or is deemed to own) stock possessing more than
10% of the total combined voting power of all classes of stock of TiVo or any
of its affiliates must have an exercise price equal to 110% of the fair market
value of the common stock on the grant date. The option term is 10 years but
it
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terminates three months after the optionholder's service as a director, an
employee or a consultant to TiVo or an affiliate terminates. If such
termination is due to the optionholder's disability, the exercise period is
extended to 12 months. If such termination is due to the optionholder's death
or if the optionholder dies within three months after his or her service
terminates, the exercise period is extended to 18 months following death.
Other Provisions. The optionholder may transfer the option by gift to
immediate family or for estate-planning purposes. The optionholder also may
designate a beneficiary to exercise the option following the optionholder's
death. Otherwise, the option exercise rights will pass by the optionholder's
will or by the laws of descent and distribution. Transactions not involving
receipt of consideration by TiVo, such as a merger, consolidation,
reorganization, stock dividend, or stock split, may change the class and
number of shares subject to the directors' plan and to outstanding options. In
that event, the board will appropriately adjust the directors' plan as to the
class and the maximum number of shares subject to the directors' plan and
subject to future option grants. It also will adjust outstanding options as to
the class, number of shares and price per share subject to such options. Upon
a change in control of TiVo, the vesting and exercisability of outstanding
options will accelerate, and the options will terminate unless an acquiring
corporation assumes or replaces outstanding options.
Options Issued. We have issued an aggregate of 120,000 shares under the
directors' plan.
Termination. The directors' plan will terminate in 2009 unless the board
terminates it sooner.
1999 Employee Stock Purchase Plan
Our board and stockholders adopted the 1999 Employee Stock Purchase Plan on
July 14, 1999.
Share Reserve. We have reserved 600,000 shares of our common stock for
issuance pursuant to purchase rights granted to employees of TiVo and
designated affiliates of TiVo. On December 31 of each year for 10 years,
beginning in 1999, the number of shares in the reserve automatically will be
increased by the lower of:
. 5% of our outstanding shares on a fully-diluted basis;
. 500,000 shares; or
. a smaller number of shares as determined by the board.
Eligibility. The purchase plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which employees may purchase our common
stock through payroll deductions. We implement the purchase plan by offerings
of purchase rights to eligible employees. Generally, all full-time employees
who have been employed for at least 10 days may participate in the purchase
plan. However, no employee may participate in the purchase plan if immediately
after we grant the employee a purchase right, the employee has voting power
over, or the value of, 5% or more of the outstanding capital stock of TiVo or
an affiliate of TiVo.
Administration. The board administers the purchase plan unless it delegates
it to a committee. The board has the authority to construe, interpret and
amend the purchase plan. Under the purchase plan, the board may specify
offerings of up to 27 months. The first offering will begin on the effective
date of this initial public offering. Unless the board otherwise determines,
common stock is purchased for accounts of participating employees at a price
per share equal to the lower of:
. 85% of the fair market value of a share on the first day of the
offering; or
. 85% of the fair market value of a share on the purchase date.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering.
These employees will purchase our stock at the lower of:
. 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
. 85% of the fair market value of a share on the purchase date.
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Participating employees may authorize payroll deductions of up to 15% of
their base compensation for the purchase of stock under the purchase plan.
Employees may end their participation in the offering at any time up to 10
days before a purchase date. Participation ends automatically on termination
of employment with TiVo and its affiliates.
Other Provisions. The board may grant eligible employees purchase rights
under this plan only if the purchase rights together with any other purchase
rights granted under other employee stock purchase plans established by TiVo
or its affiliates, do not permit the employee's rights to purchase our stock
to accrue at a rate which exceeds $25,000 of the fair market value of our
stock for each calendar year in which the purchase rights are outstanding.
Transactions not involving receipt of consideration by TiVo, such as a merger,
consolidation, reorganization, stock dividend or stock split, may change the
class and number of shares subject to the purchase plan and to outstanding
options. In that event, the board will appropriately adjust the purchase plan
as to the class and the maximum number of shares subject to the purchase plan.
It will also adjust outstanding rights as to class, number of shares and
purchase limits of such outstanding rights.
Upon a change in control of TiVo, the board may provide that the successor
corporation will assume or substitute for outstanding purchase rights.
Alternatively, the board may shorten the offering period and provide that our
stock will be purchased for the participants immediately before the change in
control.
Shares Issued. We have not issued any shares under the purchase plan.
Termination. The purchase plan will terminate when the share reserve is
exhausted unless the board terminates it sooner.
401(k) Plan
We maintain the TiVo Inc. 401(k) Retirement Plan for eligible employees. In
order to be a participant in the 401(k) plan, an employee must have attained
age 21. A participant may contribute up to 20% of his or her total annual
compensation to the 401(k) plan, or up to a statutorily prescribed annual
limit, if less. The annual limit for 1999 is $10,000. Each participant is
fully vested in his or her deferred salary contributions. Participant
contributions are held and invested by the 401(k) plan's trustee. We may make
discretionary contributions as a percentage of participant contributions,
subject to establish limits. To date, we have not made any contributions to
the 401(k) plan on behalf of the participants. The 401(k) plan is intended to
qualify under Section 401 of the Internal Revenue Code, so that contributions
by us or our employees to the 401(k) plan, and income earned on the 401(k)
plan contributions, are not taxable to employees until withdrawn from the
401(k) plan, and so that our contributions, if any, will be deductible by us
when made.
Limitation of Liability and Indemnification Matters
Our Amended and Restated Certificate of Incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that a director of a corporation will not be personally liable for
monetary damages for breach of the fiduciary duties as a director except for
liability:
. for any breach of the director's duty of loyalty to TiVo or to our
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. for any transaction from which the director derives an improper personal
benefit.
Our bylaws provide that we shall indemnify our directors and executive
officers and may indemnify our officers, employees and other agents to the
full extent permitted by law. We believe that indemnification under our bylaws
covers at least negligence and gross negligence on the part of an indemnified
party. Our bylaws also require us to advance expenses incurred by directors
and executive officers in connection with the defense of
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any action or proceeding, subject to several exceptions, arising out of the
status or service as one of our directors or executive officers upon an
undertaking by that party to repay these advances if it is ultimately
determined that the party is not entitled to indemnification. Furthermore, our
bylaws authorize us to enter into indemnification agreements with our
directors, officers, employees and agents and we intend to enter into these
agreements. A copy of the form of the indemnity agreement has been filed as an
exhibit to the registration statement of which this prospectus is part. We
also maintain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any of our directors, officers, employees or agents where
indemnification will be required or permitted. Furthermore, we are not aware
of any threatened litigation or proceeding that may result in a claim for such
indemnification.
We are aware that the Securities and Exchange Commission considers
indemnification for liabilities arising under the Securities Act to be against
public policy. Even if our indemnification of our directors, officers and
controlling persons for liabilities arising under the Securities Act is
permitted under indemnification agreements, it would be unenforceable as a
matter of public policy.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Private Placement Financings
On August 5, 1997, we sold 1,400,000 shares (split to 1,458,332 shares on
September 24, 1997) of common stock to each of our founders, Michael Ramsay
and James Barton. The aggregate purchase price for these shares was $10,080.
Between September 24, 1997 and July 21, 1999, we sold an aggregate of
18,695,655 shares of preferred stock in the following rounds of financings:
. on September 24, 1997 and October 22, 1997, we sold an aggregate of
5,000,000 shares of Series A preferred stock at a per share price of
$0.60;
. on May 29, 1998, June 26, 1998 and July 27, 1998, we sold an aggregate
of 3,660,914 shares of Series B preferred stock at a per share price of
$1.26;
. on October 8, 1998, October 30, 1998 and December 22, 1998, we sold an
aggregate of 2,513,513 shares of Series C preferred stock at a per share
price of $1.85;
. on January 20, 1999, we sold 1,358,695 shares of Series D preferred
stock at a per share price of $3.68;
. on March 19, 1999, we sold 270,270 shares of Series E preferred stock at
a per share price of $7.40;
. on April 13, 1999, sold 405,405 shares of Series F preferred stock at a
per share price of $7.40;
. on April 16, 1999, we sold 1,013,513 shares of Series G preferred stock
at a per share price of $7.40;
. on April 23, 1999, we sold 1,351,351 shares of Series H preferred stock
at a per share price of $7.40; and
. on July 21, 1999 we sold 3,121,994 shares of Series I preferred stock at
a per share price of $10.41.
Each of the foregoing private financings was made pursuant to preferred
stock purchase agreements and investor rights agreements. The terms of those
agreements, with the exception of amount and price, were substantially similar
for the Series A through Series I financings, under which we made standard
representations, warranties and covenants, and which provided the purchasers
with rights of first offer and registrations rights. All of the material terms
of the Series A through Series I agreements, with the exception of the
registration rights, will terminate upon the effective date of the
registration statement of which this prospectus is a part. For a description
of the registration rights, see "Description of Capital Stock--Registration
Rights." The purchasers of the preferred stock included, among others, the
following directors, entities associated with directors, and holders of 5% or
more of our common stock:
<TABLE>
<CAPTION>
Common Common Common Common Common Common Common Warrants to
equivalent equivalent equivalent equivalent equivalent equivalent equivalent purchase
shares of shares of shares of shares of shares of shares of shares of shares of
Series A Series B Series C Series D Series F Series G Series H Series A
preferred preferred preferred preferred preferred preferred preferred preferred
Investor(1) stock stock stock stock stock stock stock stock
----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Ramsay(2).... 666,667 -- -- -- -- -- -- --
James Barton(3)...... 166,667 -- -- -- -- -- -- --
Randy Komisar(4)..... -- 24,800 -- -- -- -- -- 52,083
Entities affiliated
with New Enterprise
Associates (Stewart
Alsop).............. 2,000,000 1,587,302 594,595 -- -- -- -- --
Entities affiliated
with Institutional
Venture Partners
(Geoffrey Y. Yang).. 2,000,000 1,587,302 594,595 -- -- -- -- --
DIRECTV, Inc (Larry
N. Chapman)......... -- -- -- -- 405,405 -- -- --
Vulcan Ventures
Incorporated........ -- -- -- 1,358,695 -- -- -- --
NBC Multimedia, Inc.
(Thomas S. Rogers).. -- -- -- -- -- 1,013,513 -- --
Philips Venture
Capital Fund B.V. .. -- -- -- -- -- -- 1,351,351 --
</TABLE>
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- ---------------------
(1) Shares held by all affiliated persons and entities have been aggregated.
See "Principal Stockholders" for more detail on shares held by these
purchasers.
(2) Michael Ramsay is Chairman of the Board, Chief Executive Officer and
President.
(3) James Barton is Vice President of Research and Development, Chief
Technical Officer and a director.
(4) Randy Komisar is a director. His Series B preferred stock is held by his
family trust, of which he is a trustee.
The foregoing table has been adjusted to reflect the automatic conversion of
each outstanding share of Series A through I preferred stock into common stock
on a 1-for-1 basis upon the completion of this offering.
Other transactions with major stockholders and directors
In connection with Mr. Komisar's appointment as a director in March 1998, he
received a warrant to purchase 52,083 shares of Series A preferred stock at an
exercise price of $0.60 per share. This warrant is fully exerciseable as of
the date of its issuance. The warrant expires on the closing of this offering.
On April 8, 1999, we entered into a secured convertible debenture purchase
agreement with certain stockholders, including the following 5% stockholders:
(1) New Enterprise Associates VII, L.P., and (2) Institutional Ventures VII,
L.P. Under the terms of this agreement, we can borrow up to $3,000,000 at an
interest rate of 4.67% per annum. The debentures to be delivered by us for any
loan made under this agreement are convertible into common stock on a one-for-
one basis and secured substantially by all of our assets other than
intellectual property. The debentures mature on June 30, 2000. In conjunction
with the agreement, we issued warrants to purchase 81,522 shares of common
stock at an exercise price of $2.50 per share, including warrants to purchase
35,307 shares of common stock to New Enterprise VII, L.P. and warrants to
purchase 35,307 shares of common stock to Institutional Ventures VII, L.P.
These warrants expire on the closing of this offering.
We intend to enter into indemnification agreements with our directors and
executive officers for the indemnification of and advancement of expenses to
these persons to the full extent permitted by law. We also intend to execute
these agreements with future directors and executive officers.
Agreement with DIRECTV, Inc.
On April 13, 1999, in connection with the issuance and sale of Series F
preferred stock to DIRECTV, we issued an aggregate of 2,981,196 shares of our
common stock to DIRECTV, Inc. at a per share purchase price of $2.50. Pursuant
to the terms of a marketing agreement with DIRECTV, Inc., $2,822,168 of the
common stock purchase price was paid by a promissory note maturing in 36
months, $2,981 of the purchase price was paid in past services and $4,627,841
of the purchase price was to be paid by future services.
Our marketing agreement with DIRECTV provides for the promotion and support
of our products and the TiVo Service on the DIRECTV satellite system. DIRECTV
has agreed to give us access to its seven million subscribers and to actively
market and promote TiVo and the TiVo Service. Specifically, DIRECTV has agreed
to use its commercially reasonable efforts to encourage retailers to
distribute our products and the TiVo Service. DIRECTV also has agreed to make
broadcast time available via its DIRECTV satellite broadcast system for
infomercials and commercials that promote the TiVo Service and our products.
DIRECTV has agreed to provide us with access to DIRECTV subscribers for the
purpose of mailing promotional materials relating to the TiVo Service and
products that enable the TiVo Service. Further, DIRECTV has agreed to include
advertising relating to our products and the TiVo Service on DIRECTV's website
and in DIRECTV's On and See magazines. DIRECTV has also agreed to make
available to us a specified level of bandwidth on the DIRECTV system to expand
and enrich the TiVo Service offered to DIRECTV subscribers. Finally, DIRECTV
and TiVo have agreed to work together with Philips or other manufacturers to
develop a combination DIRECTV/TiVo set-top receiver. In exchange for these
marketing and advertising obligations, DIRECTV will receive a percentage of
TiVo's revenue attributable to DIRECTV subscribers.
Of the 2,981,196 shares granted to DIRECTV in connection with the marketing
agreement, 1,128,867 shares are subject to a right of repurchase held by TiVo.
Under the terms of the marketing agreement, we have the right to repurchase
all or a portion of these shares in specified circumstances.
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Agreement with Philips Business Electronics B.V.
On March 31, 1999, we entered into an agreement with Philips Business
Electronics B.V., an affiliate of a principal stockholder, for the
manufacture, marketing and distribution of personal video recorders that
enable the TiVo Service. Subject to specified limitations, this agreement
grants Philips the right to manufacture, market and sell personal video
recorders that enable the TiVo Service in North America. We also granted
Philips the right to manufacture, market and sell personal video recorders in
North America that incorporate both DIRECTV's satellite receiver and the TiVo
Service.
We also granted Philips a license to our technology for the purpose of
manufacturing personal video recorders and other devices that enable the TiVo
Service. In addition, we have agreed to subsidize Philips' manufacture and
sale of the personal video recorders. The amount of the subsidy is formula-
based and periodically adjusted based on Phillips manufacturing costs and
selling prices. A portion of the subsidy is payable after shipment by Philips
and the balance is payable after the subscription is activated.
In addition to this manufacturing subsidy, we have agreed to pay Philips a
fixed amount per month for each Philips-branded personal video recorder that
is owned by an active TiVo Service subscriber. Finally, our agreement with
Philips provides that Philips will spend a specified amount on marketing
activities related to Philips-branded personal video recorders that enable the
TiVo Service. After this initial marketing expenditure, Philips has also
agreed to dedicate a percentage of the net sales revenues that it receives
from personal video recorders that enable the TiVo Service to further
marketing activities.
Agreement with NBC Multimedia, Inc.
On April 16, 1999, in connection with the issuance and sale of Series G
preferred stock to NBC Multimedia, Inc., we entered into an agreement with NBC
relating to the TiVo Service. Under the agreement, we granted NBC preferential
"anchor" placement on the Showcase screen of the TiVo Service. In addition,
NBC programming packages and specials will be featured in TiVolution Magazine
and NBC may include NBC promotions and/or featured programs for inclusion on
the materials packaged with each personal video recorder. TiVo and NBC will
feature each other as partners on their respective Internet websites with a
link to the other's website. We have also agreed to work with NBC to produce
weekly showcases and special programming packages that highlight current and
upcoming NBC programs.
NBC also received certain rights with respect to our couch commerce and
Internet services should such services be enabled on the TiVo Service during
the term of our agreement with NBC. After our couch commerce area is launched,
NBC will receive free placement in such area to sell NBC merchandise. In the
event that we enable Internet connection for the TiVo Service during the term
of the NBC agreement, we will ensure that any links and/or web content
incorporated within NBC signals will be passed through to TiVo Service
viewers.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of July 21, 1999, and as adjusted
to reflect the sale of the shares of common stock offered hereby, by:
. each person or group of affiliated persons who is known by us to own
beneficially 5% or more of our common stock;
. each of our directors and named executive officers; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the persons listed below have sole voting and
investment power with respect to shares of our common stock shown as
beneficially owned by them, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with respect to
securities. Percentage of beneficial ownership prior to the offering is based
on 27,011,031 shares of common stock outstanding as of July 21, 1999, and
shares of common stock outstanding after completion of the offering. In
accordance with the rules of the SEC, each beneficial owner's percentage
ownership assumes the exercise or conversion of all options, warrants and
other convertible securities held by such person and that are exercisable or
convertible 60 days after July 21, 1999. Each beneficial owner's percentage
ownership does not include any shares of common stock that such owner may
purchase in the offering. Except as otherwise noted, the address of each
person listed is c/o TiVo Inc., 894 Ross Drive, Suite 100, Sunnyvale, CA
94089.
<TABLE>
<CAPTION>
Percentage of Shares
Number of Beneficially Owned
Shares --------------------
Beneficially Before After
Beneficial Owner Owned Offering Offering(1)
- ---------------- ------------ -------- -----------
<S> <C> <C> <C>
Executive Officers and Directors
Michael Ramsay(2)........................... 2,764,999 10.0
James Barton(3)............................. 1,724,999 6.4
Geoffrey Y. Yang(4)......................... 4,183,563 15.5
Stewart Alsop(5)............................ 4,183,563 15.5
Randy Komisar(6)............................ 182,716 *
Larry N. Chapman(7)......................... 3,388,267 12.5
Thomas S. Rogers(8)......................... 1,015,179 3.8
Michael J. Homer(9)......................... 1,666 *
5% Stockholders
Entities Affiliated with Institutional
Venture Partners(4)........................ 4,181,897 15.5
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Entities Affiliated with New Enterprise
Associates(5).............................. 4,181,897 15.5
2490 Sand Hill Road
Menlo Park, CA 94025
DIRECTV, Inc. .............................. 3,386,601 12.5
2230 East Imperial Highway
El Segundo, CA 90245
Vulcan Ventures Incorporated................ 1,358,695 5.0
110 110th Avenue, N.E.
Suite 550
Bellevue, WA 98004
Philips Venture Capital Fund B.V. .......... 1,351,351 5.0
P.O. Box 77900
1070 MX Amsterdam
The Netherlands
All executive officers and directors as a
group (9 persons)(10)...................... 17,699,770 63.3
</TABLE>
- -----------------------
* Represents beneficial ownership of less than one percent of the common
stock.
59
<PAGE>
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." If the Underwriters' over-allotment option is exercised
in full, we will sell up to shares of common stock, and shares of
common stock will be outstanding after the completion of the offering.
(2) Includes 650,000 shares Mr. Ramsay has the right to acquire pursuant to
outstanding options exercisable within 60 days, none of which will have
vested.
(3) Includes 100,000 shares Mr. Barton has the right to acquire pursuant to
outstanding options exercisable within 60 days, none of which will have
vested.
(4) Includes 4,006,440 shares of stock owned by Institutional Venture
Partners VII, L.P. ("IVP"), 83,638 shares of stock owned by Institutional
Venture Management VII, L.P. ("IVM VII") and 91,819 shares of stock owned
by IVP Founders Fund I, L.P. ("FFI"). Mr. Yang, one of our directors, is
a general partner of IVM VII, the general partner of IVP, and a general
partner of Institutional Venture Management VI, L.P., the general partner
of FFI. Mr. Yang disclaims beneficial ownership of these shares except to
the extent of his individual partnership interests, but exercises shared
voting and investment power with respect to these shares. Also includes
1,666 shares subject to stock options exercisable within 60 days of July
21, 1999.
(5) Represents, (a) 41,667 shares held by NEA Presidents Fund, L.P., (b)
8,333 shares held by NEA Ventures 1997, L.P., and (c) 4,131,897 shares
held by New Enterprise Associates VII, L.P. Mr. Alsop, one of our
directors, is a limited partner of NEA Partners VII, which is the general
partner of New Enterprise Associates VII, L.P. Mr. Alsop disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interests therein. Mr. Alsop is not a partner of NEA Presidents Fund L.P.
or NEA Ventures 1997, L.P. Also includes 1,666 shares subject to stock
options exercisable within 60 days of July 21, 1999.
(6) Includes 156,250 shares Mr. Komisar acquired pursuant to the exercise of
stock options, 58,593 shares of which will be vested within 60 days. All
shares are held by Komisar/Dunn Family Trust, of which Mr. Komisar is a
trustee. Also includes 1,666 shares subject to stock options exercisable
within 60 days of July 21, 1999.
(7) Includes 3,386,601 shares held by DIRECTV, Inc. Mr. Chapman is an officer
of DIRECTV, Inc. and is a member of our board of directors. Mr. Chapman
disclaims beneficial ownership of such shares. Also includes 1,666 shares
subject to stock options exercisable within 60 days of July 21, 1999.
(8) Includes 1,013,513 shares held by NBC Multimedia, Inc., a wholly owned
subsidiary of National Broadcasting Company, Inc. Mr. Rogers is an
officer of National Broadcasting Company, Inc. and is a member of our
board of directors. Mr. Rogers disclaims beneficial ownership of such
shares. Also includes 1,666 shares subject to stock options exercisable
within 60 days of July 21, 1999.
(9) Includes 1,666 shares subject to stock options exercisable within 60 days
of July 21, 1999.
(10) Includes 939,814 shares subject to options exercisable within 60 days,
9,996 of which will have vested. Also includes 231,250 shares acquired
pursuant to the exercise of stock options, 58,593 shares of which will be
vested within 60 days.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, after giving effect to the conversion of
all outstanding shares of preferred stock into common stock and the filing of
our Amended and Restated Certificate of Incorporation, our authorized capital
stock will consist of 75,000,000 shares of common stock, $0.001 par value per
share, and 2,000,000 shares of preferred stock, $0.001 par value per share.
Common Stock
As of July 21, 1999, there were 27,011,031 shares of common stock
outstanding held of record by 99 stockholders. The holders of common stock are
entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders.
Subject to preferences that may be applicable to any outstanding shares of
preferred stock, the holders of common stock are entitled to receive ratably
such dividends as may be declared by the board of directors out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up, holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no preemptive rights and no right to convert
their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, fully-paid and nonassessable.
Preferred Stock
There are, and upon completion of this offering, there will be, no shares of
preferred stock outstanding. The board of directors has the authority, without
further action by the stockholders, to issue up to 2,000,000 shares of
preferred stock, $.001 par value, in one or more series and to fix the powers,
preferences, privileges, rights and qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and
the number of shares constituting any series or the designation of such
series, without any further vote or action by stockholders. We believe that
the board of directors' authority to set the terms of, and our ability to
issue, preferred stock will provide flexibility in connection with possible
financing transactions in the future. The issuance of preferred stock,
however, could adversely affect the voting power of holders of common stock,
and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control. We have no present plan to issue any shares of
preferred stock.
Warrants
On April 8, 1999, we issued warrants to purchase an aggregate of 81,522
shares of our common stock at an exercise price of $2.50 per share to four of
our shareholders.
On March 18, 1998, we issued a warrant to purchase 52,083 shares of our
Series A preferred stock at an exercise price of $0.60 per share to Randy
Komisar, one of our directors. On February 12, 1999, we issued a warrant to
purchase 60,813 shares of our Series B preferred stock at an exercise price of
$1.26 per share to Comdisco, Inc. On November 6, 1998, we issued a warrant to
purchase 324,325 shares of our Series C preferred stock at an exercise price
of $0.01 per share to Quantum Corporation. At the same time, we also issued
Quantum a warrant to purchase 543,478 shares of our Series D preferred stock
at an exercise price of $0.01 per share. On April 30, 1999, we issued a
warrant to purchase 1,250 shares of our Series E preferred stock at an
exercise price of $7.40 per share to Silicon Valley Bank. On July 21, 1999, we
issued a warrant to purchase 192,122 shares of our Series I preferred stock at
an exercise price of $10.41 per share to Creative Artists Agency, LLC.
Generally, each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon exercise of
the warrant under certain circumstances, including stock dividends, stock
splits, reorganizations, reclassifications, consolidations and certain
dilutive issuances of securities at prices
61
<PAGE>
below the then existing warrant price. Subject to specified limitations, the
warrants will expire upon the closing of an initial public offering of our
stock.
Registration Rights
The holders of an aggregate of 21,676,851 shares of common stock, or their
transferees, are entitled to rights with respect to the registration of these
shares under the Securities Act. These rights are provided under the terms of
an investors rights agreement between us and the holders of these shares. In
the event our preferred stock warrant holders exercise their warrants they
will be added as parties to this agreement. Subject to specified limitations
in the investor rights agreement, the holders of these shares may require, on
two occasions at any time after September 1, 2001, that we use our best
efforts to register these shares for public resale, provided that the proposed
aggregate offering price of such shares exceeds $10 million. These holders
also have the right, in specified circumstances, to have these shares
registered by us on Form S-3. If we register any of our common stock either
for our own account or for the account of other security holders, the holders
of these shares are entitled to include their shares of common stock in the
registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in this offering. All fees, costs and expenses of such
registrations will be borne by us and all selling expenses, including
underwriting discounts, selling commissions and stock transfer taxes, will be
borne by the holders of the securities being registered.
Delaware Law and Certain Charter Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. For purposes of
Section 203, a "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder,
and an "interested stockholder" is a person who, together with affiliates and
employees, owns or, within three years prior, did own 15% or more of the
corporation's voting stock.
Our Amended and Restated Certificate of Incorporation and Bylaws also
require that, effective upon the closing of this offering, any action required
or permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of the stockholders and may not be effected by a
consent in writing. In addition, special meetings of our stockholders may be
called only by our board of directors, the Chairman of the Board or the Chief
Executive Officer. Our Amended and Restated Certificate of Incorporation and
bylaws also provide that directors may be removed only for cause by a vote of
a majority of the stockholders and that vacancies on the board of directors
created either by resignation, death, disqualification, removal or by an
increase in the size of the board of directors may be filled by a majority of
the directors in office, although less than a quorum. Our Amended and Restated
Certificate of Incorporation also provides for a classified board of directors
and specifies that the authorized number of directors may be changed only by
resolution of the board of directors. These provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management. See
"Management--Board Composition."
California Foreign Corporation Law
Pursuant to section 2115 of the California Corporations Code, under some
circumstances several provisions of the California Corporations Code may be
applied to foreign corporations qualified to do business in California
notwithstanding the law of the jurisdiction where the corporation is
incorporated. The corporations are referred to in this prospectus as "quasi-
California" corporations. Section 2115 applies to foreign corporations that
have more than half of their voting stock held by stockholders residing in
California and more than half of their business deriving from California,
measured on or after the 135th day of the corporation's fiscal
62
<PAGE>
year. If we were determined to be a quasi-California corporation, we would
have to comply with California law with respect to, among other things,
elections of directors and distributions to stockholders. Under the California
Corporations Code, a corporation is prohibited from paying dividends unless:
(1) the retained earnings of the corporation immediately prior to the
distribution equals or exceeds the amount of the proposed distribution;
or
(2)(a) the assets of the corporation, exclusive of specific non-tangible
assets, equal or exceed 1 1/4 times its liabilities, exclusive of
specific liabilities; and
(b) the current assets of the corporation at least equal its current
liabilities. If the average pre-tax net earnings of the corporation
before interest expense for the two years preceding the distribution
was less than the average interest expense of the corporation for
those years, however, the current assets of the corporation must
exceed 1 1/4 times its current liabilities.
Following this offering, we will be exempt from the application of Section
2115 until January 1, 2000, and thereafter in the event that more than half of
our voting stock is held by stockholders with residences outside of California
or is held by more than 800 persons.
Transfer Agent and Registrar
Norwest Bank Minnesota, N.A. has been appointed as the transfer agent and
registrar for our common stock.
Listing
We have applied for quotation of our common stock on the Nasdaq National
Market under the trading symbol TIVO.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and we cannot provide any assurances that a significant public market
for our common stock will develop or be sustained after this offering. Future
sales of substantial amounts of common stock, including shares issued upon
exercise of outstanding options and warrants, in the public market, or the
possibility of such sales occurring, could adversely affect prevailing market
prices for our common stock and impair our future ability to raise capital
through an offering of equity securities.
After this offering, we will have outstanding shares of common stock,
assuming no exercise of outstanding options. Of these shares, the shares to
be sold in this offering or shares if the underwriters' over-allotment
option is exercised in full, will be freely tradable in the public market
without restriction under the Securities Act, unless such shares are held by
our "affiliates," as that term is defined in Rule 144 under the Securities
Act.
The remaining 27,011,031 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold the restricted shares in private transactions in reliance on
exemptions from registration under the Securities Act. Restricted shares may
be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.
Pursuant to the "lock-up" agreements between our directors, executive
officers and stockholders and the underwriters, the holders of shares
have agreed not to offer, sell, pledge or otherwise dispose of, directly or
indirectly, or announce their intention to do the same, any of our common
stock or any security convertible into, or exchangeable or exercisable for our
common stock for a period of 180 days from the date of this offering. However,
the restrictions described in this paragraph do not apply to:
. transfers as a bona fide gift or gifts;
. transfers by an individual, either during his or her lifetime or on
death by will or intestacy, to his or her immediate family or to a trust
the beneficiaries of which are exclusively the holder of the securities
and/or a member of his or her immediate family;
. distributions to limited partners or stockholders;
. transfers of our common stock purchased on the open market after this
offering.
We also have entered into an agreement with the underwriters that we will
not offer, sell or otherwise dispose of common stock for a period of 180 days
from the date of this offering. On the date of the expiration of the lock-up
agreements, all of the restricted shares will be eligible for immediate sale,
of which shares will be subject to the volume, manner of sale and other
limitations under Rule 144.
Following the expiration of the lock-up periods, some shares issued upon
exercise of options that we granted prior to the date of this offering will
also be available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of such shares in reliance upon Rule
144 under the Securities Act but without compliance with the restrictions,
including the holding-period requirement, imposed under Rule 144. In general,
under Rule 144 as in effect at the closing of this offering, beginning 90 days
after the date of this prospectus, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one
year, including the holding period of any prior owner who is not an affiliate,
would be entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of:
. 1% of the then-outstanding shares of common stock; or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.
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<PAGE>
Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate 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 who is not an affiliate, is entitled to sell these
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
We intend to file, after the effective date of this offering, a registration
statement on Form S-8 to register approximately 9.3 million shares of common
stock reserved for issuance under the 1997 Amended and Restated Equity
Incentive Plan, the 1999 Equity Incentive Plan, the 1999 Non-Employee
Directors' Stock Option Plan and the 1999 Employee Stock Purchase Plan. The
registration statement will become effective automatically upon filing. Shares
issued under the foregoing plans after the filing of a registration statement
on Form S-8 may be sold in the public market, except for some holders, subject
to the Rule 144 limitations applicable to affiliates, the above-referenced
lock-up agreements and vesting restrictions imposed by us. Accordingly,
subject to the exercise of such options, shares registered under such
registration statement will be available for sale in the public market
immediately after the 180-day lock-up period expires.
In addition, following this offering, the holders of 21,676,851 shares of
common stock will, under some circumstances, have rights to require us to
register their shares for future sale.
65
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, BancBoston Robertson
Stephens, Thomas Weisel Partners LLC and Allen & Company Incorporated are
acting as representatives, the following respective numbers of shares of
common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation...............................
BancBoston Robertson Stephens Inc. ..................................
Thomas Weisel Partners LLC...........................................
Allen & Company Incorporated.........................................
Total..............................................................
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are not
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or the offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. This option may be exercised
only to cover over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay:
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions payable
by us.................. $ $ $
Expenses payable by us.. $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We and our officers and directors and other stockholders and optionholders
have agreed that we and they will not offer, sell, contract to sell, announce
our intention to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the SEC a registration statement under the Securities Act
relating to, any additional shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of common stock
without the prior consent of Credit Suisse First Boston Corporation for a
period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent such persons purchase
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other shares.
66
<PAGE>
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.
We have applied to list our shares of common stock on the Nasdaq National
Market under the symbol TIVO.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include:
. the information set forth in this prospectus and otherwise available to
the representatives;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for future earnings; the present state of our development
and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives, on behalf of the underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member are purchased in stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
In July 1999, we issued an aggregate of 3,121,994 shares of our Series I
preferred stock at a per share price of $10.41. Allen & Company Incorporated
acted as the placement agent for this private placement for which it received
a customary fee for its services.
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<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that:
. such purchaser is entitled under applicable provincial securities laws
to purchase such common stock without the benefit of a prospectus
qualified under such securities laws;
. where required by law, that such purchaser is purchasing as principal
and not as agent; and
. such purchaser has reviewed the text above under "Resale Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario Securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts names
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such
report must be filed in respect of common stock acquired on the same date and
under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors and with respect to the tax consequences of an investment in the
common stock in their particular circumstances and with respect to the
eligibility of the common stock for investment by the purchaser under relevant
Canadian legislation.
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<PAGE>
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Palo Alto, California. Certain legal
matters in connection with the offering will be passed upon for the
underwriters by Shearman & Sterling, Menlo Park, California.
EXPERTS
The financial statements of TiVo Inc. as of December 31, 1997 and 1998 and
for the period from August 4, 1997 (Inception) to December 31, 1997, and for
the year ended December 31, 1998 included in this prospectus and registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
A registration statement on Form S-1, including amendments thereto, relating
to the common stock offered by this prospectus has been filed by us with the
SEC. This prospectus, which constitutes a part of the Registration Statement,
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 us and the common stock offered by this prospectus, reference is
made to the registration statement, exhibits and schedules. A copy of the
registration statement may be inspected by anyone without charge at the public
reference facilities maintained by the SEC at 450 Fifth Street, NW, Judiciary
Plaza, Washington, D.C. 20549, and copies of all or any part thereof maybe
obtained from the SEC upon payment of the fees prescribed by the SEC. The SEC
maintains a World Wide Web site that contains reports, proxy and information
statements and other information filed electronically with the SEC. The
address of the site is http://www.sec.gov.
69
<PAGE>
TIVO INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders Equity.......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of TiVo Inc.:
We have audited the accompanying balance sheets of TiVo Inc. (a Delaware
corporation in the development stage) as of December 31, 1997 and 1998, and
the related statements of operations, stockholders' equity and cash flows for
the period from August 4, 1997 (Inception) to December 31, 1997, and for the
year ended December 31, 1998. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TiVo Inc. as of December
31, 1997 and 1998, and the results of its operations and its cash flows for
the period from August 4, 1997 (Inception) to December 31, 1997, and for the
year ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California,
January 15, 1999
F-2
<PAGE>
TIVO INC.
(a development-stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------ Pro forma
1997 1998 June 30, 1999 June 30, 1999
---------- ------------ ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents........... $2,110,000 $ 2,248,000 $ 11,967,000 $ 12,297,000
Short-term
investments........... 20,000 164,000 7,623,000 7,623,000
Accounts receivable,
net of allowance for
doubtful accounts of
$14,000 as of June 30,
1999.................. -- -- 502,000 502,000
Inventories............ -- 120,000 1,202,000 1,202,000
Prepaid expenses and
other................. 57,000 219,000 1,068,000 1,068,000
---------- ------------ ------------ ------------
Total current assets... 2,187,000 2,751,000 22,362,000 22,692,000
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of
$15,000, $170,000, and
$352,000 as of December
31, 1997, December 31,
1998, and June 30,
1999, respectively..... 361,000 792,000 1,442,000 1,442,000
---------- ------------ ------------ ------------
Total assets........... $2,548,000 $ 3,543,000 $ 23,804,000 $ 24,134,000
========== ============ ============ ============
LIABILITIES AND STOCK-
HOLDERS' EQUITY
LIABILITIES:
Bank overdraft......... $ -- $ 442,000 $ 989,000 $ 989,000
Accounts payable....... 117,000 305,000 688,000 688,000
Accrued liabilities.... 26,000 675,000 2,210,000 2,210,000
Deferred revenue....... -- -- 142,000 142,000
Current portion of
obligations under
capital lease ........ -- -- 112,000 112,000
---------- ------------ ------------ ------------
Total current
liabilities........... 143,000 1,422,000 4,141,000 4,141,000
Long-term portion of
obligations under
capital lease......... -- -- 558,000 558,000
---------- ------------ ------------ ------------
Total liabilities...... 143,000 1,422,000 4,699,000 4,699,000
---------- ------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Convertible preferred
stock, par value
$0.001:
Authorized shares at
December 31, 1997,
1998, June 30, 1999
(unaudited) and pro
forma June 30, 1999
(unaudited), are
5,200,000, 13,000,000,
20,100,000 and
23,415,000,
respectively
Issued and outstanding
shares at December 31,
1997, 1998, June 30,
1999 (unaudited) and
pro forma June 30,
1999 (unaudited) are
5,000,000, 11,174,427,
15,573,661 and 0,
respectively. (See
Note 7) .............. $2,990,000 $ 12,242,000 $ 39,580,000 $ --
Common stock, par value
$0.001:
Authorized shares at
December 31, 1997,
1998, June 30, 1999
(unaudited) and pro
forma June 30, 1999
(unaudited) are
25,500,000,
25,500,000,
40,000,000, and
50,000,000,
respectively.
Issued and outstanding
shares at December 31,
1997, December 31,
1998, June 30, 1999
(unaudited), and pro
forma June 30, 1999
(unaudited), are
2,916,664, 5,216,937,
8,291,876, and
24,929,008,
respectively.......... 3,000 5,000 8,000 25,000
Additional paid-in
capital................ 7,000 190,000 22,727,000 62,620,000
Deferred compensation... -- -- (2,746,000) (2,746,000)
Prepaid marketing
expenses............... -- -- (15,698,000) (15,698,000)
Note receivable......... -- -- (2,822,000) (2,822,000)
Losses accumulated
during the development
stage.................. (595,000) (10,316,000) (21,944,000) (21,944,000)
---------- ------------ ------------ ------------
Total stockholders'
equity................ 2,405,000 2,121,000 19,105,000 19,435,000
========== ============ ============ ============
Total liabilities and
stockholders' equity.. $2,548,000 $ 3,543,000 $ 23,804,000 $ 24,134,000
========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
TIVO INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
August 4, 1997 Period from
(Inception), to Year Ended Six Months Ended August 4, 1997
December 31, December June 30, (Inception), to
1997 31, ------------------------- June 30,
(unaudited) 1998 1998 1999 1999
--------------- ----------- ----------- ------------ ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Subscription revenues... $ -- $ -- $ -- $ 8,000 $ 8,000
Costs and expenses:
Cost of services...... -- -- -- 1,170,000 1,170,000
Research and
development.......... 356,000 5,614,000 1,809,000 2,999,000 8,969,000
Sales and marketing... 28,000 1,277,000 356,000 3,784,000 5,089,000
Sales and marketing--
related parties...... -- -- -- 382,000 382,000
General and
administrative....... 241,000 2,946,000 903,000 3,024,000 6,211,000
Stock-based
compensation......... -- -- -- 187,000 187,000
Other operating
expense, net......... -- -- -- 189,000 189,000
---------- ----------- ----------- ------------ ------------
Loss from
operations......... (625,000) (9,837,000) (3,068,000) (11,727,000) (22,189,000)
Interest income......... 49,000 116,000 35,000 277,000 442,000
Interest expense and
other.................. (19,000) -- (13,000) (178,000) (197,000)
---------- ----------- ----------- ------------ ------------
Net loss............ $ (595,000) $(9,721,000) $(3,046,000) $(11,628,000) $(21,944,000)
========== =========== =========== ============ ============
Net loss per share
Basic and diluted... $ (0.20) $ (2.21) $ (0.79) $ (1.75) $ (4.74)
========== =========== =========== ============ ============
Weighted average
shares............. 2,916,664 4,406,449 3,839,586 6,632,917 4,630,429
========== =========== =========== ============ ============
Pro forma net loss per
share:
Basic and diluted... $ (0.80) $ (0.56)
=========== ============
Weighted average
shares............. 12,135,082 20,745,255
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
TIVO INC.
(a development-stage company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Losses
Convertible Accumulated
Preferred Stock Common Stock Additional Prepaid During the
---------------------- ----------------- Paid-in Deferred Marketing Note Development
Shares Amount Shares Amount Capital Compensation Expense Receivable Stage
---------- ----------- --------- ------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST
4, 1997.......... -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of
common stock for
cash............ -- -- 2,916,664 3,000 7,000 -- -- -- --
Issuance of
Series A
preferred stock
at $0.60 per
share for cash.. 5,000,000 2,990,000 -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- (595,000)
---------- ----------- --------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE, DECEMBER
31, 1997......... 5,000,000 2,990,000 2,916,664 3,000 7,000 -- -- -- (595,000)
Issuance of
Series B
preferred stock
at $1.26 per
share for cash.. 3,660,914 4,609,000 -- -- -- -- -- -- --
Issuance of
Series C
preferred stock
at $1.85 per
share for cash.. 2,500,000 4,618,000 -- -- -- -- -- -- --
Exercise of
stock options
for common
stock........... -- -- 2,276,458 2,000 130,000 -- -- -- --
Common stock
exchanged for
services........ -- -- 198,586 -- 60,000 -- -- -- --
Series C
preferred stock
exchanged for
services........ 13,513 25,000 -- -- -- -- -- -- --
Common stock
repurchases..... -- -- (174,771) -- (7,000) -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- (9,721,000)
---------- ----------- --------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE, DECEMBER
31, 1998......... 11,174,427 12,242,000 5,216,937 5,000 190,000 -- -- -- (10,316,000)
Issuance of
Series D
preferred stock
at $3.68 per
share for cash.. 1,358,695 4,973,000 -- -- -- -- -- -- --
Issuance of
Series E
preferred stock
at $7.40 per
share for cash.. 270,270 1,982,000 -- -- -- -- -- -- --
Issuance of
Series F
preferred stock
at $7.40 per
share for cash.. 405,405 2,960,000 -- -- -- -- -- -- --
Issuance of
Series G
preferred stock
at $7.40 per
share for cash.. 1,013,513 7,431,000 -- -- -- -- -- -- --
Issuance of
Series H
preferred stock
at $7.40 per
share for cash.. 1,351,351 9,992,000 -- -- -- -- -- -- --
Exercise of
stock options
for common
stock........... -- -- 212,500 -- 172,000 -- -- -- --
Common stock
exchanged for
services........ -- -- 106,422 -- 337,000 -- -- -- --
Issuance of
common stock
warrants for
services........ -- -- -- -- 290,000 -- -- -- --
Issuance of
preferred stock
warrants for
services........ -- -- -- -- 2,430,000 -- (2,400,000) -- --
Amortization of
prepaid
marketing
expenses........ -- -- -- -- -- -- 276,000 -- --
Recognition of
deferred
compensation.... -- -- -- -- 2,933,000 (2,933,000) -- -- --
Stock-based
compensation.... -- -- -- -- -- 187,000 -- -- --
Common stock
repurchases..... -- -- (225,179) -- (18,000) -- -- -- --
Issuance of
common stock for
marketing
services........ -- -- 1,852,329 2,000 10,186,000 -- (10,188,000) -- --
Issuance of
common stock for
marketing
services and
note
receivable...... -- -- 1,128,867 1,000 6,207,000 -- (3,386,000) (2,822,000) --
Net loss........ -- -- -- -- -- -- -- -- (11,628,000)
---------- ----------- --------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE, JUNE 30,
1999
(unaudited)...... 15,573,661 $39,580,000 8,291,876 $8,000 $22,727,000 $(2,746,000) $(15,698,000) $(2,822,000) $(21,944,000)
========== =========== ========= ====== =========== =========== ============ =========== ============
<CAPTION>
Total
------------
<S> <C>
BALANCE, AUGUST
4, 1997.......... $ --
Issuance of
common stock for
cash............ 10,000
Issuance of
Series A
preferred stock
at $0.60 per
share for cash.. 2,990,000
Net loss........ (595,000)
------------
BALANCE, DECEMBER
31, 1997......... 2,405,000
Issuance of
Series B
preferred stock
at $1.26 per
share for cash.. 4,609,000
Issuance of
Series C
preferred stock
at $1.85 per
share for cash.. 4,618,000
Exercise of
stock options
for common
stock........... 132,000
Common stock
exchanged for
services........ 60,000
Series C
preferred stock
exchanged for
services........ 25,000
Common stock
repurchases..... (7,000)
Net loss........ (9,721,000)
------------
BALANCE, DECEMBER
31, 1998......... 2,121,000
Issuance of
Series D
preferred stock
at $3.68 per
share for cash.. 4,973,000
Issuance of
Series E
preferred stock
at $7.40 per
share for cash.. 1,982,000
Issuance of
Series F
preferred stock
at $7.40 per
share for cash.. 2,960,000
Issuance of
Series G
preferred stock
at $7.40 per
share for cash.. 7,431,000
Issuance of
Series H
preferred stock
at $7.40 per
share for cash.. 9,992,000
Exercise of
stock options
for common
stock........... 172,000
Common stock
exchanged for
services........ 337,000
Issuance of
common stock
warrants for
services........ 290,000
Issuance of
preferred stock
warrants for
services........ 30,000
Amortization of
prepaid
marketing
expenses........ 276,000
Recognition of
deferred
compensation.... --
Stock-based
compensation.... 187,000
Common stock
repurchases..... (18,000)
Issuance of
common stock for
marketing
services........ --
Issuance of
common stock for
marketing
services and
note
receivable...... --
Net loss........ (11,628,000)
------------
BALANCE, JUNE 30,
1999
(unaudited)...... $19,105,000
============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
TIVO INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from Period from
August 4, 1997 For the Six Months Ended August 4, 1997
(Inception), to Year Ended June 30, (Inception), to
December 31, December 31, ------------------------- June 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ------------ ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. $ (595,000) $(9,721,000) $(3,046,000) $(11,628,000) $(21,944,000)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization......... 15,000 242,000 208,000 182,000 439,000
Stock exchanged for
services............. -- 85,000 4,000 337,000 422,000
Issuance of warrants
for services......... -- -- -- 176,000 176,000
Amortization of
prepaid marketing
expenses............. -- -- -- 276,000 276,000
Noncash compensation
expense.............. -- -- -- 187,000 187,000
Changes in current
assets and
liabilities:
Accounts receivable.. -- -- -- (502,000) (502,000)
Inventories.......... -- (120,000) -- (1,083,000) (1,203,000)
Prepaid expenses and
other............... (57,000) (162,000) (107,000) (705,000) (924,000)
Accounts payable..... 117,000 188,000 (73,000) 383,000 688,000
Deferred revenue..... -- -- -- 142,000 142,000
Accrued liabilities.. 26,000 649,000 239,000 1,535,000 2,210,000
---------- ----------- ----------- ------------ ------------
Net cash used in
operating
activities......... (494,000) (8,839,000) (2,775,000) (10,700,000) (20,033,000)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Acquisition of
property and
equipment, net....... (376,000) (673,000) (128,000) (162,000) (1,211,000)
Purchase of short-term
investments.......... (20,000) (144,000) -- (7,459,000) (7,623,000)
---------- ----------- ----------- ------------ ------------
Net cash used in
investing
activities......... (396,000) (817,000) (128,000) (7,621,000) (8,834,000)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of convertible
preferred stock, net
of issuance costs.... 2,990,000 9,227,000 4,577,000 27,339,000 39,556,000
Borrowings under line
of credit............ -- 610,000 610,000 -- 610,000
Repayments under line
of credit............ -- (610,000) -- -- (610,000)
Proceeds from issuance
of common stock and
exercise of stock
options.............. 10,000 132,000 79,000 172,000 314,000
Repurchase of common
stock................ -- (7,000) (2,000) (18,000) (25,000)
Increase in bank
overdraft............ -- 442,000 -- 547,000 989,000
---------- ----------- ----------- ------------ ------------
Net cash provided by
financing
activities......... 3,000,000 9,794,000 5,264,000 28,040,000 40,834,000
NET INCREASE IN CASH
AND CASH EQUIVALENTS.. 2,110,000 138,000 2,361,000 9,719,000 11,967,000
---------- ----------- ----------- ------------ ------------
CASH AND CASH
EQUIVALENTS:
Balance at beginning
of period............ -- 2,110,000 2,110,000 2,248,000 --
---------- ----------- ----------- ------------ ------------
Balance at end of
period............... $2,110,000 $ 2,248,000 $ 4,471,000 $ 11,967,000 $ 11,967,000
========== =========== =========== ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid for
interest............. $ -- $ 19,000 $ -- $ 2,000 $ 21,000
SUPPLEMENTAL DISCLOSURE
OF NON-CASH
TRANSACTIONS:
Stock issued for a
note receivable...... -- -- -- $ 2,822,000 $ 2,822,000
Equipment acquired
under capital lease.. -- -- -- $ 670,000 $ 670,000
Deferred stock-based
compensation......... -- -- -- $ 2,933,000 $ 2,933,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS
(Information with respect to the six months ended June 30, 1998 and 1999, and
the period from August 4, 1997 (Inception) to June 30, 1999, and as of June
30, 1999 is unaudited)
1. NATURE OF OPERATIONS:
TiVo Inc. (the Company or TiVo) was incorporated in August 1997 as a
Delaware corporation with facilities in Sunnyvale, California. The Company has
developed a subscription-based personal television service (the TiVo Service)
that provides viewers with the ability to pause, rewind and play back any live
or recorded television broadcasts, as well as to search for, watch and record
programs. The TiVo Service also provides television listings, daily
suggestions and special viewing packages. The TiVo Service relies on three key
components: the personal video recorder, the TiVo remote control and the TiVo
Broadcast Center. Beginning in the second half of 1999, the Company expects
that manufacturing and distribution of the personal video recorder and remote
control will be undertaken by Philips Business Electronics B.V. (Philips). The
Company also anticipates that Philips will begin marketing the TiVo Service
and the personal video recorder that enables the TiVo Service in retail
markets in the second half of 1999. The Company plans to stop selling personal
video recorders by the end of 1999. In the interim, the personal video
recorder and remote control are being manufactured by a contract manufacturer
and, since March 1999, have been sold by TiVo through its web site and toll-
free telephone number. The Company conducts its operations through one
reportable segment.
The Company is in the early stages of development and insignificant
subscription revenues have been generated to date. No assurance can be given
that a market for the TiVo Service and products that enable the TiVo Service
will develop, or that customers will be willing to pay for the TiVo Service
and products that enable the TiVo Service. The Company is identified as a
development-stage company at this time. However, upon the transfer of
manufacturing and distribution responsibility to Philips and a successful
retail launch of the TiVo Service and products that enable the TiVo Service,
which management expects in the second half of 1999, the Company anticipates
that it will no longer be identified as a development-stage company.
The Company continues to be subject to certain risks common to companies in
similar stages of development, including the uncertainties outlined above, as
well as the uncertainty of availability of additional financing; dependence on
third parties for manufacturing and marketing and sales support; the
uncertainty of the market for personal television; dependence on key
management; limited manufacturing, marketing and sales experience; and the
uncertainty of future profitability.
The unaudited pro forma June 30, 1999 information reflected in the
accompanying balance sheets reflects the automatic conversion of all the
shares of the Company's convertible preferred stock outstanding as of June 30,
1999 into shares of common stock on a one-for-one basis and the exercise and
conversion of all outstanding warrants as of June 30, 1999 into shares of
common stock on a one-for-one basis upon completion of the proposed initial
public offering.
Unaudited Interim Financial Statements
The accompanying balance sheet as of June 30, 1999 and the accompanying
statements of operations, stockholders' equity and cash flows for the six
months ended June 30, 1998 and 1999 included herein have been prepared by the
Company and are unaudited. The information furnished in the unaudited
financial statements referred to above includes all adjustments that are, in
the opinion of management, necessary for a fair presentation of such financial
statements. The results of operations for the six months ended June 30, 1999,
are not necessarily indicative of the results to be expected for the entire
fiscal year.
F-7
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash Equivalents
The Company classifies financial instruments as cash equivalents if the
original maturity of such instruments is three months or less.
Short-term investments
Short-term investments consist of commercial paper investments and
certificates of deposit with original maturities at date of purchase ranging
between three and six months. The Company classifies these investments as held
to maturity and records the instruments at amortized cost, which approximates
fair value due to the short maturities.
Inventories
Inventories consist of raw materials, primarily hard-disk drives, work in
progress and finished goods. Inventory is valued at the lower of cost (first-
in, first-out) or market. Included in inventory costs are direct materials,
direct labor and allocated tooling costs. Once the Company transfers
manufacturing responsibility to Philips, all inventory will be sold to
Philips. Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1999
----------------- -------------
(unaudited)
<S> <C> <C>
Raw materials................................ $120,000 $ 216,000
Work in progress............................. -- --
Finished goods............................... -- 986,000
-------- ----------
$120,000 $1,202,000
======== ==========
</TABLE>
Property and Equipment
Property and equipment are stated at cost. For financial reporting purposes,
depreciation is computed using the straight-line method over estimated useful
lives as follows:
<TABLE>
<S> <C>
Furniture and fixtures.......................................... 5 years
Computer and office equipment................................... 1-5 years
</TABLE>
Maintenance and repair expenditures are expensed as incurred.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets or liabilities of a change in tax rates is recognized in the period
in which the rate change occurs. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be
recovered.
F-8
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, certificates of deposit,
short-term investments, accounts receivable, and accounts payable approximate
fair value due to the short-term maturity of these instruments.
Business Concentrations and Credit Risk
Financial instruments that subject the Company to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company maintains
cash with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. The
Company's customers are primarily concentrated in the United States. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of customers and other information. The allowance
for doubtful accounts was $0 at December 31, 1997 and 1998, and $14,000 at
June 30, 1999.
Net Loss Per Common Share
Historical--The Company computes net loss per share in accordance with SFAS
No. 128, "Earnings Per Share," and SEC Staff Accounting Bulletin No. 98 (SAB
No. 98). Under the provisions of SFAS No. 128 and SAB No. 98, basic net loss
per common share is computed by dividing net loss by the weighted average
number of common shares outstanding. Diluted net loss per common share is
computed by dividing net loss by the weighted average number of common shares
and dilutive common share equivalents outstanding.
Diluted net loss per share does not include the effect of the following
antidulutive common share equivalents:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998 June 30, 1999
--------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
Options to purchase common stock......... 630,000 1,235,000 3,161,512
Warrants to purchase common stock........ -- -- 81,522
Convertible preferred stock warrants..... -- 52,083 981,949
Convertible preferred stock.............. 5,000,000 11,174,427 15,573,661
--------- ---------- ----------
5,630,000 12,461,510 19,798,644
========= ========== ==========
</TABLE>
Pro forma--Pro forma net loss per share is calculated as if the convertible
preferred stock outstanding as of June 30, 1999 was converted into shares of
common stock on the date of its issuance on a one-for-one basis and as if all
warrants outstanding as of June 30, 1999 had been exercised and converted into
shares of common stock on the date of issuance.
Stock-Based Compensation and Stock Exchanged for Services
The Company has elected to follow Accounting Principles Board Opinion No. 25
(APB 25), "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock options. Under APB 25,
when the exercise price of employee stock options is less than the market
price of the underlying stock on the date of grant, compensation expense is
recorded for the difference between fair value and the exercise price. Expense
associated with stock-based compensation is being amortized on an accelerated
basis over the vesting period of the individual award consistent with the
method described in Financial Accounting Standards Board ("FASB")
Interpretation No. 28. No stock compensation expense was recorded in 1997 and
1998. The Company has recorded compensation expense of $187,000 for the six
months ended June 30, 1999 (unaudited). The Company has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation."
F-9
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
The value of warrants, options or stock exchanged for services is expensed
over the period benefitted. To calculate the expense, the Company uses either
the market value of the stock or the value of the services, whichever is more
objectively determinable.
Revenue Recognition
Subscription revenues represent revenues from customer subscriptions to the
TiVo Service. Subscriptions to the TiVo Service are available on a monthly,
annual or lifetime basis. Subscription fees are generally charged to
customers' credit cards and are generally billed in advance on a monthly
basis. A lifetime subscription covers the life of the particular personal
video recorder purchased. Revenues from subscriptions are recognized ratably
over the subscription period. Subscription revenues from lifetime
subscriptions are recognized ratably over a 4 year period, the best estimate
of the useful life of the personal video recorder. Deferred revenue relates to
subscription fees collected but for which revenues have not been recognized.
Research And Development
Research and development expenses consist primarily of employee salaries and
related expenses and consulting fees relating to the development of the TiVo
Service and products that enable the TiVo Service. Research and development
costs are expensed as incurred.
Sales and Marketing--Related Parties
Sales and marketing--related parties consists of cash and noncash charges
related to the Company's agreements with DIRECTV, Inc. (DIRECTV), Philips, and
Quantum Corporation (Quantum), all of which hold stock or warrants in the
Company (see Note 10).
Other Operating Expense, Net
Prior to the anticipated transition of manufacturing and distribution
responsibility to Philips in the second half of 1999, the Company has sold
personal video recorders directly to consumers. The Company plans to stop
selling personal video recorders by the second half of 1999 in connection with
the transition of manufacturing to Philips. The sales of personal video
recorders are considered incidental to the Company's business and the cost of
the personal video recorders, net of sales proceeds of $895,000, is classified
as other operating expense, net.
Comprehensive Income
The Company has no material components of other comprehensive income or loss
and, accordingly, the comprehensive loss is the same as the net loss for all
periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. Actual results could differ from those estimates.
F-10
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998 June 30, 1999
-------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Furniture and fixtures..................... $ 18,000 $ 16,000 $ 20,000
Computer and office equipment.............. 358,000 946,000 1,104,000
-------- -------- ---------
376,000 962,000 1,124,000
Accumulated depreciation................... (15,000) (170,000) (352,000)
-------- -------- ---------
$361,000 $792,000 $ 772,000
======== ======== =========
</TABLE>
Equipment under capital leases was zero as of December 31, 1997 and 1998 and
$670,000 as of June 30, 1999. Depreciation and amortization expense was
$15,000, $155,000, $208,000 (unaudited) and $182,000 (unaudited) for the
period ended December 31, 1997, the year ended December 31, 1998, and the six
months ended June 30, 1998 and 1999, respectively.
4. Accrued Liabilities:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998 June 30, 1999
------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Marketing and promotions...................... $ -- $223,000 $ 744,000
Compensation and vacation..................... 16,000 213,000 252,000
Legal and accounting.......................... -- 86,000 447,000
Consulting.................................... -- 11,000 353,000
Other......................................... 10,000 142,000 414,000
------- -------- ----------
$26,000 $675,000 $2,210,000
======= ======== ==========
</TABLE>
5. LINE OF CREDIT:
The Company has a line of credit with a bank under which a maximum of
$750,000 can be borrowed at the bank's prime rate plus 0.75% (8.5% at December
31, 1998). The line of credit expires on August 15, 1999. No amounts were
borrowed under this line in 1997 or 1999. During 1998, a maximum amount of
$610,000 was borrowed. The average amount outstanding was $159,000, at an
average interest rate of 8.5%. No amounts were outstanding under this line of
credit as of December 31, 1997 or 1998, or June 30, 1999. In April 1999, the
bank issued a letter of credit on behalf of the Company in the amount of
$600,000. This amount reduces the available borrowings on the Company's line
of credit to $150,000. Substantially all of the Company's assets other than
intellectual property are pledged as collateral under this line of credit.
F-11
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
6. INCOME TAXES:
There was no provision or benefit for income taxes for the period from
August 4, 1997 (Inception) to June 30, 1999.
Significant components of deferred tax assets were as follows as of December
31, 1998:
<TABLE>
<S> <C>
Net operating loss carryforwards.............................. $3,930,000
Tax credit carryforwards...................................... 103,000
Temporary differences, net.................................... 25,000
----------
Gross deferred tax assets................................... 4,058,000
Valuation allowance........................................... (4,058,000)
----------
Net deferred tax assets..................................... $ 0
==========
</TABLE>
As of December 31, 1998, the Company had a tax net operating loss (NOL)
carryforward of approximately $10,300,000 for federal and California purposes.
The federal NOL expires beginning in 2117, and the California NOL expires
beginning in 2002. A significant change in ownership of the Company may limit
the Company's ability to utilize these NOL carryforwards. SFAS No. 109
requires that the tax benefit of such NOL be recorded as an asset. A valuation
allowance for the entire amount has been provided because of uncertainties
about the realizability of the deferred tax assets.
7. STOCKHOLDERS' EQUITY:
Common Stock
In August 1997, the Company issued 2,800,000 shares of common stock to the
founders for $10,000. On September 24, 1997, the Company declared a stock
split of 1.04167 to 1, which resulted in 2,916,664 founders shares outstanding
after the split.
In 1998, the Company issued 2,276,458 shares of common stock as a result of
the exercise of stock options. During 1998, 174,771 shares of common stock
were repurchased in accordance with the terms the Company's stock option plan
(see Note 8). The Company has the right to repurchase 2,024,187 unvested
shares as of December 31, 1998, at the stock issuance price, if the holders'
service with the Company terminates.
For the six months ended June 30, 1999, the Company issued 212,500 shares of
common stock as a result of the exercise of stock options and repurchased
225,166 shares. The Company has the right to repurchase 1,440,727 unvested
shares as of June 30, 1999, at the stock issuance price, if the holders'
service with the Company terminates.
In 1998, the Company issued 198,586 shares of common stock to consultants
and vendors in exchange for services. For the six months ended June 30, 1999,
the Company issued 106,409 shares of common stock in exchange for services.
The common stock issued was recorded at the estimated fair value of the common
stock at the time the services were performed and the expense was recorded.
The Company's management believes that the value of the common stock issued
approximates the value of services received.
F-12
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
Convertible Preferred Stock
Convertible preferred stock outstanding at June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Issued and Liquidation
Authorized Outstanding Preference Carrying
Shares Shares Per Share Value
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Series A......................... 5,200,000 5,000,000 $0.60 $ 2,990,000
Series B......................... 4,400,000 3,660,914 1.26 4,609,000
Series C......................... 4,000,000 2,513,513 1.85 4,643,000
Series D......................... 2,500,000 1,358,695 3.68 4,973,000
Series E......................... 300,000 270,270 7.40 1,982,000
Series F......................... 500,000 405,405 7.40 2,960,000
Series G......................... 1,100,000 1,013,513 7.40 7,431,000
Series H......................... 2,100,000 1,351,351 7.40 9,992,000
---------- ---------- -----------
20,100,000 15,573,661 $39,580,000
========== ========== ===========
</TABLE>
In September and October 1997, the Company issued 5,000,000 shares of Series
A preferred stock at $0.60 per share. In May, June and July 1998, the Company
issued 3,660,914 shares of Series B preferred stock at $1.26 per share. In
October 1998, the Company issued 2,500,000 shares of Series C preferred stock
at $1.85 per share. In December 1998, the Company issued 13,513 shares of
Series C preferred stock at $1.85 per share in exchange for services received.
In January 1999, the Company issued 1,358,695 shares of Series D preferred
stock at $3.68 per share. In March 1999, the Company issued 270,270 shares of
Series E preferred stock at $7.40 per share. In April 1999, the Company issued
405,405, 1,013,513, and 1,351,351 shares of Series F, G and H preferred stock,
respectively, at $7.40 per share.
Each share of preferred stock is convertible into common stock at the option
of the holder on a one-for-one basis, subject to certain adjustments. Each
share of preferred stock has voting rights and, upon any liquidation of the
Company, the holders of preferred stock are entitled to a liquidation
preference, to be paid out of the assets of the Company, equal to the
respective original issue price per share plus all declared and unpaid
dividends. Each share of preferred stock will automatically be converted into
shares of common stock at any time upon the election of the holders of at
least two-thirds of the outstanding shares of the preferred or upon the
closing of a firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933.
F-13
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
8. STOCK OPTION PLAN:
Under the terms of the Company's 1997 Equity Incentive Plan, adopted in 1997
as amended and restated in 1999 (the 1997 Plan), options to purchase shares of
the Company's common stock may be granted to employees and other individuals
at a price equal to the fair market value of the common stock at the date of
grant. The options vest 25 percent after the first year of service, and the
remaining 75 percent vest ratably over the next 36 months. Options expire 10
years after the grant date. The terms of the 1997 Plan allow individuals to
exercise their options prior to full vesting. In the event that the individual
terminates their service to the Company before becoming fully vested, the
Company has the right to repurchase the unvested shares at the original option
price. The number of shares authorized for option grants under the 1997 Plan
is 4,000,000; as of December 31, 1998, 3,773,458 have been issued.
The Company accounts for stock options under APB Opinion No. 25, under
which, for the period from August 4, 1997 (Inception) to December 31, 1997 and
for the year ended December 31, 1998, no compensation cost was recognized when
the awards were granted to employees or directors. Stock-based Compensation
expense of $187,000 was recognized for the six months ended June 30, 1999 (see
Note 13). Had compensation cost for the stock options been determined
consistently with SFAS No. 123, the effect on the Company's net loss and basic
and diluted loss per share would have been changed to the following pro forma
amounts:
<TABLE>
<CAPTION>
Period from Period from
August 4, 1997 August 4,
(inception), 1997
to Year Ended Six Months Ended June 30, (Inception)
December 31, December 31, --------------------------- to June 30,
1997 1998 1998 1999 1999
-------------- ------------- ------------ ------------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net loss, as reported... $(595,000) $(9,721,000) $ (3,046,000) $ (11,628,000) $(21,944,000)
Pro forma effect of SFAS
No. 123................ -- (10,000) (2,000) (535,000) (545,000)
--------- ----------- ------------ ------------- ------------
Net loss, pro forma..... (595,000) (9,731,000) (3,048,000) (12,163,000) (22,489,000)
Basic and diluted loss
per share, as
reported............... $ (0.20) $ (2.21) $ (0.79) $ (1.75) $ (4.74)
Basic and diluted loss
per share, pro forma... $ (0.20) $ (2.21) $ (0.79) $ (1.83) $ (4.86)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants: weighted average risk-free interest rates of
between 4.45 percent and 5.9 percent; expected dividend yield of 0 percent;
expected lives of four years for the options; and expected volatility of 0
percent.
Refer to Note 12, Equity Incentive Plans, for a description of the 1999
Equity Incentive Plan (the 1999 Plan).
F-14
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
A summary of the status of the 1997 Plan and the 1999 Plan is presented in
the table and narrative below:
<TABLE>
<CAPTION>
Weighted
Range of Average
Shares Exercise Prices Exercise Price
---------- --------------- --------------
<S> <C> <C> <C>
Outstanding at inception........... 0 $0.00
Granted.......................... 700,000 0.04 0.04
---------- -----
Outstanding at December 31, 1997... 700,000 0.04
Granted.......................... 3,073,458 0.04--0.45 0.17
Exercised........................ (2,276,458) 0.06
Canceled......................... (195,000) 0.04
---------- -----
Outstanding at December 31, 1998... 1,302,000 $0.30
Granted.......................... 2,323,387 1.00--6.50 4.93
Exercised........................ (212,500) 0.82
Canceled......................... (251,375) 0.66
---------- -----
Outstanding at June 30, 1999
(unaudited)....................... 3,161,512 $3.65
========== =====
</TABLE>
The weighted average fair value of options granted as of December 31, 1998,
and June 30, 1999 (unaudited), is $0.02 and $0.84, respectively. Of the
options outstanding at December 31, 1998, and June 30, 1999, 93,542 and
733,481 are vested, respectively. Included in the options exercised above in
1998 and for the six months ended June 30, 1999 are 174,771 and 225,166,
respectively, unvested options where the Company repurchased the stock upon
the individuals' leaving the Company.
The options outstanding have the following contractual lives:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1999 (unaudited)
- -------------------------------------------------- -------------------------------------------------
Number of Options Weighted Average Number of Options Weighted Average
- ------------------------ Exercise Remaining ----------------------- Exercise Remaining
Outstanding Exercisable Price Contractual Life Outstanding Exercisable Price Contractual Life
- ----------- ----------- -------- ---------------- ----------- ----------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
55,000 16,042 $0.04 9.25 years 55,000 22,917 $0.04 8.75 years
504,000 -- 0.13 9.50 years 300,625 24,625 0.13 9.00 years
169,000 -- 0.20 9.75 years 145,000 -- 0.20 9.25 years
507,000 -- 0.45 10.00 years 412,500 -- 0.45 9.50 years
-- -- -- -- 30,000 -- 0.75 9.50 years
-- -- -- -- 272,782 -- 1.00 9.70 years
-- -- -- -- 263,000 -- 2.50 9.75 years
-- -- -- -- 127,105 -- 4.00 9.83 years
-- -- -- -- 188,000 -- 5.00 9.90 years
-- -- -- -- 1,367,500 -- 6.50 10.00 years
- --------- ------ --------- ------
1,235,000 16,042 3,161,512 47,542
========= ====== ========= ======
</TABLE>
F-15
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
9. WARRANTS:
In addition to receiving 156,250 options to purchase common stock under the
1997 Plan, in March 1998, a member of the Company's board of directors
received warrants to purchase a total of 52,083 shares of Series A preferred
stock at an exercise price of $0.60 per share, the estimated fair market value
of the Series A preferred stock at the date of issuance. These warrants will
expire on the earlier of (1) the closing of the initial public offering of the
Company's common stock or (2) March 18, 2008. The value of the above warrants
has been included in the calculation of pro forma net loss for the year ended
December 31, 1998 under SFAS No. 123, discussed in Note 8.
See Note 10 for a description of Series C and Series D preferred stock
warrants issued to Quantum under a hard disk drive supply agreement.
The warrants outstanding have the following contractual lives:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1999 (unaudited)
- ----------------------------------------------- ----------------------------------------------
Weighted Weighted
Number of Average Average
Warrants Outstanding Exercise Remaining Number of Exercise Remaining
and Exercisable Price Contractual Life Warrants Outstanding Price Contractual Life
- -------------------- -------- ---------------- -------------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Director Director
Preferred--52,083 $0.60 9.25 years Preferred-- 52,083 $0.60 8.75 years
Other
Preferred-- 60,813 1.26 9.67 years
Common-- 35,307 2.50 4.75 years
Common-- 35,307 2.50 4.75 years
Common-- 2,715 2.50 4.75 years
Common-- 8,193 2.50 4.75 years
Preferred-- 1,250 7.40 9.83 years
Supplier
Preferred-- 324,325 0.01 1.75 years
Preferred-- 543,478 0.01 2.75 years
--------------------
1,063,471
====================
</TABLE>
All of the warrants outstanding at June 30, 1999 except for the warrants for
543,478 shares of preferred stock are exercisable. The warrants for 543,478
shares of preferred stock outstanding automatically vest upon completion of an
initial public offering.
10. MARKETING AND MANUFACTURING AGREEMENTS
Quantum Agreement
In November 1998, the Company entered into an agreement with Quantum to
allow the Company or certain third-party manufacturers to purchase up to an
agreed-upon number of hard disk drives used in the personal video recorder and
other devices that enable the TiVo Service. Under the terms of the agreement,
the buyer is entitled to a discounted purchase price if certain milestones are
met. When the buyer receives the hard disk drives on each unit, the Company is
required to pay a fee to Quantum which is expensed at the time of purchase.
TiVo has also agreed to share with Quantum a portion of the TiVo Service
subscription fees it receives from the personal video recorders and other
devices equipped with these hard disk drives.
F-16
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
In addition, the Company issued a warrant to Quantum to purchase 324,325
shares of Series C preferred stock and 543,478 shares of Series D preferred
stock at an exercise price of $0.01 per share. The warrants vest and are
exercisable upon the meeting of certain milestones under a hard disk supply
agreement or upon the closing of an initial public offering of the Company's
common stock. As of December 31, 1998, Quantum had not vested in the warrants
because no hard-disk drives had been purchased at the discounted price. The
value of the warrants will be determined and recorded when they vest, and
expense will be recorded as Quantum performs under the contract. In April
1999, the warrants to purchase Series C preferred stock vested and the Company
recorded as a contra equity account a prepaid marketing expense of $2.4
million related to the vesting of 324,325 shares of Series C preferred stock
warrants. The $2.4 million represents the estimated fair value of the warrants
at the vesting date and will be recognized as a sales and marketing expense--
related parties as the personal video recorders related to the Series C
warrants are sold. The Company recorded $276,000 of sales and marketing
expense--related parties for the six months ended June 30, 1999 related to
these warrants.
DIRECTV Agreement
The Company entered into a corporate partnership agreement with DIRECTV to
promote and offer support for the TiVo Service and products that enable the
TiVo Service (the DIRECTV Agreement). The DIRECTV Agreement provides that
DIRECTV will provide a variety of marketing and sales support to promote TiVo
and the TiVo Service, collaborate on certain product development efforts and
make a portion of the bandwidth capacity of DIRECTV's satellite network
available to TiVo.
The Company issued 1,852,329 shares of common stock in exchange for
marketing services under the DIRECTV Agreement. The shares are non-forfeitable
and were valued at an estimated fair value of $5.50 per share for accounting
purposes. The Company recorded prepaid marketing expenses classified as a
contra equity account related to the issuance of these shares of common stock
of $10.2 million. These prepaid marketing expenses are expensed as the
marketing services are provided.
Additionally, the Company issued 1,128,867 shares of common stock in
exchange for a $2.8 million promissory note due in three years. For accounting
purposes, the shares were valued at an estimated fair value of $5.50 per
share. The $3.4 million of estimated fair value in excess of the balance of
the note was recorded as a prepaid marketing expense contra equity account.
DIRECTV may repay the note either by providing bandwidth capacity at no
additional charge or by paying in cash. At the end of three years, if
specified milestones are not achieved, TiVo will have the right to repurchase
some or all of these shares at $.001 per share.
The value of the common stock issued to DIRECTV and recorded as prepaid
marketing expenses of $13.6 million is recognized as a sales and marketing
expense--related parties ratably as the services are provided to TiVo.
In addition to the equity consideration for DIRECTV's marketing services
described above, DIRECTV will receive a percentage of TiVo's revenues
attributable to DIRECTV/TiVo subscribers. These amounts are expensed as earned
and included in marketing and sales expense--related parties.
In April 1999, TiVo sold 405,405 shares of Series F preferred stock to
DIRECTV at $7.40 per share.
Philips Agreement
On March 31, 1999, the Company entered into an agreement with Philips for
the manufacture, marketing and distribution of personal video recorders that
enable the TiVo Service. Subject to certain limitations, this agreement grants
Philips the right to manufacture, market and sell personal video recorders
that enable the TiVo
F-17
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
Service in North America. Philips was also granted the right to manufacture,
market and sell personal video recorders in North America that incorporate
both DIRECTV's satellite receiver and the TiVo Service. The Company also
granted Philips a license to TiVo technology for the purpose of developing and
manufacturing personal video recorders and other devices that enable the TiVo
Service.
The Company has agreed to pay Philips a subsidy on each personal video
recorder that is manufactured and sold by Philips. The amount of the subsidy
is formula-based and periodically adjusted based on Philips manufacturing
costs and selling prices. A portion of the subsidy amount paid to Philips is
due when the personal video recorder is shipped. The remaining portion is due
when the subscriber activates the TiVo Service. In addition to these amounts,
the Company has agreed to pay Philips a fixed amount per month for each
Philips-branded personal video recorder that has an active subscription to the
TiVo Service.
Under the terms of the agreement, Philips has committed to provide a
specified amount of marketing activities related to Philips-branded personal
video recorders that enable the TiVo Service.
In April 1999, Philips purchased 1,351,351 shares of Series H preferred
stock for $7.40 per share.
11. COMMITMENTS AND CONTINGENCIES:
The Company leases its office space under operating leases that expire on
March 31 and June 30, 2000. As of December 31, 1998, and June 30, 1999, future
minimum rental payments under this lease are $1,327,000 and $901,000,
respectively. Rent expense under operating leases was approximately $45,000,
$619,000, and $483,000 for the period from inception to December 31, 1997, for
the year ended December 31, 1998 and for the six months ended June 30, 1999,
respectively.
The Company has entered into various supply or service agreements and
purchase commitments with a number of vendors. As of June 30, 1999, the
Company's commitment under these agreements is approximately $7.5 million.
12. RETIREMENT PLAN
In December 1997, the Company established a 401(k) Retirement Plan (the
Retirement Plan) available to employees who meet the plan's eligibility
requirements. Participants may elect to contribute a percentage of their
compensation to the Retirement Plan up to a statutory limit. Participants are
fully vested in their contributions. The Company may make discretionary
contributions to the Retirement Plan as a percentage of participant
contributions, subject to established limits. The Company has not made any
contributions to the Retirement Plan through June 30 ,1999.
13. SUBSEQUENT EVENTS (unaudited):
Equipment Lease Line
In March 1999, the Company entered into an equipment lease line for $2.5
million over the 12 months following the date of the lease. The annual
interest rate is 7.25%, and the line is repayable over 36 months. The lessor
received a warrant for 60,814 shares of the Company's Series B preferred stock
at an exercise price of $1.26 per share. The Company expenses the fair value
of the warrants of $30,000 over the life of the lease. This lease of $670,000
is accounted for as a capital lease. The current portion of the capital lease
obligation at June 30, 1999 is $112,000. The unused lease line expires
February 2000.
F-18
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
Equity Incentive Plans
In April 1999, the Company's stockholders approved the 1999 Plan. Amendments
to the 1999 Plan were adopted in July 1999. The 1999 Plan allows the grant of
options to purchase shares of the Company's common stock to employees and
other individuals at a price equal to the fair market value of the common
stock at the date of grant. The options vest 25 percent after the first year
of service, and the remaining 75 percent vest ratably over the next 36 months.
Options expire 10 years after the grant date. The terms of the 1999 Plan also
allow individuals to exercise their options prior to full vesting. In the
event that the individual terminates before becoming fully vested, the Company
has the right to repurchase the unvested shares at the original option price.
The number of shares authorized for option grants under the 1999 Plan is
4,200,000 subject to an annual increase of the greater of 7% of outstanding
shares or 4,000,000 shares, up to a maximum of 40,000,000 shares.
In July 1999, the Company adopted the 1999 Non-Employee Directors' Stock
Option Plan (the Directors' Plan). The Director's Plan becomes effective upon
the completion of an initial public offering. The Directors' Plan provides for
the automatic grant of options to purchase shares of the Company's common
stock to nonemployee directors at a price equal to the fair market value of
the stock at the date of the grant. The options vest monthly over two years.
The option term is ten years after the grant date but terminates three months
after a director's service terminates. The number of shares authorized for
option grants under the Directors' Plan is 500,000, subject to an annual
increase of 100,000 shares.
In July 1999, the Company adopted the 1999 Employee Stock Purchase Plan (the
Employee Stock Purchase Plan). The Employee Stock Purchase Plan provides a
means for employees to purchase TiVo common stock through payroll deductions
of up to 15 percent of their base compensation. The Company offers the common
stock purchase rights to eligible employees, generally all full-time employees
who have been employed for at least 10 days. This plan allows for common stock
purchase rights to be granted to employees of TiVo at a price equal to the
lower of 85% of the fair market value on the first day of the offering period
or on the common stock purchase date. Under the purchase plan, the board may
specify offerings up to 27 months. The number of shares reserved for issuance
under this plan is 600,000 subject to automatic annual increase by the lesser
of (i) 5 percent of the outstanding shares of common stock on a diluted basis,
(ii) 500,000 shares, or (iii) a smaller number as determined by the board of
directors.
Convertible Debt
In April 1999, the Company entered into a secured convertible debenture
purchase agreement with certain stockholders. Under the terms of this
agreement, TiVo can borrow up to $3,000,000 at an interest rate of 4.67% per
annum. The debentures to be delivered by TiVo for any loan made under this
agreement are convertible into common stock on a one-for-one basis and secured
by substantially all of the Company's assets other than intellectual property.
In conjunction with the agreement, TiVo issued warrants to purchase 81,522
shares of common stock at an exercise price of $2.50 per share. Deferred
financing costs of $290,000 was recorded using the fair value of the warrants
at the date of issuance. The value assigned to the warrants is being amortized
over the term of the commitment which expires on June 30, 2000. Of this
amount, $145,000 was expensed for the six months ended June 30, 1999. As of
June 30, 1999, TiVo had no outstanding amounts under this agreement. All of
the warrants issued under the terms of this agreement expire upon the
completion of an initial public offering.
Deferred Compensation
During 1999, the Company granted stock options with exercise prices that
were less than the estimated fair market value of the underlying shares of
common stock on the date of grant. As a result, the Company has
F-19
<PAGE>
TIVO INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information with respect to the six months ended June 30, 1998 and 1999 and
the period from
August 4, 1997 (Inception) to June 30, 1999 and as of June 30, 1999 is
unaudited)
recorded deferred compensation of approximately $2,933,000 as a contra equity
account and recorded stock-based compensation expense of $187,000 during the
six months ended June 30, 1999. These amounts will be recognized as stock-
based compensation over the vesting period of the options (four years).
Series I Preferred Stock
In July 1999, the Company issued 3,121,994 shares of Series I preferred
stock at $10.41 per share. Series I shares are convertible on a one-for-one
basis into shares of common stock and have a $10.41 liquidation preference per
share. All other terms are comparable with the prior series of preferred
stock.
Series I Warrant
In July 1999 the Company also issued a Series I preferred stock warrant at
$10.41 per share. This warrant is exercisable immediately and terminates at
the earlier of the closing of a firmly underwritten public offering or five
years from the date of issuance. Upon exercise, the warrant converts into
192,123 shares of common stock.
Initial Public Offering
The Company is proposing an initial public offering of up to shares of
common stock.
F-20
<PAGE>
DESCRIPTION OF ARTWORK APPEARING ON BACK COVER INSIDE
[To come]
<PAGE>
[LOGO OF TIVO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in
connection with the distribution of the common stock being registered. All
amounts are estimated, except the SEC Registration Fee, the NASD Filing Fee
and the Nasdaq National Market Filing Fee:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. 22,240
NASD Filing Fee................................................... 8,500
Nasdaq National Market Filing Fee.................................
Blue Sky Fees and Expenses........................................ *
Accounting Fees................................................... *
Legal Fees and Expenses........................................... *
Transfer Agent and Registrar Fees................................. *
Printing and Engraving............................................ *
Miscellaneous..................................................... *
------
Total........................................................... $ *
======
</TABLE>
- -----------------------
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
The Registrant's Amended and Restated Certificate of Incorporation, filed as
Exhibit 3.2 to the Registration Statement, provides that directors of the
Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
to the fullest extent permitted by the Delaware General Corporation Law,
except for liability (i) for any breach of duty of loyalty to Registrant or to
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. The Registrant's
Amended and Restated Certificate of incorporation further states that if the
Delaware General Corporation Law is amended after its stockholders approve its
Amended and Restated Certificate of Incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
The Registrant's Bylaws provide that Registrant shall indemnify its officers
and directors to the fullest extent not prohibited by Delaware law and
authorizes the Registrant to modify the extent of such indemnification by
individual contracts with its officers and directors. Registrant's Bylaws
further provide, however, that the Registrant shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made pursuant to Registrant's contractual
obligations to its directors and officers.
Section 145 of the Delaware General Corporation Law makes provision for such
indemnification in terms sufficiently broad to cover officers and directors
under certain circumstances for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act").
The Registrant intends to enter into indemnification agreements with each
director and certain officers which provide indemnification under certain
circumstances for acts and omissions which may not be covered by any
directors' and officers' liability insurance.
II-1
<PAGE>
The form of Underwriting Agreement, filed as Exhibit 1.1 to the Registration
Statement, provides for indemnification of the Registrant and its controlling
persons against certain liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since the Company's inception on August 4, 1997, the Company has sold and
issued the following unregistered securities:
(a) On August 5, 1997, the Registrant sold an aggregate of 2,800,000
shares of its Common Stock to its founders under the exemption from
registration provided by Rule 701 of the Securities Act, raising aggregate
proceeds of $10,080. Michael Ramsay, the Registrant's Chairman of the
Board, Chief Executive Officer and President, and James Barton, its Chief
Technical Officer and Vice President of Research and Development, each
purchased 1,400,000 shares pursuant to Founder Stock Purchase Agreements.
On September 24, 1997, these shares were split into an aggregate of
2,916,664 common shares.
(b) On September 24, 1997, the Registrant sold an aggregate of 4,833,334
shares, and on October 22, 1997, an aggregate of 166,666 shares, in a
private placement of its Series A Preferred Stock having an aggregate
liquidation preference of $3.0 million and raising aggregate net proceeds
of $3.0 million, which were used for general corporate purposes. The
transactions were consummated pursuant to a Series A Preferred Stock
Purchase Agreement, Investor Rights Agreement and Stockholders Agreement,
agreements which designate certain rights and obligations of the Series A
Preferred Stock. In connection with the Series A offering, Michael Ramsay,
the Registrant's Chief Executive Officer, purchased 666,667 shares, James
Barton, the Registrant's Chief Technical Officer, purchased 166,667 shares,
entities affiliated with New Enterprise Associates, a stockholder owning in
excess of 5% of Registrant voting securities, purchased an aggregate of
2,000,000 shares, entities affiliated with Institutional Venture Partners,
a 5% stockholder, purchased an aggregate of 2,000,000 shares, and three
accredited investors purchased an aggregate of 166,666 shares.
(c) On February 23, 1998, the Registrant issued an aggregate of 15,740 of
its common shares to two of its consultants for past consulting services.
(d) On May 29, 1998, the Registrant sold an aggregate of 3,174,604
shares, on June 26, 1998, an aggregate of 461,310 shares, and on July 27,
1998, 25,000 shares in a private placement of an aggregate of 3,660,914
shares of its Series B Preferred Stock having an aggregate liquidation
preference of $4.6 million and raising aggregate net proceeds of
approximately $4.6 million which were used for general corporate purposes.
The transactions were pursuant to a Series B Preferred Stock Purchase
Agreement and Investor Rights Agreement, agreements which designate certain
rights and obligations of the Series B Preferred Stock. In connection with
the Series B offering, entities affiliated with New Enterprise Associates,
a stockholder owning in excess of 5% of Registrant voting securities,
purchased an aggregate of 1,587,302 shares, entities affiliated with
Institutional Venture Partners, a 5% stockholder, purchased an aggregate of
1,587,302 shares, Randy Komisar, a director of the Registrant, purchased
24,800 shares, an aggregate of 158,731 was sold to two accredited investors
and seven employees of the Registrant purchased an aggregate of 302,770
shares.
(e) On October 8, 1998 and October 30, 1998, the Registrant sold an
aggregate of 2,162,163 and 337,837 shares, respectively, in a private
placement of an aggregate of 2,500,000 shares of its Series C Preferred
Stock having an aggregate liquidation preference of $4.6 million, raising
aggregate net proceeds of approximately $4.6 million which were used for
general corporate purposes. The transactions were consummated pursuant to
the Series C Preferred Stock Purchase Agreement and Investor Rights
Agreement, agreements which designate certain rights and obligations of the
Series C Preferred Stock. In connection with the Series C offering,
entities affiliated with New Enterprise Associates and entities affiliated
with Institutional Venture Partners, each stockholders owning in excess of
5% of Registrant voting securities, purchased an aggregate of 594,595
shares each. Three venture capital investors purchased an aggregate of
1,243,245 shares and five employees of the Registrant purchased 13,513
shares each.
II-2
<PAGE>
(f) On December 22, 1998, the Registrant issued 13,513 shares of its
Series C Preferred Stock to Odyssey Capital, L.L.C. at a purchase price of
$1.85 per share pursuant to a Series C Preferred Stock Purchase Agreement
and in consideration for past services.
(g) On January 20, 1999, the Registrant completed a private placement to
Vulcan Ventures Corporation of 1,358,695 shares of its Series D Preferred
Stock having a liquidation preference of $5.0 million and raising net
proceeds of approximately $5.0 million which were used for general
corporate purposes. The transaction were pursuant to a Series D Preferred
Stock Purchase Agreement and Investor Rights Agreement, agreements which
designate certain rights and obligations of the Series D Preferred Stock.
(h) On March 19, 1999, the Registrant completed a private placement to
Showtime Networks, Inc. of 270,270 shares of its Series E Preferred Stock
having a liquidation preference of $2.0 million and raising net proceeds of
approximately $2.0 million which were used for general corporate purposes.
The transaction was consummated pursuant to the Preferred Stock Purchase
Agreement and Investor Rights Agreement, agreements which designate certain
rights and obligations of the Series E Preferred Stock.
(i) On April 13, 1999, the Registrant completed a private placement to
DIRECTV, Inc. of 405,405 shares of its Series F Preferred Stock having a
liquidation preference of $3.0 million, raising net proceeds of
approximately $3.0 million which were used for general corporate purposes.
The transaction was consummated pursuant to a Series F Preferred Stock
Purchase Agreement and Investor Rights Agreement, agreements which
designate certain rights and obligations of the Series F Preferred Stock.
On the same date, the Registrant entered into a Marketing Agreement with
DIRECTV, Inc. under which it issued 2,981,196 shares of its Common Stock to
DIRECTV, Inc. in consideration for $4.6 million of past and future services
to the Registrant by DIRECTV, Inc. and under which net proceeds of
approximately $2.8 million were raised under a promissory note
(j) On April 16, 1999, the Registrant completed a private placement to
NBC Multimedia, Inc. of 1,013,513 shares of its Series G Preferred Stock
having a liquidation preference of $7.5 million, raising net proceeds of
approximately $7.5 million which were used for general corporate purposes.
The transaction was consummated pursuant to a Series G Preferred Stock
Purchase Agreement and Investor Rights Agreement, agreements which
designate certain rights and obligations of the Series G Preferred Stock.
(k) On April 23, 1999, the Registrant completed a private placement to
Philips Corporate External Ventures B.V. of 1,351,351 shares of its Series
H Preferred Stock having a liquidation preference of $10.0 million, raising
net proceeds of approximately $10.0 million which were used for general
corporate purposes. The transaction was consummated pursuant to a Series F
Preferred Stock Purchase Agreement and Investor Rights Agreement,
agreements which designate certain rights and obligations of the Series H
Preferred Stock.
(l) On July 21, 1999, the Registrant sold an aggregate of 3,121,994
shares of its Series I Preferred Stock having an aggregate liquidation
preference of $32.5 million and raising aggregate net proceeds of
approximately $32.5 million. The transaction was pursuant to a Series I
Preferred Stock Purchase Agreement and Investor Rights Agreement,
agreements which designate certain rights and obligations of the Series I
Preferred Stock.
(m) Since inception of the Company on August 4, 1997 through June 30,
1999, options to purchase 4,109,240 shares of the Registrant's Common
Stock, net of 421,375 shares cancelled upon employee termination, were
granted to 72 optionees under the Registrant's 1997 Equity Incentive Plan.
Registrant has granted options to purchase 1,987,605 shares of its Common
Stock, net of 25,000 shares cancelled upon employee termination, to 45
optionees under its 1999 Equity Incentive Plan. Through June 30, 1999,
optionees have exercised 2,471,958 shares under the Registrant's 1997
Equity Incentive Plan raising net proceeds of $265,558, of which 399,937
shares have been repurchased upon employee termination at a cost
II-3
<PAGE>
of $27,337. Optionees have exercised 17,000 shares under Registrant's 1999
Equity Incentive Plan through June 30, 1999. The Registrant has granted
stock awards for 195,233 shares of its Common Stock under its 1997 Equity
Incentive Plan and 94,009 shares under its 1999 Equity Incentive Plan for
past services.
(n) On March 18, 1998, the Registrant issued a warrant to purchase 52,083
shares of its Series A Preferred Stock at an exercise price of $0.60 per
share to Randy Komisar, a director of the Company in consideration for
Board participation. The warrant expires upon the closing of the Initial
Public Offering.
(o) On February 2, 1999, the Registrant issued a warrant to purchase
60,813 shares of its Series B Preferred Stock at an exercise price of $1.26
per share to Comdisco, Inc. in connection with a Lease Line Agreement. The
warrant expires upon the closing of the Initial Public Offering.
(p) On November 6, 1998, the Registrant issued a warrant to purchase
324,325 shares of its Series C Preferred Stock at an exercise price of
$0.01 per share to Quantum Corporation in connection with a Hard Disk Drive
Supply Agreement dated November 6, 1998. The warrant expires prior to
closing of the Initial Public Offering.
(q) On November 6, 1998, the Registrant issued a warrant to purchase
543,478 shares of its Series D Preferred Stock at an exercise price of
$0.01 per share to Quantum Corporation in connection with a Hard Disk Drive
Supply Agreement dated November 6, 1998. The warrant expires prior to
closing of the Initial Public Offering.
(r) On April 8, 1999, the Registrant issued warrants to purchase an
aggregate of 81,522 shares of its Common Stock at exercise prices of $2.50
per share to New Enterprise Associates VII, L. P., Institutional Venture
Partners VII, L.P., both of which own in excess of 5% of Registrant voting
securities, and two other accredited investors pursuant to a certain
Secured Convertible Debenture Purchase Agreement under which the Registrant
raised an aggregate of $3.0 million in a debt financing. The warrants
expire upon the closing of the Initial Public Offering at a per share
public offering price of not less than $5.00 and an aggregate public
offering price of at least $10,000,000.
The sales and issuances of securities in the transactions described in
paragraphs (a) and (c) and the exercise of stock options referred to in
paragraph (m) above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder in that they were
offered and sold either pursuant to a written compensatory benefit plan or
pursuant to a written contract relating to compensation, as provided by Rule
701.
The sales and issuances of securities in the transactions described in
paragraph (b) and paragraphs (d) through (k) and (m) through (r) above were
deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) as transactions by an issuer not involving any public offering.
The purchasers in each case represented their intention to acquire the
securities for investment only and not with a view to the distribution
thereof. Appropriate legends are affixed to the stock certificates issued in
such transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to such information.
Item 16. Exhibits And Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation to be in
effect immediately upon the closing of the offering.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.3 Bylaws of the Registrant as currently in effect.
3.4 Amended and Restated Bylaws of the Registrant to be in effect
immediately following the closing of the Offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
*4.2 Specimen Common Stock Certificate.
4.3 Eighth Amended and Restated Investor Rights Agreement between the
Registrant and certain investors dated July 21, 1999.
*5.1 Opinion of Cooley Godward LLP.
10.1 Form of Indemnification Agreement between the Registrant and its
officers and directors.
10.2 Registrant's 1999 Equity Incentive Plan and related documents.
10.3 Registrant's Amended and Restated 1997 Equity Incentive Plan and
related documents.
10.4 Registrant's 1999 Employee Stock Purchase Plan and related
documents.
10.5 Registrant's 1999 Non-Employee Directors' Stock Option Plan and
related documents.
+10.6 Hard Disk Drive Supply Agreement between Quantum Corporation and
the Registrant dated November 6, 1998.
+10.7 Master Agreement between Philips Business Electronics B.V. and the
Registrant dated March 31, 1999.
+10.8 Marketing Agreement between DIRECTV, Inc. and the Registrant dated
April 13, 1999.
+10.9 Agreement between NBC Multimedia, Inc. and the Registrant dated
April 16, 1999.
10.10 Sublease Agreement between Verity, Inc. and the Registrant dated
February 23, 1998.
10.11 Amendment to Sublease Agreement between Verity, Inc. and the
Registrant dated November 1998.
10.12 Second Amendment to Sublease Agreement between Verity, Inc. and
the Registrant dated March 1999.
10.13 Consent of Landlord to Sublease between Verity, Inc. and the
Registrant dated February 23, 1998.
10.14 Loan and Security Agreement between Silicon Valley Bank and the
Registrant dated December 15, 1997.
10.15 Master Lease Agreement between Comdisco, Inc. and the Registrant
dated February 12, 1999.
+10.16 Warrant Purchase and Equity Rights Agreement between Quantum
Corporation and the Registrant dated November 6, 1998 and related
documents.
10.17 Warrant to Purchase Shares of Series A Preferred Stock issued to
Randy Komisar dated March 18, 1998.
10.18 Warrant Agreement between Comdisco, Inc. and the Registrant dated
February 12, 1999.
10.19 Secured Convertible Debenture Purchase Agreement between the
Registrant and certain of its investors dated April 8, 1999, and
related documents.
10.20 First Amendment to Hard Disk Supply Agreement between Quantum and
the Registrant dated June 25, 1999.
10.21 Registrant's 401(k) Plan effective December 1, 1997.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
+10.22 Tribune Media Services Television Listing Agreement between
Tribune Media Services and the Registrant dated June 1, 1998.
+10.23 Amendment to the Data License Agreement between Teleworld Inc.,
and Tribune Media Services, Inc. between Tribune Media Services
and the Registrant dated November 10, 1998.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -----------------------
+ Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Such portions have been filed separately with the
Commission.
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules are omitted because they are not applicable, or because the
information is included in the Financial Statements or the Notes thereto.
Item 17. Undertakings
A. The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
B. 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 provisions described in Item 14 above, 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, 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.
C. The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of 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 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Registration Statement to be signed on its behalf, by the
undersigned, thereunto duly authorized, in the City of Sunnyvale, County of
Santa Clara, State of California, on July 22, 1999.
TiVo Inc.
By: /s/ Michael Ramsay
___________________________________
Michael Ramsay
President, Chief Executive
Officer and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael Ramsay and David H. Courtney, and each
of them, his attorneys-in-fact, each with the power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto in all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof. Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael Ramsay President, Chief Executive July 22, 1999
______________________________________ Officer, and Chairman of
Michael Ramsay the Board (Principal
Executive Officer)
/s/ David H. Courtney Vice President of Finance July 22, 1999
______________________________________ and Chief Financial
David H. Courtney Officer (Principal
Financial and Accounting
Officer)
/s/ James Barton Vice President of Research July 22, 1999
______________________________________ and Development, Chief
James Barton Technical Officer and
Director
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Geoffrey Y. Yang Director July 22, 1999
______________________________________
Geoffrey Y. Yang
/s/ Stewart Alsop Director July 22, 1999
______________________________________
Stewart Alsop
/s/ Randy Komisar Director July 22, 1999
______________________________________
Randy Komisar
/s/ Larry N. Chapman Director July 22, 1999
______________________________________
Larry N. Chapman
/s/ Thomas S. Rogers Director July 22, 1999
______________________________________
Thomas S. Rogers
/s/ Michael J. Homer Director July 22, 1999
______________________________________
Michael J. Homer
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation to be in
effect immediately upon the closing of the offering.
3.3 Bylaws of the Registrant as currently in effect.
3.4 Amended and Restated Bylaws of the Registrant to be in effect
immediately following the closing of the Offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
*4.2 Specimen Common Stock Certificate.
4.3 Eighth Amended and Restated Investor Rights Agreement between the
Registrant and certain investors dated July 21, 1999.
*5.1 Opinion of Cooley Godward LLP.
10.1 Form of Indemnification Agreement between the Registrant and its
officers and directors.
10.2 Registrant's 1999 Equity Incentive Plan and related documents.
10.3 Registrant's Amended and Restated 1997 Equity Incentive Plan and
related documents.
10.4 Registrant's 1999 Employee Stock Purchase Plan and related
documents.
10.5 Registrant's 1999 Non-Employee Directors' Stock Option Plan and
related documents.
+10.6 Hard Disk Drive Supply Agreement between Quantum Corporation and
the Registrant dated November 6, 1998.
+10.7 Master Agreement between Philips Business Electronics B.V. and the
Registrant dated March 31, 1999.
+10.8 Marketing Agreement between DIRECTV, Inc. and the Registrant dated
April 13, 1999.
+10.9 Agreement between NBC Multimedia, Inc. and the Registrant dated
April 16, 1999.
10.10 Sublease Agreement between Verity, Inc. and the Registrant dated
February 23, 1998.
10.11 Amendment to Sublease Agreement between Verity, Inc. and the
Registrant dated November 1998.
10.12 Second Amendment to Sublease Agreement between Verity, Inc. and
the Registrant dated March 1999.
10.13 Consent of Landlord to Sublease between Verity, Inc. and the
Registrant dated February 23, 1998.
10.14 Loan and Security Agreement between Silicon Valley Bank and the
Registrant dated December 15, 1997.
10.15 Master Lease Agreement between Comdisco, Inc. and the Registrant
dated February 12, 1999.
+10.16 Warrant Purchase and Equity Rights Agreement between Quantum
Corporation and the Registrant dated November 6, 1998 and related
documents.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
10.17 Warrant to Purchase Shares of Series A Preferred Stock issued to
Randy Komisar dated March 18, 1998.
10.18 Warrant Agreement between Comdisco, Inc. and the Registrant dated
February 12, 1999.
10.19 Secured Convertible Debenture Purchase Agreement between the
Registrant and certain of its investors dated April 8, 1999, and
related documents.
10.20 First Amendment to Hard Disk Supply Agreement between Quantum and
the Registrant dated June 25, 1999.
10.21 Registrant's 401(k) Plan effective December 1, 1997.
+10.22 Tribune Media Services Television Listing Agreement between
Tribune Media Services and the Registrant dated June 1, 1998.
+10.23 Amendment to the Data License Agreement between Teleworld Inc.,
and Tribune Media Services, Inc. between Tribune Media Services
and the Registrant dated November 10, 1998.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -----------------------
+ Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Such portions have been filed separately with the
Commission.
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
TIVO INC.
Pursuant to Sections 242 and 245 of Delaware Code
Michael Ramsay and Alan C. Mendelson hereby certify that:
1. The name of this corporation is TiVo Inc. The name under which
this corporation was originally incorporated is Teleworld Inc. and the date of
filing the original Certificate of Incorporation of this corporation with the
Secretary of State of the State of Delaware is August 4, 1997.
2. They are the duly elected and acting President and Secretary,
respectively, of TiVo Inc., a Delaware corporation.
3. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of the corporation is TiVo Inc. (the "Corporation" or the
"Company").
II.
The address of the registered office of the Corporation in the State
of Delaware is 15 East North Street, City of Dover, County of Kent. The name of
the Corporation's registered agent at said address is Amerisearch Corporate
Services Inc.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
A. This Corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is Seventy-Three
Million Four Hundred Fifteen Thousand (73,415,000) shares, Fifty Million
(50,000,000) shares of which shall be Common Stock (the "Common Stock") and
Twenty-Three Million Four Hundred Fifteen Thousand (23,415,000) shares of which
shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have
a par value of One-Tenth of One Cent ($.001) per share and the Common Stock
shall have a par value of One-Tenth of One Cent ($.001) per share.
B. The number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares of Common Stock then
outstanding or reserved for issuance upon conversion of outstanding Preferred
Stock) by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
1.
<PAGE>
C. Five Million Two Hundred Thousand (5,200,000) of the authorized
shares of Preferred Stock are hereby designated "Series A Preferred Stock," Four
Million Four Hundred Thousand (4,400,000) of the authorized shares of Preferred
Stock are hereby designated "Series B Preferred Stock," Four Million (4,000,000)
of the authorized shares of Preferred Stock are hereby designated "Series C
Preferred Stock," Two Million Five Hundred Thousand (2,500,000) of the
authorized shares of Preferred Stock are hereby designated "Series D Preferred
Stock," Three Hundred Thousand (300,000) of the authorized shares of Preferred
Stock are hereby designated "Series E Preferred Stock," Five Hundred Thousand
(500,000) of the authorized shares of Preferred Stock are hereby designated
"Series F Preferred Stock," One Million One Hundred Thousand (1,100,000) of the
authorized shares of Preferred Stock are hereby designated "Series G Preferred
Stock," Two Million One Hundred Thousand (2,100,000) of the authorized shares of
Preferred Stock are hereby designated "Series H Preferred Stock," and Three
Million Three Hundred Fifteen Thousand (3,315,000) of the authorized shares of
Preferred Stock are hereby designated "Series I Preferred Stock" (together, the
"Series Preferred").
D. The rights, preferences, privileges, restrictions and other
matters relating to the Series Preferred are as follows:
1. Dividend Rights.
(a) Holders of Series Preferred, in preference to the
holders of any other stock of the Company ("Junior Stock"), shall be entitled to
receive, when, if, and as declared by the Board of Directors, but only out of
funds that are legally available therefor, cash dividends at the rate of ten
percent (10%) of the "Original Issue Price" per annum on each outstanding share
of Series Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares). The Original Issue
Price of the Series A Preferred Stock shall be Sixty Cents ($.60), the Original
Issue Price of the Series B Preferred Stock shall be One Dollar and Twenty-Six
Cents ($1.26), the Original Issue Price of the Series C Preferred Stock shall be
One Dollar and Eighty-Five Cents ($1.85), the Original Issue Price of the Series
D Preferred Stock shall be Three Dollars and Sixty-Eight Cents ($3.68), the
Original Issue Price of the Series E Preferred Stock shall be Seven Dollars and
Forty Cents ($7.40), the Original Issue Price of the Series F Preferred Stock
shall be Seven Dollars and Forty Cents ($7.40), the Original Issue Price of the
Series G Preferred Stock shall be Seven Dollars and Forty Cents ($7.40), the
Original Issue Price of the Series H Preferred Stock shall be Seven Dollars and
Forty Cents ($7.40) and the Original Issue Price of the Series I Preferred Stock
shall be Ten Dollars and Forty-One Cents ($10.41). Such dividends shall be
payable only when, as and if declared by the Board of Directors and shall be
non-cumulative. Each share of Series Preferred shall rank on a parity with each
other share of Series Preferred, irrespective of series, with respect to
dividends, and no dividends shall be declared or paid or set apart for payment
on any series of Series Preferred unless at the same time a dividend, bearing
the same proportion to the applicable dividend rate, shall be declared or paid
or set apart for payment, as the case may be, on each other series of Series
Preferred then outstanding.
(b) So long as any shares of Series Preferred shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions
2.
<PAGE>
of Common Stock by the Company pursuant to agreements which permit the Company
to repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 1(a) above) on the Series Preferred shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Series Preferred in an amount per share (on an as-if-
converted to Common Stock basis) equal to the amount paid or set aside for each
share of Common Stock. The provisions of this Section 1(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is unanimously
approved by the Company's Board of Directors.
2. Voting Rights.
(a) General Rights. Except as otherwise provided herein or
as required by law, the Series Preferred shall be voted equally with the shares
of the Common Stock of the Company and not as a separate class, at any annual or
special meeting of shareholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
(b) Separate Vote of Series Preferred. For so long as at
least 4,000,000 shares of Series Preferred (subject to adjustment for any stock
split, reverse stock split or other similar event affecting the Series
Preferred) remain outstanding, in addition to any other vote or consent required
herein or by law, the vote or written consent of the holders of at least sixty-
six and two-thirds percent (66 2/3%) of the outstanding Series Preferred shall
be necessary for effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or the Bylaws of the Company,
whether by merger, consolidation or otherwise (including any filing of a
Certificate of Designation);
(ii) Alteration or change in the voting powers,
preferences, or other special rights or privileges, qualifications, limitations,
or restrictions of the Series Preferred, whether by merger, consolidation or
otherwise;
(iii) Any increase or decrease (other than by
redemption or conversion) in the authorized number of shares of Preferred Stock;
(iv) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series Preferred in right of redemption, liquidation
preference, voting or dividends or any increase in the authorized or designated
number of any such new class or series;
3.
<PAGE>
(v) Any redemption, repurchase, payment of dividends
or other distributions with respect to Junior Stock (except for acquisitions of
Common Stock by the Company pursuant to employee agreements which permit the
Company to repurchase such shares upon termination of services to the Company or
in exercise of the Company's right of first refusal upon a proposed transfer);
(vi) An Asset Transfer or Acquisition (each as
defined in Section 3(c));
(vii) A reclassification or recapitalization of the
outstanding capital stock of the Company; or
(viii) Any increase or decrease in the authorized
number of members of the Company's Board of Directors.
(c) Election of Board of Directors. For so long as at least
4,000,000 shares of Series Preferred remain outstanding (subject to adjustment
for any stock split, reverse stock split or similar event affecting the Series
Preferred), (i) the holders of Series A Preferred Stock and Series B Preferred
Stock, voting together as a separate class, shall be entitled to elect two (2)
members of the Company's Board of Directors at each meeting or pursuant to each
consent of the Company's shareholders for the election of directors, and to
remove from office such directors and to fill any vacancy caused by the
resignation, death or removal of such directors; (ii) the holders of Common
Stock, voting as a separate class, shall be entitled to elect two (2) members of
the Board of Directors at each meeting or pursuant to each consent of the
Company's shareholders for the election of directors, and to remove from office
such directors and to fill any vacancy caused by the resignation, death or
removal of such directors; (iii) the holders of Series C Preferred Stock, Series
D Preferred Stock and Series E Preferred Stock, voting together as a separate
class, shall be entitled to elect one (1) member of the Board of Directors at
each meeting or pursuant to each consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such director; (iv) the
holders of Series G Preferred Stock, voting as a separate class, shall be
entitled to elect one (1) member of the Board of Directors at each meeting or
pursuant to each consent of the Company's shareholders for the election of
directors, and to remove from office such director and to fill any vacancy
caused by the resignation, death or removal of such director; (v) the holders of
Series H Preferred Stock, voting as a separate class, shall be entitled to elect
one (1) member of the Board of Directors at each meeting or pursuant to each
consent of the Company's shareholders for the election of directors, and to
remove from office such director and to fill any vacancy caused by the
resignation, death or removal of such director; (vi) the holders of Series I
Preferred Stock, voting as a separate class, shall be entitled to elect one (1)
member of the Board of Directors at each meeting or pursuant to each consent of
the Company's shareholders for the election of directors, and to remove from
office such director and to fill any vacancy caused by the resignation, death or
removal of such director; and (vii) the holders of Common Stock and Series
Preferred, voting together as a class, shall be entitled to elect all remaining
members of the Board of Directors.
4.
<PAGE>
3. Liquidation Rights.
(a) Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Series
Preferred shall be entitled to be paid out of the assets of the Company an
amount per share of Series Preferred equal to the respective Original Issue
Price (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus all declared
and unpaid dividends on the Series Preferred Stock for each share of Series
Preferred held by them.
(b) After the payment of the full liquidation preference of
the Series Preferred as set forth in Section 3(a) above, the remaining assets of
the Company legally available for distribution, if any, shall be distributed
ratably to the holders of the Common Stock.
(c) The following events shall be considered a liquidation
under this Section:
(i) any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions in which in excess of fifty
percent (50%) of the Company's voting power is transferred (an "Acquisition");
or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) If, upon any liquidation, distribution, or
winding up, the assets of the Company shall be insufficient to make payment in
full to all holders of Series Preferred of the liquidation preference set forth
in Sections 3(a), then such assets shall be distributed among the holders of
Series Preferred at the time outstanding, ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
4. Conversion Rights. The holders of the Series Preferred shall
have the following rights with respect to the conversion of the Series Preferred
into shares of Common Stock (the "Conversion Rights"):
(a) Optional Conversion. Subject to and in compliance with
the provisions of this Section 4, any shares of Series Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series Conversion Rate" then in effect (determined
as provided in Section 4(b)) by the number of shares of Series Preferred being
converted.
(b) Series Preferred. The Series Conversion Rate in effect
at any time for conversion of the Series Preferred (the "Series Conversion
Rate") shall be the quotient
5.
<PAGE>
obtained by dividing the respective Original Issue Price for each series of the
Series Preferred by the "Series Preferred Price" for such series, calculated as
provided in Section 4(c).
(c) Conversion Price. The conversion price for each series
of the Series Preferred shall initially be the respective Original Issue Price
of such series (in each case, the "Series Preferred Price"). Each such initial
Series Preferred Price shall be adjusted from time to time in accordance with
this Section 4. All references to any Series Preferred Price herein shall mean
such Series Preferred Price as so adjusted.
(d) Mechanics of Conversion. Each holder of Series
Preferred who desires to convert the same into shares of Common Stock pursuant
to this Section 4 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Series
Preferred, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series Preferred being converted. Thereupon, the Company shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series Preferred being converted.
Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificates representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(e) Adjustment for Stock Splits and Combinations. If the
Company shall at any time or from time to time after the date that the first
share of Series Preferred is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, each Series Preferred Price in effect immediately before
that subdivision shall be proportionately decreased. Conversely, if the Company
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Preferred Stock, each Series Preferred Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Common Stock Dividends and
Distributions. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event each Series
Preferred Price that is then in effect shall be decreased as of the time of such
issuance or, in the event such record date is fixed, as of the close of business
on such record date, by multiplying each Series Preferred Price then in effect
by a fraction (i) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (ii) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of
6.
<PAGE>
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Series Preferred Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series Preferred Price shall be
adjusted pursuant to this Section 4(f) to reflect the actual payment of such
dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. If
the Company at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Company which they
would have received had their Series Preferred been converted into Common Stock
on the date of such event and had they thereafter, during the period from the
date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series Preferred or with respect to
such other securities by their terms.
(h) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series Preferred is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4), in
any such event each holder of Series Preferred shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or other change
by holders of the maximum number of shares of Common Stock into which such
shares of Series Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(i) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than an Acquisition or
Asset Transfer as defined in Section 3(c)) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4, as a part of such capital reorganization, provision
shall be made so that the holders of the Series Preferred shall thereafter be
entitled to receive upon conversion of the Series Preferred the number of shares
of stock or other securities or property of the Company to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of Series Preferred after the capital
reorganization to the end that the provisions of this Section 4 (including
adjustment of each Series Preferred Price then in effect and the number
7.
<PAGE>
of shares issuable upon conversion of the Series Preferred) shall be applicable
after that event and be as nearly equivalent as practicable.
(j) Sale of Shares Below Series Preferred Price.
(i) If at any time or from time to time after the
Original Issue Date, the Company issues or sells, or is deemed by the express
provisions of this Section 4(j) to have issued or sold, Additional Shares of
Common Stock (as defined in Section 4(j)(iv) below) or Non-Convertible
Securities (as defined in Section 4(j)(iii) below), other than as a dividend or
other distribution on any class of stock as provided in Section 4(f) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section 4(e) above, for an Effective Price (as defined in Section 4(j)(iv)
below) less than the then effective Series Preferred Price for one or more
series of Series Preferred, then and in each such case each then existing Series
Preferred Price that is higher than the Effective Price shall be reduced, as of
the opening of business on the date of such issue or sale, to a price determined
by multiplying such Series Preferred Price by a fraction (i) the numerator of
which shall be (A) the number of shares of Common Stock deemed outstanding (as
defined below) immediately prior to such issue or sale, plus (B) the number of
shares of Common Stock which the aggregate consideration received (as defined in
Section 4(j)(ii)) by the Company for the total number of Additional Shares of
Common Stock or Non-Convertible Securities so issued would purchase at such
Series Preferred Price, and (ii) the denominator of which shall be the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus the total number of Additional Shares of Common Stock
so issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Series
Preferred could be converted if fully converted on the day immediately preceding
the given date, and (C) the number of shares of Common Stock which could be
obtained through the exercise or conversion of all other rights, options and
convertible securities on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required
under this Section 4(j), the consideration received by the Company for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale but without deduction of
any expenses payable by the Company, (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined in
good faith by the Board of Directors, and (C) if Additional Shares of Common
Stock, Non-Convertible Securities, Convertible Securities (as defined in Section
4(j)(iii)) or rights or options to purchase either Additional Shares of Common
Stock, Non-Convertible Securities or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock, Non-
Convertible Securities, Convertible Securities or rights or options.
8.
<PAGE>
(iii) For the purpose of the adjustment required under
this Section 4(j), if the Company issues or sells (i) any rights or options for
the purchase of, or stock or other securities convertible into, Additional
Shares of Common Stock (such convertible stock or securities being herein
referred to as "Convertible Securities") or (ii) stock or other securities not
convertible into Additional Shares of Common Stock (such stock or securities
being herein referred to as "Non-Convertible Securities") and if the Effective
Price of such Additional Shares of Common Stock or Non-Convertible Securities is
less than the Series Preferred Price for one or more series of Series Preferred,
in each case the Company shall be deemed to have issued at the time of the
issuance of such rights or options, Convertible Securities or Non-Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Company for the issuance of such rights
or options, Convertible Securities or Non-Convertible Securities, plus, in the
case of such rights or options, the minimum amounts of consideration, if any,
payable to the Company upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Company (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) upon the conversion thereof; provided
that if in the case of Convertible Securities the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses; provided
further that if the minimum amount of consideration payable to the Company upon
the exercise or conversion of rights, options or Convertible Securities is
reduced over time or on the occurrence or non-occurrence of specified events
other than by reason of antidilution adjustments, the Effective Price shall be
recalculated using the figure to which such minimum amount of consideration is
reduced; provided further that if the minimum amount of consideration payable to
the Company upon the exercise or conversion of such rights, options or
Convertible Securities is subsequently increased, the Effective Price shall be
again recalculated using the increased minimum amount of consideration payable
to the Company upon the exercise or conversion of such rights, options or
Convertible Securities. No further adjustment of any Series Preferred Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, each Series Preferred Price as adjusted upon the issuance
of such rights, options or Convertible Securities shall be readjusted to the
Series Preferred Price which would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were
the Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the
9.
<PAGE>
conversion of such Convertible Securities, provided that such readjustment shall
not apply to prior conversions of Series Preferred.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company or deemed to be issued pursuant
to this Section 4(j), whether or not subsequently reacquired or retired by the
Company other than (A) shares of Common Stock issued upon conversion of the
Series Preferred; (B) shares of Common Stock and/or options, warrants or other
Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like) after the Original Issue
Date to employees, officers or directors of, or consultants or advisors to the
Company pursuant to stock purchase or stock option plans or other arrangements
that are approved by the Board; (C) shares of Common Stock or Preferred Stock,
or securities convertible into or with rights to purchase Common Stock or
Preferred Stock, issued in connection with acquisition transactions, where such
transactions have been approved by the Board of Directors of the Company (D)
shares of Common Stock or Preferred Stock, or other securities convertible into
or with rights to purchase shares of Common Stock or Preferred Stock, issued to
financial and other institutions, lessors or vendors of the Company in
connection with the provision of credit to the Company; and (E) any shares of,
or securities convertible into, the Company's Common Stock or Preferred Stock
issued in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements; provided
that such strategic transactions, and the issuance of shares therein, have been
approved by the Company's Board of Directors. The "Effective Price" of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Company under this Section 4(j), into the
aggregate consideration received, or deemed to have been received by the Company
for such issue under this Section 4(j), for such Additional Shares of Common
Stock.
(k) Certificate of Adjustment. In each case of an
adjustment or readjustment of the Series Preferred Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series Preferred, if the Series Preferred is then convertible pursuant to this
Section 4, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series Preferred
at the holder's address as shown in the Company's books. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon
which such adjustment or readjustment is based, including a statement of (i) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Series Preferred Price at the time in effect for such series
of Series Preferred, (iii) the number of Additional Shares of Common Stock and
(iv) the type and amount, if any, of other property which at the time would be
received upon conversion of the Series Preferred.
(l) Notices of Record Date. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders
10.
<PAGE>
thereof who are entitled to receive any dividend or other distribution, or (ii)
any Acquisition (as defined in Section 3(c) or other capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company, any merger or consolidation of the Company with or into any other
corporation, or any Asset Transfer (as defined in Section 3(c)), or any
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to each holder of Series Preferred at least twenty (20)
days prior to the record date specified therein a notice specifying (A) the date
on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is
expected to become effective, and (C) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(m) Automatic Conversion.
(i) Each share of Series Preferred shall
automatically be converted into shares of Common Stock, based on the then-
effective Series Preferred Price for such series of Series Preferred, (A) at any
time upon the affirmative election of the holders of at least sixty-six and two-
thirds percent (66 2/3%) of the outstanding shares of the Series Preferred, or
(B) immediately upon the closing of a firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Company in which (i) the per share price is at least Ten Dollars and Forty-
One Cents ($10.41) per share (as adjusted for stock splits, combinations and
similar events) and (ii) the gross cash proceeds to the Company (before
underwriting discounts, commissions and fees) are not less than $15,000,000.
Upon such automatic conversion, any declared and unpaid dividends shall be paid
in accordance with the provisions of Section 4(d).
(ii) Upon the occurrence of the event specified in
paragraph (i) above, the outstanding shares of Series Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series Preferred, the holders of Series Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series Preferred. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series Preferred
11.
<PAGE>
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 4(d).
(n) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
(o) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(p) Notices. Any notice required by the provisions of this
Section 4 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
(q) Payment of Taxes. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted were registered.
(r) No Dilution or Impairment. Without the consent of the
holders of then outstanding Series Preferred as required under Section 2(b), the
Company shall not amend its Amended and Restated Certificate of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or take any other voluntary action, for
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but shall at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Series Preferred against dilution or other impairment.
12.
<PAGE>
5. No Preemptive Rights. Stockholders shall have no preemptive
rights except as granted by the Company pursuant to written agreements.
IV.
A. A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article IV shall only be
prospective and shall not effect the rights under this Article IV in effect at
the time of the alleged occurrence of any action or omission to act giving rise
to liability.
V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. The Board of Directors may from time to time make, amend, supplement
or repeal the Bylaws; provided, however, that the stockholders may change or
repeal any Bylaw adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
* * * *
4. This Amended and Restated Certificate of Incorporation has been duly
approved by the Board of Directors of this Corporation.
13.
<PAGE>
5. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 228 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation.
14.
<PAGE>
In Witness Whereof, TiVo Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the President and the Secretary
this 21/st/ day of July, 1999.
TiVo Inc.
By: /s/ Michael Ramsay
---------------------------------
Michael Ramsay, President
Attest:
By: /s/ Alan C. Mendelson
-------------------------------------
Alan C. Mendelson, Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TIVO INC.
TiVo Inc., a corporation organized and existing under the laws of the state
of Delaware (the "Corporation") hereby certifies that:
1. The name of the Corporation is TiVo Inc. The name under which this
corporation was originally incorporated is Teleworld Inc.
2. The date of filing of the Corporation's original Certificate of
Incorporation was August 4, 1997.
3. The Amended and Restated Certificate of Incorporation of the
Corporation as provided in Exhibit A hereto was duly adopted in accordance with
the provisions of Section 242 and Section 245 of the General Corporation Law of
the State of Delaware by the Board of Directors of the Corporation.
4. Pursuant to Section 245 of the Delaware General Corporation Law,
approval of the stockholders of the Corporation has been obtained.
5. The Amended and Restated Certificate of Incorporation so adopted reads
in full as set forth in Exhibit A attached hereto and is hereby incorporated by
reference.
In Witness Whereof, the undersigned has signed this certificate this ___
day of ______, 1999, and hereby affirms and acknowledges under penalty of
perjury that the filing of this Amended and Restated Certificate of
Incorporation is the act and deed of TiVo Inc.
TiVo Inc.
By
__________________________________
Michael Ramsay
President and Chief Executive Officer
<PAGE>
AMENDED AND RESTATED Exhibit A
CERTIFICATE OF INCORPORATION
OF
TIVO INC.
I.
The name of this corporation is TiVo Inc.
II.
The address of the registered office of the Corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent, DE 19901. The
name of the registered agent of the Corporation in the State of Delaware at such
address is Amerisearch Corporate Services Inc.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is seventy seven million
(77,000,000) shares. Seventy five million (75,000,000) shares shall be Common
Stock, each having a par value of one tenth of one cent ($.001). Two million
(2,000,000) shares shall be Preferred Stock, each having a par value of one
tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
A. For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation,
1
<PAGE>
of its directors and of its stockholders or any class thereof, as the case may
be, it is further provided that:
(1) The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
(2) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, and to any
restrictions or limitations of applicable law, following the closing of the
initial public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, covering the offer and sale of Common
Stock to the public (the "Initial Public Offering"), the directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class I directors shall expire and Class I directors
shall be elected for a full term of three years. At the second annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the Corporation, entitled to vote at an election of directors (the "Voting
Stock"). The Board of Directors or any individual director may not be removed
from office without cause.
(4) Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full
2
<PAGE>
term of the director for which the vacancy was created or occurred and until
such director's successor shall have been elected and qualified.
B. (1) Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
(2) The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
(3) There shall be no cumulative voting by the stockholder's of this
Corporation.
(4) No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
(5) Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
3
<PAGE>
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, or this
Certificate of Incorporation, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock, voting together as a single class,
shall be required to alter, amend or repeal Articles V, VI and VII.
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
TiVo Inc.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I OFFICES............................................................................... 1
Section 1. Registered Office................................................................. 1
Section 2. Other Offices..................................................................... 1
ARTICLE II CORPORATE SEAL........................................................................ 1
Section 3. Corporate Seal.................................................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS................................................................ 1
Section 4. Place of Meetings................................................................. 1
Section 5. Annual Meeting.................................................................... 1
Section 6. Special Meetings.................................................................. 2
Section 7. Notice of Meetings................................................................ 3
Section 8. Quorum............................................................................ 3
Section 9. Adjournment and Notice of Adjourned Meetings...................................... 4
Section 10. Voting Rights..................................................................... 4
Section 11. Joint Owners of Stock............................................................. 4
Section 12. List of Stockholders.............................................................. 4
Section 13. Action Without Meeting............................................................ 5
Section 14. Organization...................................................................... 5
ARTICLE IV DIRECTORS............................................................................. 6
Section 15. Number and Term of Office......................................................... 6
Section 16. Powers............................................................................ 6
Section 17. Term of Directors................................................................. 6
Section 18. Vacancies......................................................................... 6
Section 19. Resignation....................................................................... 7
Section 20. Removal........................................................................... 7
Section 21. Meetings.......................................................................... 7
(a) Annual Meetings................................................................... 7
(b) Regular Meetings.................................................................. 7
(c) Special Meetings.................................................................. 7
(d) Telephone Meetings................................................................ 7
(e) Notice of Meetings................................................................ 8
(f) Waiver of Notice.................................................................. 8
Section 22. Quorum and Voting................................................................. 8
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
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Section 23. Action Without Meeting............................................................ 8
Section 24. Fees and Compensation............................................................. 8
Section 25. Committees........................................................................ 9
(a) Executive Committee............................................................... 9
(b) Other Committees.................................................................. 9
(c) Term.............................................................................. 9
(d) Meetings.......................................................................... 10
Section 26. Organization...................................................................... 10
ARTICLE V OFFICERS.............................................................................. 10
Section 27. Officers Designated............................................................... 10
Section 28. Tenure and Duties of Officers..................................................... 11
(a) General........................................................................... 11
(b) Duties of Chairman of the Board of Directors...................................... 11
(c) Duties of President............................................................... 11
(d) Duties of Vice Presidents......................................................... 11
(e) Duties of Secretary............................................................... 11
(f) Duties of Chief Financial Officer................................................. 11
Section 29. Delegation of Authority........................................................... 12
Section 30. Resignations...................................................................... 12
Section 31. Removal........................................................................... 12
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION.. 12
Section 32. Execution of Corporate Instruments................................................ 12
Section 33. Voting of Securities Owned by the Corporation..................................... 13
ARTICLE VII SHARES OF STOCK....................................................................... 13
Section 34. Form and Execution of Certificates................................................ 13
Section 35. Lost Certificates................................................................. 14
Section 36. Transfers......................................................................... 14
Section 37. Fixing Record Dates............................................................... 14
Section 38. Registered Stockholders........................................................... 15
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION................................................... 15
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
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Section 39. Execution of Other Securities.................................................... 15
ARTICLE IX DIVIDENDS............................................................................ 16
Section 40. Declaration of Dividends......................................................... 16
Section 41. Dividend Reserve................................................................. 16
ARTICLE X FISCAL YEAR.......................................................................... 16
Section 42. Fiscal Year...................................................................... 16
ARTICLE XI INDEMNIFICATION...................................................................... 16
Section 43. Indemnification of Directors, Executive Officers, Other Officers,
Employees and Other Agents....................................................... 16
(a) Directors and Executive Officers................................................. 16
(b) Officers, Employees and Other Agents............................................. 17
(c) Expenses......................................................................... 17
(d) Enforcement...................................................................... 17
(e) Non-Exclusivity of Rights........................................................ 18
(f) Survival of Rights............................................................... 18
(g) Insurance........................................................................ 18
(h) Amendments....................................................................... 18
(i) Saving Clause.................................................................... 18
(j) Certain Definitions.............................................................. 18
ARTICLE XII NOTICES.............................................................................. 19
Section 44. Notices.......................................................................... 19
(a) Notice to Stockholders........................................................... 19
(b) Notice to Directors.............................................................. 19
(c) Affidavit of Mailing............................................................. 19
(d) Time Notices Deemed Given........................................................ 20
(e) Methods of Notice................................................................ 20
(f) Failure to Receive Notice........................................................ 20
(g) Notice to Person with Whom Communication Is Unlawful............................. 20
(h) Notice to Person with Undeliverable Address...................................... 20
ARTICLE XIII AMENDMENTS........................................................................... 21
Section 45. Amendments....................................................................... 21
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TABLE OF CONTENTS
(Continued)
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ARTICLE XIV RIGHT OF FIRST REFUSAL............................................................... 21
Section 46. Right of First Refusal........................................................... 21
ARTICLE XV LOANS TO OFFICERS.................................................................... 23
Section 47. Loans to Officers................................................................ 23
ARTICLE XVI MISCELLANEOUS........................................................................ 24
Section 48. Annual Report.................................................................... 24
</TABLE>
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<PAGE>
BYLAWS
OF
TiVo Inc.
(A DELAWARE CORPORATION)
ARTICLE 1
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought
1
<PAGE>
before an annual meeting, business must be: (A) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (B) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (C) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total
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number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is presented
to the Board of Directors for adoption) or (iv) by the holders of shares
entitled to cast not less than sixty six and two-thirds percent (66 2/3%) of the
votes at the meeting, and shall be held at such place, on such date, and at such
time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
Section 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, including
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided,
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however, that directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by statute or by the
Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes
cast, including abstentions, by the holders of shares of such class or classes
or series shall be the act of such class or classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to
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vote at said meeting, arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not specified, at the place where the meeting is
to be held. The list shall be produced and kept at the time and place of meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
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(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
Directors
Section 15. Number and Term of Office.
The authorized number of directors of the corporation shall be fixed
by the Board of Directors from time to time. Directors need not be stockholders
unless so required by the Certificate of Incorporation. If for any cause, the
directors shall not have been elected at an annual meeting, they may be elected
as soon thereafter as convenient at a special meeting of the stockholders called
for that purpose in the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Term of Directors. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year. Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal. No decrease
in the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or
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occurred and until such director's successor shall have been elected and
qualified. A vacancy in the Board of Directors shall be deemed to exist under
this Bylaw in the case of the death, removal or resignation of any director.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least a majority of the voting power of all the then-outstanding
shares of the Voting Stock.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
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(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, postage prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed
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to preclude any director from serving the corporation in any other capacity as
an officer, agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) Other Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
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unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any director by attendance thereat, except when the
director attends such special meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTILCE V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
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Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the
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order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
Section 29. Delegation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTILCE VI
Execution Of Corporate Instruments And Voting
Of Securities Owned By The Corporation
Section 32. Execution of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock of
the corporation, shall be executed, signed or endorsed by the Chairman of the
Board of Directors, or the President or any Vice President, and by the Secretary
or Treasurer or any Assistant Secretary or Assistant Treasurer. All other
instruments and
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documents requiring the corporate signature, but not requiring the corporate
seal, may be executed as aforesaid or in such other manner as may be directed by
the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
Shares Of Stock
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences
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and/or rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within 10 days after the
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date on which such a request is received, adopt a resolution fixing the record
date. If no record date has been fixed by the Board of Directors within 10 days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTILCE VIII
Other Securities Of The Corporation
Section 39. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate
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security, authenticated by a trustee as aforesaid, shall be signed by the
Treasurer or an Assistant Treasurer of the corporation or such other person as
may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
Dividends
Section 40. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTILCE X
Fiscal Year
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
Indemnification
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors and Executive Officers. The corporation shall indemnify
its directors and officers to the fullest extent not prohibited by the Delaware
General Corporation Law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or
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part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) Officers, Employees and Other Agents. The corporation shall have
power to indemnify its officers, employees and other agents as set forth in the
Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an officer of
the corporation (except by reason of the fact that such officer is or was a
director of the corporation in which event this paragraph shall not apply) in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware
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General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent)
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absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this Bylaw
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
Notices
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or
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notices was or were given, and the time and method of giving the same, shall in
the absence of fraud, be prima facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
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ARTICLE XIII
Amendments
Section 45. Amendments.
Subject to paragraph (h) of Section 43 of the Bylaws, these Bylaws may be
amended or repealed and new Bylaws adopted by the stockholders entitled to vote.
The Board of Directors shall also have the power, if such power is conferred
upon the Board of Directors by the Certificate of Incorporation, to adopt,
amend, or repeal Bylaws (including, without limitation, the amendment of any
Bylaw setting forth the number of Directors who shall constitute the whole Board
of Directors).
ARTICLE XIV
Right Of First Refusal
Section 46. Right of First Refusal. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(a) If the stockholder desires to sell or otherwise transfer any of
his shares of stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice, the Secretary of the corporation shall so
notify the transferring stockholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring stockholder's notice; provided that if the terms of payment set
forth in said transferring stockholder's notice were other than cash against
delivery, the corporation
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and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring stockholder's notice.
(e) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring stockholder's notice,
said transferring stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(f) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A stockholder's transfer of any or all of such stockholder's
shares to the corporation or to any other stockholder of the corporation.
(4) A stockholder's transfer of any or all of such stockholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
(5) A corporate stockholder's transfer of any or all of its shares
pursuant to and in accordance with the terms of any merger, consolidation,
reclassification of shares or capital reorganization of the corporate
stockholder, or pursuant to a sale of all or substantially all of the stock or
assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its shares
to any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(g) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the
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stockholders, upon the express written consent of the owners of a majority of
the voting power of the corporation (excluding the votes represented by those
shares to be transferred by the transferring stockholder). This bylaw may be
amended or repealed either by a duly authorized action of the Board of Directors
or by the stockholders, upon the express written consent of the owners of a
majority of the voting power of the corporation.
(h) Any sale or transfer, or purported sale or transfer, of securities
of the corporation shall be null and void unless the terms, conditions, and
provisions of this bylaw are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On August 3, 2007;
(2) Upon the date securities of the corporation are first offered
to the public pursuant to a registration statement filed with, and declared
effective by, the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(j) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS
ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE CORPORATION."
ARTICLE XV
Loans To Officers
Section 47. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
23
<PAGE>
ARTICLE XVI
Miscellaneous
Section 48. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
24
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS
OF
TiVo INC.
(A DELAWARE CORPORATION)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I OFFICES................................................................................ 1
Section 1. Registered Office.................................................................. 1
Section 2. Other Offices...................................................................... 1
ARTICLE II CORPORATE SEAL......................................................................... 1
Section 3. Corporate Seal..................................................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS................................................................. 1
Section 4. Place Of Meetings.................................................................. 1
Section 5. Annual Meetings.................................................................... 1
Section 6. Special Meetings................................................................... 4
Section 7. Notice Of Meetings................................................................. 5
Section 8. Quorum............................................................................. 5
Section 9. Adjournment And Notice Of Adjourned Meetings....................................... 5
Section 10. Voting Rights...................................................................... 6
Section 11. Joint Owners Of Stock.............................................................. 6
Section 12. List Of Stockholders............................................................... 6
Section 13. Action Without Meeting............................................................. 6
Section 14. Organization....................................................................... 7
ARTICLE IV DIRECTORS.............................................................................. 8
Section 15. Number And Term Of Office.......................................................... 8
Section 16. Powers............................................................................. 8
Section 17. Classes of Directors............................................................... 8
Section 18. Vacancies.......................................................................... 9
Section 19. Resignation........................................................................ 10
Section 20. Removal............................................................................ 10
Section 21. Meetings........................................................................... 11
Section 22. Quorum And Voting.................................................................. 12
Section 23. Action Without Meeting............................................................. 12
Section 24. Fees And Compensation.............................................................. 12
Section 25. Committees......................................................................... 12
</TABLE>
i.
<PAGE>
Table of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 26. Organization...................................................................... 13
ARTICLE V OFFICERS.............................................................................. 14
Section 27. Officers Designated............................................................... 14
Section 28. Tenure And Duties Of Officers..................................................... 14
Section 29. Delegation Of Authority........................................................... 15
Section 30. Resignations...................................................................... 15
Section 31. Removal........................................................................... 16
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION........................................................................... 16
Section 32. Execution Of Corporate Instruments................................................ 16
Section 33. Voting Of Securities Owned By The Corporation..................................... 16
ARTICLE VII SHARES OF STOCK....................................................................... 16
Section 34. Form And Execution Of Certificates................................................ 16
Section 35. Lost Certificates................................................................. 17
Section 36. Transfers......................................................................... 17
Section 37. Fixing Record Dates............................................................... 17
Section 38. Registered Stockholders........................................................... 19
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION................................................... 19
Section 39. Execution Of Other Securities..................................................... 19
ARTICLE IX DIVIDENDS............................................................................. 19
Section 40. Declaration Of Dividends.......................................................... 19
Section 41. Dividend Reserve.................................................................. 19
ARTICLE X FISCAL YEAR........................................................................... 20
Section 42. Fiscal Year....................................................................... 20
ARTICLE XI INDEMNIFICATION....................................................................... 20
Section 43. Indemnification Of Directors, Officers, Employees And Other Agents................ 20
ARTICLE XII NOTICES............................................................................... 23
Section 44. Notices........................................................................... 23
ARTICLE XIII AMENDMENTS............................................................................ 25
</TABLE>
ii.
<PAGE>
Table of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 45. Amendments........................................................................ 25
ARTICLE XIV LOANS TO OFFICERS..................................................................... 25
Section 46. Loans To Officers................................................................. 25
</TABLE>
iii.
<PAGE>
BYLAWS
OF
TiVo INC.
(A DELAWARE CORPORATION)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a
1.
<PAGE>
stockholder of record at the time of giving of notice provided for in the
following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90/th/) day nor earlier than the close of business on
the one hundred twentieth (120/th/) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120/th/) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90/th/) day prior to such annual meeting
or the tenth (10/th/) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is
2.
<PAGE>
made (i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner, (ii) the class and number of
shares of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, and (iii) whether either such stockholder
or beneficial owner intends to deliver a proxy statement and form of proxy to
holders of, in the case of the proposal, at least the percentage of the
corporation's voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, a sufficient number of holders
of the corporation's voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10/th/) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive
3.
<PAGE>
Officer, (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (iv) the
holders of fifty percent of the Company's Common Stock.
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders only as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120/th/) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90/th/) day prior to such meeting or the tenth (10/th/)
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
4.
<PAGE>
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the
5.
<PAGE>
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with
the Secretary shows that any such tenancy is held in unequal interests, a
majority or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum
6.
<PAGE>
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the DGCL if such action had been voted on by stockholders at a meeting
thereof, then the certificate filed under such section shall state, in lieu of
any statement required by such section concerning any vote of stockholders, that
written consent has been given in accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for
7.
<PAGE>
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
Directors
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering, the directors shall be divided into
three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, this Section 17(a) shall become
effective and apply only when the corporation is a "listed" corporation within
the meaning of Section 301.5 of the CGCL.
(b) In the event that the corporation (i) is subject to Section
2115(b) of the CGCL and (ii) is not a "listed" corporation or ceases to be a
"listed" corporation under Section 301.5 of the CGCL, Section 17(a) of these
Bylaws shall not apply and all directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting.
(c) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation (i) is subject to (S)2115(b) of the CGCL and (ii) is
not a "listed" corporation or ceases to be a "listed"
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corporation under Section 301.5 of the CGCL. During this time, every stockholder
entitled to vote at an election for directors may cumulate such stockholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which such stockholder's
shares are otherwise entitled, or distribute the stockholder's votes on the same
principle among as many candidates as such stockholder thinks fit. No
stockholder, however, shall be entitled to so cumulate such stockholder's votes
unless (i) the names of such candidate or candidates have been placed in
nomination prior to the voting and (ii) the stockholder has given notice at the
meeting, prior to the voting, of such stockholder's intention to cumulate such
stockholder's votes. If any stockholder has given proper notice to cumulate
votes, all stockholders may cumulate their votes for any candidates who have
been properly placed in nomination. Under cumulative voting, the candidates
receiving the highest number of votes, up to the number of directors to be
elected, are elected.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
(c) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
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(1) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer subject
to Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section 20(a) above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
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(b) Regular Meetings. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
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(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any
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reason remove any individual committee member and the Board of Directors may
fill any committee vacancy created by death, resignation, removal or increase in
the number of members of the committee. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee, and, in addition,
in the absence or disqualification of any member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers
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and agents with such powers and duties as it shall deem necessary. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors.
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform
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other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
Execution Of Corporate Instruments And Voting Of Securities Owned By The
Corporation
Section 32. Execution Of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into
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contracts on behalf of the corporation, except where otherwise provided by law
or these Bylaws, and such execution or signature shall be binding upon the
corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
Shares Of Stock
Section 34. Form And Execution Of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face
or back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class
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of stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights. Except as otherwise expressly provided by
law, the rights and obligations of the holders of certificates representing
stock of the same class and series shall be identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the
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stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days of the date on which such a request is received,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
Other Securities Of The Corporation
Section 39. Execution Of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a
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trustee under an indenture pursuant to which such bond, debenture or other
corporate security shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate security
may be the imprinted facsimile of the signatures of such persons. Interest
coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
Dividends
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
Fiscal Year
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
19.
<PAGE>
ARTICLE XI
Indemnification
Section 43. Indemnification Of Directors, Officers, Employees And Other
Agents.
(a) Directors And Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the DGCL or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the DGCL or any other
applicable law. The Board of Directors shall have the power to delegate the
determination of whether indemnification shall be given to any such person to
such officers or other persons as the Board of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Section 43 or
otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
20.
<PAGE>
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
and officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or officer. Any right to indemnification or
advances granted by this Section 43 to a director or officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such officer is or
was a director of the corporation) for advances, the corporation shall be
entitled to raise a defense as to any such action clear and convincing evidence
that such person acted in bad faith or in a manner that such person did not
believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
be indemnified, or to such advancement of expenses, under this Section 43 or
otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
21.
<PAGE>
(g) Insurance. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) Amendments. Any repeal or modification of this Section 43 shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full to the full extent under any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as, respectively, a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
22.
<PAGE>
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
Notices
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be
23.
<PAGE>
required to act, or within which any director may exercise any power or right,
or enjoy any privilege, pursuant to any notice sent him in the manner above
provided, shall not be affected or extended in any manner by the failure of such
stockholder or such director to receive such notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
Amendments
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
24.
<PAGE>
ARTICLE XIV
Loans To Officers
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
25.
<PAGE>
Exhibit 4.3
TIVO INC.
EIGHTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. General........................................... 1
1.1 Definitions......................................... 1
Section 2. Registration; Restrictions on Transfer............ 3
2.1 Restrictions on Transfer............................ 3
2.2 Demand Registration................................. 4
2.3 Piggyback Registrations............................. 5
2.4 Form S-3 Registration............................... 6
2.5 Expenses of Registration............................ 7
2.6 Obligations of the Company.......................... 7
2.7 Termination of Registration Rights.................. 8
2.8 Delay of Registration; Furnishing Information....... 8
2.9 Indemnification..................................... 9
2.10 Assignment of Registration Rights................... 11
2.11 Amendment Of Registration Rights.................... 11
2.12 "Market Stand-Off" Agreement........................ 11
2.13 Rule 144 Reporting.................................. 12
Section 3. Covenants of the Company and Certain Stockholders. 12
3.1 Basic Financial Information and Reporting........... 12
3.2 Inspection Rights................................... 13
3.3 Confidentiality of Records.......................... 14
3.4 Strategic Value I, L.P. Board Observer.............. 14
3.5 Vulcan Ventures Incorporated Board Observer......... 14
3.6 Showtime Board Observer............................. 15
3.7 DIRECTV Board Seat.................................. 15
3.8 Series H Preferred Stock Board Seat................. 15
3.9 Series I Preferred Stock Board Seat................. 16
3.10 Future Authorization of Series I Preferred Stock.... 16
3.11 Reservation of Common Stock......................... 16
3.12 Proprietary Information and Inventions Agreement.... 16
3.13 Board of Directors.................................. 16
3.14 Termination of Covenants............................ 16
</TABLE>
<PAGE>
Table of Contents
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 4. Rights of First Refusal........................... 16
4.1 Subsequent Offerings................................ 16
4.2 Exercise of Rights.................................. 17
4.3 Issuance of Equity Securities to Other Persons...... 17
4.4 Termination of Rights of First Refusal.............. 17
4.5 Transfer of Rights of First Refusal................. 17
4.6 Excluded Securities................................. 17
Section 5. Miscellaneous..................................... 18
5.1 Governing Law....................................... 18
5.2 Survival............................................ 18
5.3 Successors and Assigns.............................. 18
5.4 Entire Agreement.................................... 18
5.5 Severability........................................ 18
5.6 Amendment and Waiver................................ 18
5.7 Delays or Omissions................................. 19
5.8 Notices............................................. 19
5.9 Titles and Subtitles................................ 19
5.10 Amendment of Prior Agreement........................ 19
5.11 Counterparts........................................ 20
</TABLE>
<PAGE>
TIVO INC.
EIGHTH AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Eighth Amended and Restated Investor Rights Agreement (the
"Agreement") is entered into as of the 21st day of July, 1999, by and among TiVo
Inc., a Delaware corporation (the "Company") and the purchasers of the Company's
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock
(together, the "Series Preferred") and Registrable Common Stock set forth on
Exhibit A hereto. The purchasers of the Series Preferred and Registrable Common
Stock shall be referred to hereinafter as the "Investors" and each individually
as an "Investor."
Recitals
Whereas, certain of the Investors hold shares of the Company's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock and Registrable Common Stock and
possess registration rights, information rights and other rights pursuant to
that certain Seventh Amended and Restated Investor Rights Agreement dated as of
April 23, 1999, between the Company and such Investors (the "Prior Agreement");
Whereas, the Company proposes to sell and issue up to Three Million Three
Hundred Fifteen Thousand (3,315,000) shares of its Series I Preferred Stock
pursuant to that certain Series I Preferred Stock Purchase Agreement by and
between the Company and the purchasers listed on Exhibit A thereto (the
"Purchase Agreement");
Whereas, the undersigned Investors who hold the Company's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock and Registrable Common Stock desire to
terminate the Prior Agreement and to accept the rights created pursuant hereto
in lieu of rights granted to them under the Prior Agreement; and
Whereas, in order to induce the Company and certain of the Investors to
enter into the Purchase Agreement, the Investors and the Company hereby agree
that this Agreement shall amend and restate the Prior Agreement and shall extend
to the Investors the registration rights, information rights and other rights as
set forth below.
Now, Therefore, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
Section 1. General
1.1 Definitions. As used in this Agreement the following terms shall have
the following respective meanings:
1.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Common Stock" means Common Stock of the Company issued to
DIRECTV, Inc., a California corporation ("DIRECTV"), pursuant to that Marketing
Agreement dated April 13, 1999, by and between the Company and DIRECTV.
"Registrable Securities" means (a) Common Stock of the Company issued
or issuable upon conversion of the Shares; (b) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities and
(c) the Registrable Common Stock. Notwithstanding the foregoing, Registrable
Securities shall not include any securities (i) sold by a person to the public
either pursuant to a registration statement or Rule 144, (ii) sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned, or (iii) held by a Holder whose registration rights have
expired under Section 2.7.
"Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2.
<PAGE>
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean the Company's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock held by the Investors listed on
Exhibit A hereto and their permitted assigns.
Section 2. Registration; Restrictions on Transfer.
2.1 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a reasonably
detailed written statement of the circumstances surrounding the proposed
disposition (such statement to include, without limitation, the name of the
transferee, the number of shares to be transferred, the price per share and type
of consideration to be received in the transfer (except for transfers to
affiliates that do not manufacture or distribute customizable personal
television systems or services) and the timing of such transfer) and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder (A) which is a partnership to its partners or former
partners in accordance with partnership interests, (B) which is a corporation to
its stockholders in accordance with their interest in the corporation, (C) which
is a limited liability company to its members or former members in accordance
with their interest in the limited liability company, (D) to the Holder's family
member or trust for the benefit of an individual Holder, or (E) to an affiliate
of Holder that does not manufacture or distribute customizable personal
television systems or services; provided that in each case the transferee will
be subject to the terms of this Agreement to the same extent as if he were an
original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
3.
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
INVESTOR RIGHTS AGREEMENT, AS AMENDED, THAT CONTAINS CERTAIN
RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES, INCLUDING
A MARKET STAND-OFF AGREEMENT. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of at least thirty percent
(30%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities having an aggregate offering price to
the public of at least $10,000,000 (a "Qualified Public Offering"), then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities
4.
<PAGE>
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of September 1, 2001 or 180 days
after the effective date of a registration statement pertaining to the Initial
Offering; and
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective.
2.3 Piggyback Registrations. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities in the above-
described notice. In such event, the right of any such Holder to be included in
a registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the
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underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; and third, to any stockholder of the Company
(other than a Holder) on a pro rata basis. No such reduction shall (i) reduce
the securities being offered by the Company for its own account to be included
in the registration and underwriting, or (ii) reduce the amount of securities of
the selling Holders included in the registration below thirty percent (30%) of
the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include shares
of any other selling stockholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence.
(b) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
2.4 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of at least 100,000 shares of Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 (or any
successor to Form S-3) or any similar short-form registration statement and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $3,000,000, or
(iii) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
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(iv) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All such Registration Expenses incurred in
connection with registrations requested pursuant to this Section 2.4 after the
first four (4) registrations shall be paid by the selling Holders pro rata in
proportion to the number of shares sold by each.
2.5 Expenses of Registration. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
2.6 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
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(d) Use all reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority in interest of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 Termination of Registration Rights. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (a) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, and (b)
all Registrable Securities held by and issuable to such Holder may be sold under
Rule 144 during any ninety (90) day period. Following such expiration provided
for in the preceding two sentences, such Holder's shares of Common Stock of the
Company shall no longer be considered Registrable Securities for purposes of
this Section 2.
2.8 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
8.
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(b) The Company shall not be required to submit any registration
statement to the Commission pursuant to Section 2.2, 2.3 or 2.4 if the selling
Holders have not furnished to the Company such information regarding themselves,
the Registrable Securities held by them and the intended method of disposition
of such securities as shall be required to effect the registration of their
Registrable Securities; provided, however, that the Company may eliminate the
shares proposed to be sold by any selling Holder from registration pursuant to
Section 2.2, 2.3 or 2.4 if such Holder has not provided such information, to the
reasonable satisfaction of the Company, within twenty (20) days of having
received written notice of a request for such information from the Company.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) The Company will indemnify and hold harmless each Holder, the
partners, officers, directors and legal counsel of each Holder, any underwriter
(as defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, officer, director, legal counsel, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided however, that the indemnity agreement contained in this Section
2.9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, legal counsel, underwriter or controlling person of such
Holder.
9.
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(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration qualifications or
compliance is being effected, indemnify and hold harmless the Company, each of
its directors, its officers, and legal counsel and each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder's partners, directors or officers or any person who
controls such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder under an instrument duly executed
by such Holder and stated to be specifically for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, legal counsel,
controlling person, underwriter or other Holder, or partner, officer, director,
legal counsel or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to
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the amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) (i) is
a subsidiary, parent, affiliate, general partner, limited partner or retired
partner of a Holder, or (ii) is a Holder's family member or trust for the
benefit of an individual Holder, and (b) acquires at least thirty percent (30%)
of the shares of Registrable Securities held by a Holder as of the date of this
Agreement. No assignment of Registrable Securities pursuant to this Section 2.10
shall be effective unless (A) the transferor shall, within ten (10) days after
such transfer, furnish to the Company written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and (B) such transferee shall agree to be
subject to all restrictions set forth in this Agreement.
2.11 Amendment Of Registration Rights. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least sixty-six and two-
thirds percent (66-2/3%) of the Registrable Securities then outstanding;
provided, however, that any alteration or change in the rights or privileges of
any series of Series Preferred that discriminates against such series of Series
Preferred shall additionally require the written consent of at least sixty-six
and two-thirds percent (66-2/3%) of such series of Series Preferred. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.
2.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period
11.
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specified by the representative of the underwriters of Common Stock (or other
securities) of the Company not to exceed one hundred eighty (180) days following
the effective date of a registration statement of the Company filed under the
Securities Act, provided that such agreement shall apply only to the Company's
Initial Offering.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.12 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.
2.13 Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
Section 3. Covenants of the Company and Certain Stockholders.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, the Company will
furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of income and a
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statement of cash flows of the Company, for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as practicable
after the end of each month, and in any event within thirty (30) days
thereafter, a balance sheet of the Company as of the end of each such month, and
a statement of income and a statement of cash flows of the Company for such
month and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles, with the exception that no notes need
be attached to such statements and year-end audit adjustments may not have been
made.
(d) To each Investor (with its affiliates) who owns not less than
four hundred eighty thousand (480,000) shares of Registrable Securities (a
"Major Investor"), the Company will furnish each such Major Investor (i) as soon
as practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made; (ii) at least thirty (30) days prior to the beginning of
each fiscal year an annual budget and operating plans for such fiscal year (and
as soon as available, any subsequent revisions thereto); and (iii) as soon as
practicable after the end of each month, and in any event within thirty (30)
days thereafter, a balance sheet of the Company as of the end of each such
month, and a statement of income and a statement of cash flows of the Company
for such month and for the current fiscal year to date, including a comparison
to plan figures for such period and to the financial statements for the
comparable period for the prior fiscal year, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
(e) In the event Showtime Networks, Inc. ("Showtime") has
Registrable Securities included in the Company's Registration Statement on Form
S-1 with the Securities and Exchange Commission in connection with the Company's
Initial Offering, as soon as practical after the filing of such Form S-1, and
any amendment thereto, the Company shall deliver to Showtime one (1) copy of (i)
such Form S-1 or amendment, and (ii) each exhibit as filed with such Form S-1 or
amendment.
3.2 Inspection Rights. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 3.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed. So long as NBC Multimedia,
Inc. and National Broadcasting Company, Inc.
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(including, in each case, their affiliates) do not manufacture or distribute
customizable personal television systems or services, the Company acknowledges
and agrees that NBC Multimedia, Inc. and National Broadcasting Company, Inc.
shall not be considered to be competitors of the Company for purposes of this
Section 3.2. So long as Walt Disney Company (including, in each case, their
affiliates) do not manufacture or distribute customizable personal television
systems or services, the Company acknowledges and agrees that Walt Disney
Company shall not be considered to be competitors of the Company for purposes of
this Section 3.2.
3.3 Confidentiality of Records. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 Strategic Value I, L.P. Board Observer. So long as Strategic Value
I, L.P. ("SVI") or one of its affiliates holds at least 730,000 shares of the
Company's Series C Preferred Stock or Common Stock, SVI shall have the right to
appoint a representative (the "SVI Representative") who shall have the right to
attend all meetings of the Company's Board of Directors in a nonvoting observer
capacity, to receive notice of such meetings and to receive the information
provided by the Company to the Board of Directors; provided, however, that the
Company may require as a condition precedent to SVI's rights under this Section
3.4 that each person proposing to attend any meeting of the Company's Board of
Directors and each person to have access to any of the information provided by
the Company to the Board of Directors shall agree to hold in confidence and
trust and to act in a fiduciary manner with respect to all information so
received during such meetings or otherwise; and, provided further, that the
Company reserves the right not to provide information and to exclude the SVI
Representative from any meeting or portion thereof if delivery of such
information or attendance at such meeting by such SVI Representative would
result in disclosure of trade secrets to the SVI Representative or would
adversely affect the attorney-client privilege between the Company and its
counsel. Notwithstanding the foregoing, SVI shall have no rights under this
Section 3.4 during any period in which an officer of SVI is serving as a
director of the Company.
3.5 Vulcan Ventures Incorporated Board Observer. So long as Vulcan
Ventures Incorporated ("Vulcan") or one of its affiliates holds at least
1,000,000 shares of the Company's Series D Preferred Stock or Common Stock,
Vulcan shall have the right to appoint a representative (the "Vulcan
Representative") who shall have the right to attend all meetings of the
Company's Board of Directors in a nonvoting observer capacity, to receive notice
of such meetings and to receive the information provided by the Company to the
Board of Directors; provided, however, that the Company may require as a
condition precedent to Vulcan's rights under this Section 3.5 that each person
proposing to attend any meeting of the Company's Board of Directors and each
person to have access to any of the information provided by the Company to the
Board of Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings or otherwise; and, provided further, that the Company reserves the
right not to provide information and to exclude
14.
<PAGE>
the Vulcan Representative from any meeting or portion thereof if delivery of
such information or attendance at such meeting by such Vulcan Representative
would result in disclosure of trade secrets to the Vulcan Representative or
would adversely affect the attorney-client privilege between the Company and its
counsel. Notwithstanding the foregoing, Vulcan shall have no rights under this
Section 3.5 during any period in which an officer of Vulcan is serving as a
director of the Company.
3.6 Showtime Board Observer. So long as Showtime or one of its
affiliates holds at least 200,000 shares of the Company's Series E Preferred
Stock or Common Stock, Showtime shall have the right to appoint a representative
(the "Showtime Representative") who shall have the right to attend all meetings
of the Company's Board of Directors in a nonvoting observer capacity, to receive
notice of such meetings and to receive the information provided by the Company
to the Board of Directors; provided, however, that the Showtime Representative
executes a nondisclosure agreement in a form acceptable to the Company; provided
further, that the Company may require as a condition precedent to Showtime's
rights under this Section 3.6 that each person proposing to attend any meeting
of the Company's Board of Directors and each person to have access to any of the
information provided by the Company to the Board of Directors shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so received during such meetings or otherwise; and, provided
further, that the Company reserves the right not to provide information and to
exclude the Showtime Representative from any meeting or portion thereof if
delivery of such information or attendance at such meeting by such Showtime
Representative would result in disclosure of trade secrets to the Showtime
Representative or would adversely affect the attorney-client privilege between
the Company and its counsel. Notwithstanding the foregoing, Showtime shall have
no rights under this Section 3.6 during any period in which an officer of
Showtime is serving as a director of the Company.
3.7 DIRECTV Board Seat. So long as DIRECTV, Inc. ("DIRECTV") or one of
its affiliates holds at least 2,500,000 shares of the Company's capital stock
(consisting of the Company's Series F Preferred Stock and Common Stock), the
Holders of the Company's Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock shall vote to designate a person designated by DIRECTV
as the director which such Holders are entitled to designate pursuant to Section
D.2(c)(iii) of Article III of the Company's Amended and Restated Certificate of
Incorporation; provided that the person initially designated by DIRECTV shall be
Larry N. Chapman and any subsequent replacement shall be chosen by such Holders
from a list of three executives of DIRECTV provided to such Holders in DIRECTV's
sole discretion. In addition to the requirements set forth in Section 5.6
below, and so long as DIRECTV or one of its affiliates holds at least 2,500,000
shares of the Company's capital stock (consisting of Series F Preferred Stock
and Common Stock), any amendment or waiver of this Section 3.7 shall require the
prior written consent of DIRECTV.
3.8 Series H Preferred Stock Board Seat. The Holders of all of the
outstanding shares of the Company's Series H Preferred Stock hereby agree that
any individual to be designated and elected as a director of the Company
pursuant to Section D.2(c)(v) of Article III of the Company's Amended and
Restated Certificate of Incorporation shall be mutually agreed to by such
Holders and all other directors of the Company.
15.
<PAGE>
3.9 Series I Preferred Stock Board Seat. The individual designated and
elected by the holders of Series I Preferred Stock as a director of the Company
pursuant to Section D.2(c)(vi) of Article III of the Company's Amended and
Restated Certificate of Incorporation shall, prior to the closing of the
Company's Initial Offering, be designated as a Class III director (as described
in the Company's Amended and Restated Certificate of Incorporation to be
effective as of the closing of the Initial Offering and attached hereto as
Exhibit B). As soon as practicable after the date of this Agreement, the
Company agrees to take all necessary corporate action to effect the purposes of
this Section 3.9. The Company represents and warrants that the Company's Board
of Directors approved such designation on July 14, 1999, and agrees that it will
take no action in contravention of this Section 3.9. The Holders agree,
severally and not jointly, not to take any action, or cause or direct its
designees on the Company's Board of Directors to take any action, in
contravention of this Section 3.9. In addition to the requirements set forth in
Section 5.6 below, any amendment or waiver of this Section 3.9 shall require the
prior written consent of holders of at least sixty-six and two-thirds percent
(66-2/3%) of the Series I Preferred Stock.
3.10 Future Authorization of Series I Preferred Stock. The Company shall
not authorize, designate or issue any shares of Series I Preferred Stock other
than the 3,315,000 shares currently authorized in the Company's Amended and
Restated Certificate of Incorporation. In addition to the requirements set forth
in Section 5.6 below, any amendment or waiver of this Section 3.10 shall require
the prior written consent of holders of at least sixty-six and two-thirds
percent (66-2/3%) of the Series I Preferred Stock.
3.11 Reservation of Common Stock. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.12 Proprietary Information and Inventions Agreement. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form attached to the Purchase
Agreement.
3.13 Board of Directors. As of the date of this Agreement (i) the
authorized size of the Board of Directors of the Company is eleven members, and
(ii) the members of the Board of Directors of the Company include Michael
Ramsay, James Barton, Geoffrey Yang, Stewart Alsop, Randy Komisar, Larry
Chapman, Thomas Rogers, Michael Homer and three vacancies.
3.14 Termination of Covenants. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor on
the effective date of the registration statement pertaining to the Initial
Offering.
Section 4. Rights of First Refusal.
4.1 Subsequent Offerings. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.6 hereof. Each Investor's pro rata share is equal to the ratio of (a) the
number of shares of the Company's Common Stock (including all shares of
16.
<PAGE>
Common Stock issued or issuable upon conversion of the Shares) which such
Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 Issuance of Equity Securities to Other Persons. If the Investors
fail to exercise in full the rights of first refusal, the Company shall have
ninety (90) days thereafter to sell the Equity Securities in respect of which
the Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Investors pursuant to Section 4.2 hereof. If the
Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investors in the manner provided above.
4.4 Termination of Rights of First Refusal. The rights of first refusal
established by this Section 4 shall not apply to, and shall terminate upon the
effective date of the registration statement pertaining to the Company's Initial
Offering.
4.5 Transfer of Rights of First Refusal. The rights of first refusal of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 Excluded Securities. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other compensatory arrangements that are
approved by the Board of Directors;
17.
<PAGE>
(b) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
approved by the Board of Directors;
(c) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(d) shares of Common Stock issued upon conversion of the Shares;
(e) any Equity Securities issued pursuant to any equipment leasing
arrangement, or debt financing from a bank or other institution; provided that
such transactions and the issuance of shares therein, have been approved by the
Company's Board of Directors; and
(f) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (i) joint
ventures, manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that such strategic
transactions and the issuance of shares therein, have been approved by the
Company's Board of Directors.
Section 5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
5.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
18.
<PAGE>
5.5 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the Registrable
Securities; provided, however, that any amendment to the rights of any series of
Series Preferred under this Agreement that disproportionately and adversely
affects or otherwise discriminates against such series of Series Preferred shall
additionally require the written consent of at least sixty-six and two-thirds
percent (66 2/3%) of such series of Series Preferred.
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth on the signature pages hereof or
Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.9 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.10 Amendment of Prior Agreement. Effective upon the execution of this
Agreement by the Company and the Holders of a majority of the Registrable
Securities covered
19.
<PAGE>
by the Prior Agreement, the Prior Agreement shall be null and void and shall be
superseded by the provisions of this Agreement. Each Investor that was a party
to the Prior Agreement hereby waives the right of first refusal contained in
Section 4 of the Prior Agreement with respect to the sale and issuance of the
Series I Preferred Stock and the Common Stock issuable upon conversion thereof,
including any notice requirements related to such rights of first offer.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20.
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Company:
TiVo Inc.
By: /s/ Michael Ramsay
--------------------------------
Michael Ramsay, President
and Chief Executive Officer
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Investors:
New Enterprise Associates VII, Limited
Partnership
By: NEA Partners VII, Limited Partnership
Its General Partner
By: /s/ Mark W. Perry
-----------------------------
Mark W. Perry
General Partner
NEA Presidents Fund, L. P.
By: NEA General Partners, L.P.
By: General Partner
By: /s/ Mark W. Perry
-----------------------------
General Partner
NEA Ventures 1997, Limited Partnership
By: /s/ Susie Greathouse
-----------------------------
Vice President
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Institutional Venture Partners VII, L.P.
By Its General Partner
Institutional Venture Management VII, L.P.
By: /s/ Geoffrey Y. Yang
------------------------------
Geoffrey Y. Yang
General Partner
Institutional Venture Management VII, L.P.
By: /s/ Geoffrey Y. Yang
------------------------------
Geoffrey Y. Yang
General Partner
IVP Founders Fund I, L.P.
By Its General Partner
Institutional Venture Management VI, L.P.
By: /s/ Geoffrey Y. Yang
------------------------------
Geoffrey Y. Yang
General Partner
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Michael Ramsay
/s/ Michael Ramsay
------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
James Barton
/s/ James Barton
------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Randy Komisar
/s/ Randy Komisar
----------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Strategic Value I, L.P.
By Its General Partner
SV Partners, LLC
By: /s/ Robert P. Parker
--------------------------------------
Name: Robert P. Parker
------------------------------------
Title: Managing Member, SV Partners LLC
-----------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Vulcan Ventures Incorporated
By: /s/ William D. Savoy
---------------------------------
Name: William D. Savoy
-------------------------------
Title: Vice President
------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
DIRECTV, Inc.
By: /s/ Lawrence N. Chapman
---------------------------------
Name: Lawrence N. Chapman
-------------------------------
Title: Executive Vice President
------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
NBC Multimedia, Inc.
By: /s/ Thomas A. Rogers
-----------------------------------
Name: Thomas A. Rogers
---------------------------------
Title:________________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Philips Corporate External Ventures
B.V.
By: /s/ Jan Oosterveld
----------------------------------
Name: Jan Oosterveld
----------------------------------
Title: Member, Group Management Committee
----------------------------------
Royal Philips Electronics
----------------------------------
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Advance/Newhouse Programming Partnership
By: Advance Communication Corp. a
General Partner
By: /s/ Robert J. Miron
___________________________________
Robert J. Miron, President
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
CBS Corporation
By: /s/ Fredric G. Reynolds
_________________________________
Name: Fredric G. Reynolds
_______________________________
Title: Executive Vice President
Chief Financial Officer
______________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Catalyst Investments, L.L.C.
By: The Walt Disney Company Sole Member
By: /s/ Michael Dean
_________________________________
Name: Michael Dean
_______________________________
Title: Vice President
______________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Comcast Interactive Investments, Inc.
By: /s/ Judie Dionglay
_________________________________
Name: Judie Dionglay
_______________________________
Title: VP
______________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Cox Communications Holdings, Inc.
By: /s/ Andrew A. Merdek
_________________________________
Name: Andrew A. Merdek
_______________________________
Title: Secretary
______________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Discovery Communications, Inc.
By: /s/ Gregory B. Durig
_____________________________
Name: Gregory B. Durig
___________________________
Title: Chief Financial Officer
__________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
TV Guide Interactive, Inc.
By: /s/ Toby DeWeese
_________________________________
Name: Toby DeWeese
_______________________________
Title: V.P. Corp. Dev.
______________________________
<PAGE>
In Witness Whereof, the parties hereto have executed this Eighth Amended
and Restated Investor Rights Agreement as of the date set forth in the first
paragraph hereof.
Liberty DMX, Inc.
By: /s/ Charles Y. Tanabe
_________________________________
Name: Charles Y. Tanabe
_______________________________
Title: Senior Vice President
______________________________
<PAGE>
Exhibit A
INVESTOR RIGHTS AGREEMENT
SCHEDULE OF INVESTORS
Series A Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- ---------------------------------------------------------- --------------------------- -------------------------------
<S> <C> <C>
New Enterprise Associates VII, L.P. 1,950,000 $ 1,170,000.00
NEA Presidents Fund, L.P. 41,667 $ 25,000.20
NEA Ventures 1997, L.P. 8,333 $ 4,999.80
Institutional Venture Partners VII, L.P. 1,890,000 $ 1,134,000.00
Institutional Venture Management VII, L.P. 40,000 $ 24,000.00
IVP Founders Fund I, L.P. 70,000 $ 42,000.00
Michael Ramsay 666,667 $ 400,000.20
(holds 656,667 after
transfers described
below)
James Barton 166,667 $ 100,000.20
John Arillaga Survivors' Trust 41,667 $ 25,000.20
Robert C. Harris, Jr. 83,333 $ 49,999.80
GC&H Investments 41,666 $ 24,999.60
Fiona M. Bayne 5,000 Transfer from
Michael Ramsay
Ian Forrest 5,000 Transfer from
Michael Ramsay
Total: 5,000,000 $ 3,000,000
</TABLE>
1.
<PAGE>
EXHIBIT A (CONT.)
SCHEDULE OF INVESTORS
Series B Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- --------------------------------------------------------- ------------------------ ------------------------------------
<S> <C> <C>
First Closing: May 29, 1998
New Enterprise Associates VII, L.P. 1,587,302 $ 2,000,000.52
Institutional Venture Partners VII, L.P. 1,539,683 $ 1,940,000.58
Institutional Venture Management VII, L.P. 31,746 $ 39,999.96
IVP Founders Fund I, L.P. 15,873 $ 19,999.98
=========== ==================
Subtotal: 3,174,604 $ 4,000,001.04
Second Closing: June 26, 1998
Robert Bishop 119,048 $ 150,000.48
Edward C. MacBeth 59,524 $ 75,000.24
Ta-Wei Chien 59,524 $ 75,000.24
Robert C. Harris, Jr. 39,683 $ 50,000.58
Quattrone Family Trust UTA DTD 9/4/91 39,683 $ 50,000.58
R. Randolph Scott 39,683 $ 50,000.58
Michael Barton 39,683 $ 50,000.58
Randy Komisar 24,800 $ 31,248.00
Chin-Tong Chow 19,841 $ 24,999.66
Jean S. Kao 19,841 $ 24,999.66
=========== ==================
Subtotal: 3,635,914 $ 4,581,251.64
Third Closing: July 27, 1998
Edward C. MacBeth 25,000 (all 31,500
transferred to
</TABLE>
2.
<PAGE>
Steve Humphries)
Steve Humphries 25,000 Transferred from
Edward C. MacBeth
25,000 $ 31,500.00
========= =============
Total: 3,660,914 $4,612,751.64
3.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series C Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- -------------------------------------------------------- -------------------- ---------------------------------
<S> <C> <C>
First Closing: October 8, 1998
Strategic Value I, L.P. 972,973 $1,800,000.05
New Enterprise Associates VII, L.P. 594,595 $1,100,000.75
Institutional Venture Partners VII, L.P. 576,757 $1,067,000.45
Institutional Venture Management VII, L.P. 11,892 $ 22,000.20
IVP Founders Fund I, L.P. 5,946 $ 11,000.10
Subtotal: 2,162,163 $4,000,001.55
Second Closing: October 30, 1998
Comdisco 135,136 $ 250,001.60
Odyssey Capital, LLC 135,136 $ 250,001.60
SallyAnn Reiss and Peter Reiss as Trustees of the
1998 Reiss family Trust 13,513 $ 24,999.05
Clifford C. Highlund & Vickie L. Highlund as Trustees
for the Clifford C. Highlund Living Trust, dated
December 27, 1994 13,513 $ 24,999.05
Paul M. Newby 13,513 $ 24,999.05
David Allen Lockett and Deborah Marion 13,513 $ 24,999.05
Lockett
Kurtis G. Heaton 13,513 $ 24,999.05
========= =============
Subtotal 337,837 $ 624,998.45
TOTAL 2,500,000 $4,625,000.00
Subsequent Sales of Series C:
Odyssey Capital, LLC 13,513 $ 24,999.05
</TABLE>
4.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series D Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- -------------------------------------------------------- -------------------- ---------------------------------
<S> <C> <C>
Vulcan Ventures Incorporated 1,358,695 $4,999,997.60
Total: 1,358,695 $4,999,997.60
</TABLE>
5.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series E Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- -------------------------------------------------------- -------------------- ---------------------------------
<S> <C> <C>
Showtime Networks Inc. 270,270 1,999,998
Total: 270,270 1,999,998
</TABLE>
6.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series F Preferred Stock
<TABLE>
<CAPTION>
Name Shares Aggregate Purchase Price
- -------------------------------------------------------- -------------------- ---------------------------------
<S> <C> <C>
DIRECTV, Inc. 405,405 $2,999,997
Total: 405,405 $2,999,997
</TABLE>
7.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series G Preferred Stock
<TABLE>
<CAPTION>
Aggregate
Name Shares Purchase Price
- ------------------------------------------------ ------------- --------------------
<S> <C> <C>
NBC Multimedia, Inc. 1,013,513 $7,499,996.20
Total: 1,013,513 $7,499,996.20
</TABLE>
8.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series H Preferred Stock
<TABLE>
<CAPTION>
Name Shares Consideration
- ------------------------------------------------ ------------- --------------------
<S> <C> <C>
Philips Corporate External Ventures B.V. 1,351,351 $9,999,997.40
Total: 1,351,351 $9,999,997.40
</TABLE>
9.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Series I Preferred Stock
<TABLE>
<CAPTION>
Name Shares Consideration
- ------------------------------------------------ ------------- --------------------
<S> <C> <C>
Advance/Newhouse Programming Partnership 240,153 $ 2,499,992.73
CBS Corporation 240,153 $ 2,499,992.73
Catalyst Investments, L.L.C. 720,461 $ 7,499,999.01
Comcast Interactive Investments, Inc. 480,307 $ 4,999,995.87
Cox Communications Holdings, Inc. 240,153 $ 2,499,992.73
Discovery Communications, Inc. 720,461 $ 7,499,999.01
TV Guide Interactive, Inc. 240,153 $ 2,499,992.73
Liberty DMX, Inc. 240,153 $ 2,499,992.73
Total: 3,121,994 $32,499,957.54
</TABLE>
10.
<PAGE>
Exhibit A (cont.)
SCHEDULE OF INVESTORS
Registrable Common Stock
<TABLE>
<CAPTION>
Name Shares Consideration
- ------------------------------------------------ ------------- --------------------
<S> <C> <C>
DIRECTV, Inc. 2,981,196 Services, support and
promissory note as set forth
in the Marketing Agreement
Total: 2,981,196 Services, support and
promissory note as set forth
in the Marketing Agreement
</TABLE>
11.
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Exhibit 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this ____ day of _________,1999
by and between TiVo Inc., a Delaware corporation (the "Corporation"), and
____________ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in his/her
capacity as _______________ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as ______________
of the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
Now, Therefore, in consideration of Agent's continued service as
_______________ after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
______________ of the Corporation or as a director, officer or other fiduciary
of an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE>
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 43
of the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers
2.
<PAGE>
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of Agent's
separate counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which Agent shall have made
the conclusion provided for in clause (ii) above; and
3.
<PAGE>
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4.
<PAGE>
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
5.
<PAGE>
(b) If to the Corporation, to
TiVo Inc.
849 Ross Drive
Sunnyvale, CA 94089
or to such other address as may have been furnished to Agent by the Corporation.
In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
TiVo Inc.
By:___________________________________
Title:________________________________
AGENT
______________________________________
Address:
______________________________________
______________________________________
6.
<PAGE>
EXHIBIT 10.2
TiVo Inc
1999 Equity Incentive Plan
Adopted March 16, 1999
Approved By Stockholders April 9, 1999
Amended and Restated on July 14, 1999
Approved By Stockholders July 14, 1999
Termination Date: March 15, 2009
1. Purposes.
(a) Amendment and Restatement. The Plan initially was established
effective as of March 16, 1999 (the "Initial Plan"). The Initial Plan hereby is
amended and restated in its entirety effective as of the date of its adoption.
The terms of the Initial Plan (other than the aggregate number of shares
issuable thereunder) shall remain in effect and apply to all Stock Awards
granted pursuant to the Initial Plan.
(b) Eligible Stock Award Recipients. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(c) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(d) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
1
<PAGE>
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means TiVo Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
2
<PAGE>
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(s) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(t) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
3
<PAGE>
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "Participant" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "Plan" means this TiVo Inc. 1999 Equity Incentive Plan.
(z) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
4
<PAGE>
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to
a Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
5
<PAGE>
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate four million two
hundred thousand (4,200,000) shares of Common Stock.
(b) Additional Shares. The aggregate number of shares of Common Stock
that may be issued pursuant to Options granted under the Plan as specified in
subsection 4(a) shall automatically be increased as follows:
(i) For a period of ten (10) years, commencing on December 31, 1999
and ending on December 31, 2008, the aggregate number of shares of Common Stock
specified in paragraph 4(a) hereof automatically shall be increased each
December 31 (the "Calculation Date") by the greater of (1) seven percent (7%) of
the Diluted Shares Outstanding on the Calculation Date, or (2) four million
(4,000,000) shares of Common Stock.
(ii) For purposes of subsection 4(a)(i), "Diluted Shares
Outstanding" means the number of outstanding shares of Common Stock on the
Calculation Date, plus the number of shares of Common Stock issuable upon the
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the prior 12-month period, calculated using the treasury
stock method.
(iii) The maximum aggregate number of shares of Common Stock that are
available for issuance as Incentive Stock Options under the Plan shall not
exceed forty million (40,000,000) shares of Common Stock.
(c) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(d) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
(e) Share Reserve Limitation. Prior to the Listing Date and to the extent
then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.
6
<PAGE>
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants .
(b) Ten Percent Stockholders.
(i) A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Stockholder shall not
be granted a Nonstatutory Stock Option unless the exercise price of such Option
is at least (i) one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Stockholder shall not
be granted a restricted stock award unless the purchase price of the restricted
stock is at least (i) one hundred percent (100%) of the Fair Market Value of the
Common Stock at the date of grant or (ii) such lower percentage of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California Code of Regulations at the time of the
grant of the Option.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (3) the expiration of the Plan; or (4) the first
meeting of stockholders at which Directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
(d) Consultants.
(i) Prior to the Listing Date, a Consultant shall not be eligible for
the grant of a Stock Award if, at the time of grant, either the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the Securities Act ("Rule 701") because of the nature of the services that
the Consultant is providing to the Company, or because the Consultant
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is not a natural person, or as otherwise provided by Rule 701, unless the
Company determines that such grant need not comply with the requirements of Rule
701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) Rule 701 and Form S-8 generally are available to consultants
and advisors only if (1) they are natural persons; (2) they provide bona fide
services to the issuer, its parents, its majority-owned subsidiaries or (for
Rule 701 purposes only) majority-owned subsidiaries of the issuer's parent; and
(3) the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
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(c) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than one hundred percent (100%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board; provided, however, that at
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and, to the extent provided in
the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the
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Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Minimum Vesting Prior to the Listing Date. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee who is
not an Officer, Director or Consultant shall provide for vesting of the total
number of shares of Common Stock at a rate of at least twenty percent (20%) per
year over five (5) years from the date the Option was granted, subject to
reasonable conditions such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers, Directors
or Consultants may be made fully exercisable, subject to reasonable conditions
such as continued employment, at any time or during any period established by
the Company.
(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.
(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
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(k) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (2) the expiration of the term of
such Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(n) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option.
(o) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(p) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an
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obligation) to include as part of any Option Agreement a provision entitling the
Optionholder to a further Option (a "Re-Load Option") in the event the
Optionholder exercises the Option evidenced by the Option Agreement, in whole or
in part, by surrendering other shares of Common Stock in accordance with this
Plan and the terms and conditions of the Option Agreement. Any such Re-Load
Option shall (i) provide for a number of shares of Common Stock equal to the
number of shares of Common Stock surrendered as part or all of the exercise
price of such Option; (ii) have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) have an exercise price which is equal to one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Re-Load
Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option shall be subject to the same exercise price and term
provisions heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
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(iv) Transferability. For a stock bonus award made before the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a stock bonus award made on or after the Listing
Date, rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
one hundred percent (100%) of the Common Stock's Fair Market Value on the date
such award is made or at the time the purchase is consummated. For restricted
stock awards made on or after the Listing Date, the purchase price shall not be
less than one hundred percent (100%) of the Common Stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) Vesting. Subject to the "Repurchase Limitation" in subsection
10(h), shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iv) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
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(v) Transferability. For a restricted stock award made before the
Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award made on or
after the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
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(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (iii) the issuance of the shares
of Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the participant as a result of the exercise
or acquisition of Common Stock under the Stock Award in an amount not to exceed
the minimum amount of tax
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required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
(g) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) Fair Market Value. If the repurchase option gives the Company the
right to repurchase the shares of Common Stock upon termination of employment at
not less than the Fair Market Value of the shares of Common Stock to be
purchased on the date of termination of Continuous Service, then (i) the right
to repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.
(ii) Original Purchase Price. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").
(i) Cancellation and Re-Grant of Options.
(i) Authority to Reprice. The Board shall have the authority to
effect, at any time and from time to time, (1) the repricing of any outstanding
Options under the Plan and/or (2) with the consent of any adversely affected
holders of Options, the cancellation of any
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outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock. The exercise price per share of Common Stock shall be not less
than that specified under the Plan for newly granted Stock Awards.
Notwithstanding the foregoing, the Board may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which Section 424(a) of the Code applies.
(ii) Effect of Repricing under Section 162(m) of the Code. Shares of
Common Stock subject to an Option which is amended or canceled in order to set a
lower exercise price per share of Common Stock shall continue to be counted
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c). The repricing of an Option under this subsection resulting in a
reduction of the exercise price shall be deemed to be a cancellation of the
original Option and the grant of a substitute Option; in the event of such
repricing, both the original and the substituted Options shall be counted
against the maximum awards of Options permitted to be granted pursuant to
subsection 5(c). The provisions of this subsection shall be applicable only to
the extent required by Section 162(m) of the Code.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
and available for Incentive Stock Options pursuant to subsections 4(a) and 4(b)
and the maximum number of securities subject to award to any employee pursuant
to subsection 5(c), and the outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of securities and price per share of Common
Stock subject to such outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) Change in Control--Asset Sale, Stock Sale, Merger, Consolidation or
Reverse Merger. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a sale by the stockholders
of the Company of the voting stock of the Company to another corporation and/or
its subsidiaries that results in the ownership by such corporation and/or its
subsidiaries of eighty percent (80%) or more of the combined voting power of all
classes of the voting stock of the Company entitled to vote; (iii) a merger or
consolidation in which the Company is not the surviving corporation or (iv) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding
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immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 11(c)) for those outstanding under the
Plan. In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if
not exercised (if applicable) at or prior to such event. With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall terminate
if not exercised (if applicable) prior to such event.
(d) Special Acceleration Provisions. Notwithstanding any other provisions
of this Plan to the contrary, in the event of a Change in Control (as such term
is defined below) and if within thirteen (13) months after the date of such
Change in Control the Continuous Service of a Participant terminates due to an
involuntary termination (not including death or Disability) without Cause (as
such term is defined below) or a voluntary termination by the Participant due to
a Constructive Termination (as such term is defined below), then the vesting and
exercisability of all Stock Awards held by such Participant shall be
accelerated, or any reacquisition or repurchase rights held by the Company with
respect to a Stock Award shall lapse, as follows. With respect to those Stock
Awards held by a Participant who is a Designated Grantee (as such term is
defined below) at the time of such termination, fifty percent (50%) of the
unvested shares covered by such Stock Awards shall vest and become exercisable
(or reacquisition or repurchase rights held by the Company shall lapse with
respect to fifty percent (50%) of the shares still subject to such rights, as
appropriate) as of the date of such termination. With respect to those Stock
Awards held by all other Participants, twenty-five percent (25%) of the unvested
shares covered by such Stock Awards shall vest and become exercisable (or
reacquisition or repurchase rights held by the Company shall lapse with respect
to twenty-five percent (25%) of the unvested shares still subject to such
rights, as appropriate) as of the date of such termination. Notwithstanding the
foregoing, however, if such potential acceleration of the vesting and
exercisability of Stock Awards (or lapse of reacquisition or repurchase rights
held by the Company with respect to Stock Awards) would cause a contemplated
Change in Control transaction that would otherwise be eligible to be accounted
for as a "pooling-of-interests" transaction to become ineligible for such
accounting treatment under generally accepted accounting principles as
determined by the Company's independent public accountants (the "Accountants")
prior to the Change of Control, such acceleration shall not occur.
For the purposes of this subsection 11(d) only, Cause means (i) conviction
of, a guilty plea with respect to, or a plea of nolo contendere to a charge that
a Participant has committed a felony under the laws of the United States or of
any state or a crime involving moral turpitude, including, but not limited to,
fraud, theft, embezzlement or any crime that results in or is intended to result
in personal enrichment at the expense of the Company or an Affiliate; (ii)
material breach of any agreement entered into between the Participant and the
Company or an Affiliate that impairs the Company's or the Affiliate's interest
therein; (iii) willful misconduct,
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significant failure of the Participant to perform the Participant's duties, or
gross neglect by the Participant of the Participant's duties; or (iv) engagement
in any activity that constitutes a material conflict of interest with the
Company or any Affiliate.
For purposes of this subsection 11(d) only, prior to the Listing Date,
Change in Control means: (i) a dissolution or liquidation of the Company; (ii) a
sale of all or substantially all of the assets of the Company; (iii) a sale by
the stockholders of the Company of the voting stock of the Company to another
corporation or its subsidiaries that results in the ownership by such
corporation and/or its subsidiaries of eighty percent (80%) or more of the
combined voting power of all classes of the voting stock of the Company entitled
to vote; (iv) a merger or consolidation in which the Company is not the
surviving corporation and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed; or (v) a reverse
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed. For purposes of this
subsection 11(d) only, after the Listing Date, Change in Control means in
addition to an event, transaction or series of transactions described in (i)
through (v) above; (vi) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or subsidiary of the Company or other
entity controlled by the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Directors; or (vii) in the event that the individuals who, as of the Listing
Date, are members of the Company's Board (the "Incumbent Board"), cease for any
reason to constitute at least fifty percent (50%) of the Board. (If the
election, or nomination for election by the Company's stockholders, of any new
Director is approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new Director shall be considered to be a member of the Incumbent
Board in the future.) For purposes of this subsection 11(d), Change in Control
does not include the initial public offering of the securities of the Company
(the "IPO"), nor does it include any event, transaction or series of
transactions constituting part of the IPO or an attempted IPO.
For purposes of this subsection 11(d) only, Constructive Termination means
the occurrence of any of the following events or conditions: (i) (A) a change in
the Participant's status, title, position or responsibilities (including
reporting responsibilities) which represents an adverse change from the
Participant's status, title, position or responsibilities as in effect at any
time within ninety (90) days preceding the date of a Change in Control or at any
time thereafter; (B) the assignment to the Participant of any duties or
responsibilities which are inconsistent with the Participant's status, title,
position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; or (C) any
removal of the Participant from or failure to reappoint or reelect the
Participant to any of such offices or positions, except in connection with the
termination of the Participant's Continuous Service for
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<PAGE>
Cause, as a result of the Participant's Disability or death or by the
Participant other than as a result of Constructive Termination; (ii) a reduction
in the Participant's annual base compensation or any failure to pay the
Participant any compensation or benefits to which the Participant is entitled
within five (5) days of the date due; (iii) the Company's requiring the
Participant to relocate to any place outside a fifty (50) mile radius of the
Participant's current work site, except for reasonably required travel on the
business of the Company or its Affiliates which is not materially greater than
such travel requirements prior to the Change in Control; (iv) the failure by the
Company to (A) continue in effect (without reduction in benefit level and/or
reward opportunities) any material compensation or employee benefit plan in
which the Participant was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter, unless such
plan is replaced with a plan that provides substantially equivalent compensation
or benefits to the Participant, or (B) provide the Participant with compensation
and benefits, in the aggregate, at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for under each other employee
benefit plan, program and practice in which the Participant was participating at
any time within ninety (90) days preceding the date of a Change in Control or at
any time thereafter; (v) any material breach by the Company of any provision of
an agreement between the Company and the Participant, whether pursuant to this
Plan or otherwise, other than a breach which is cured by the Company within
fifteen (15) days following notice by the Participant of such breach; or (vi)
the failure of the Company to obtain an agreement, satisfactory to the
Participant, from any successors and assigns to assume and agree to perform the
obligations created under this Plan.
For purposes of this subsection 11(d) only, Designated Grantee means an
employee of the Company or an Affiliate with the title of Vice President or
higher. For purposes of this subsection 11(d) only, the term Designated Grantee
includes all Directors (regardless of title) of the Company and its Affiliates,
including all Non-Employee Directors.
(e) Parachute Payments. In the event that the acceleration of the vesting
and exercisability of the Stock Awards or lapse of reacquisition or repurchase
rights held by the Company with respect to Stock Awards provided for in
subsection 11(d) and benefits otherwise payable to a Participant (i) constitute
"parachute payments" within the meaning of Section 280G (as it may be amended or
replaced) of the Code, and (ii) but for this subsection 11(e) would be subject
to the excise tax imposed by Section 4999 (as it may be amended or replaced) of
the Code (the "Excise Tax"), then such Participant's benefits hereunder shall be
delivered to such lesser extent which would result in no portion of such
benefits being subject to the Excise Tax; provided, however, that the benefits
hereunder shall be reduced only to the extent necessary after all cash amounts
otherwise payable to such Participant and which constitute "parachute payments"
have been returned. Unless the Company and such Participant otherwise agree in
writing, any determination required under this subsection 11(e) shall be made in
writing in good faith by the Accountants. For purposes of making the
calculations required by this subsection 11(e), the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of the
Code. The Company and such Participants shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a
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determination under this subsection 11(e). The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this subsection 11(e).
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
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14. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
15. Choice of Law.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
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EXHIBIT 10.3
TIVO INC.
AMENDED AND RESTATED
1997 EQUITY INCENTIVE PLAN
Adopted October 1, 1997
Approved by Stockholders October 24, 1997
Amended May 20, 1998
Amended and Restated March 16, 1999
Approved by Stockholders April 9, 1999
Termination Date: September 30, 2007
1. Purposes.
(a) The Plan initially was established as the 1997 Equity Incentive Plan
effective as of October 1, 1997 (the "Initial Plan"). The Initial Plan hereby is
amended and restated in its entirety as the Amended and Restated 1997 Equity
Incentive Plan effective as of March 16, 1999. With the exception of subsection
5(d), the terms of the Plan shall apply to all Stock Awards granted pursuant to
the Initial Plan.
(b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to purchase
restricted stock, all as defined below.
(c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(d) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
1.
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2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Tivo Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Service" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.
(h) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to Stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means the value of the Company's common stock as
determined in good faith by the Board and, in each case prior to the Listing
date, in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
2.
<PAGE>
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Officer" means (i) prior to the Listing Date, any person designated
by the Company as an officer and (ii) from and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(u) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an
3.
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"affiliated corporation" for services in any capacity other than as a Director,
or (ii) is otherwise considered an "outside director" for purposes of Section
162(m) of the Code.
(v) "Plan" means this Tivo Inc. 1997 Equity Incentive Plan.
(w) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(x) "Securities Act" means the Securities Act of 1933, as amended.
(y) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section
13.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
4.
<PAGE>
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of two or more (2) members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Additionally, prior to the Listing Date, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary, the Board
or the Committee may delegate to a committee of one or more members of the Board
the authority to grant Stock Awards to eligible persons who (1) are not then
subject to Section 16 of the Exchange Act and/or (2) are either (x) not then
Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (y) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
4. Shares Subject To The Plan.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate four million (4,000,000) shares of the Company's
common stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
(a) Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options and may be granted only to Employees,
Directors or Consultants.
(b) No person shall be eligible for the grant of an Option or an award to
purchase restricted stock if, at the time of grant, such person owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years
5.
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from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the Fair Market Value
of such stock at the date of grant. From and after the Listing Date this
provision shall apply only to Incentive Stock Options.
(c) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than five hundred thousand (500,000) shares of the Company's common stock
in any twelve (12) month period. This subsection 5(c) shall not apply prior to
the Listing Date and, following the Listing Date, shall not apply until (i) the
earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of common
stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of Stockholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
(d) Prior to the Listing Date, a Consultant shall not be eligible for the
grant of a Stock Award if, at the time of grant, the offer and sale of the
Company's securities to such Consultant are not exempt under Rule 701 of the
Securities Act ("Rule 701") because of the nature of the services that the
Consultant is providing to the Company unless the Board determines that such
grant need not comply with the requirements of Rule 701 and can satisfy another
exemption under the Securities Act.
(e) From and after the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, Form S-8 under the
Securities Act is not available to register the offer and sale of the Company's
securities to such Consultant because of the nature of the services that the
Consultant is providing to the Company unless the Board determines that such
securities either should be registered in another manner under the Securities
Act or are not required to be registered under the Securities Act.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Incentive Stock Option on the date of grant; the exercise price
of each Nonstatutory Stock Option shall be not
6.
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less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Nonstatutory Stock Option on the date of grant. Notwithstanding
the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory
Stock Option) may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement. In
addition, to the extent the Company is then incorporated in Delaware, the "par
value," as defined in the Delaware General Corporation Law, may not be paid
pursuant to a deferred payment arrangement.
(d) Transferability. Prior to the Listing Date, an Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Option is
granted only by such person. From and after the Listing Date, an Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person. From and after the Listing Date, a
Nonstatutory Stock Option may be transferred to the extent provided in the
Option Agreement; provided that if the Option Agreement does not expressly
permit the transfer of a Nonstatutory Stock Option, the Nonstatutory Stock
Option shall not be transferable except by will, by the laws of descent and
distribution or pursuant to a domestic relations order, and shall be exercisable
during the lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to a domestic relations order. Notwithstanding
the foregoing, the person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The
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Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. Prior to the Listing Date, the vesting
provisions of individual Options may vary but in each case will provide for
vesting of at least twenty percent (20%) per year of the total number of shares
subject to the Option; provided, however, that an Option granted to an Officer,
Director or Consultant may become fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company or of any of its Affiliates. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Continuous Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Service (or such
longer or shorter period, which shall not be less than thirty (30) days,
specified in the Option Agreement); provided, however, if the Optionee is
terminated for cause, then the Option shall terminate on the date Optionee's
Continuous Service ceases or, (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the Optionee
is not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of three
(3) months after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Service
terminates as a result of the Optionee's disability, the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
as of the date of termination), but only within such period of time ending on
the earlier of (i) the date twelve (12) months following such
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termination (or such longer or shorter period, which prior to the Listing Date
shall not be less than six (6) months, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Service, the Option may be exercised (to the extent the
Optionee was entitled to exercise the Option as of the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period, which prior to the Listing Date shall not be
less than six (6) months, specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate. Prior to the Listing
Date, however, any unvested shares so purchased shall be subject to a repurchase
right in favor of the Company, with the repurchase price to be equal to the
original purchase price of the stock, or to any other restriction the Board
determines to be appropriate; provided, however, that (i) the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Option was
granted, and (ii) such right shall be exercisable only within (A) the ninety
(90)-day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Notwithstanding the
foregoing, shares received on exercise of an Option by an Officer, Director or
Consultant may be subject to additional or greater restrictions.
(j) Right of Repurchase. The Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or
any part of the
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vested shares exercised pursuant to the Option; provided, however, that (i) such
repurchase right shall be exercisable only within (A) the ninety (90)-day period
following the termination of employment or the relationship as a Director or
Consultant (or in the case of a post-termination exercise of the Option, the
ninety (90)-day period following such post-termination exercise), or (B) such
longer period as may be agreed to by the Company and the Optionee (for example,
for purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), (ii) such repurchase right shall
be exercisable for less than all of the vested shares only with the Optionee's
consent, and (iii) such right shall be exercisable only for cash or cancellation
of purchase money indebtedness for the shares at a repurchase price equal to the
stock's Fair Market Value at the time of such termination. Notwithstanding the
foregoing, shares received on exercise of an Option by an Officer, Director or
Consultant may be subject to additional or greater restrictions specified in the
Option Agreement.
(k) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal shall be exercised by the Company no more
than thirty (30) days following receipt of notice of the Optionee's intent to
transfer shares and must be exercised as to all the shares the Optionee intends
to transfer unless the Optionee consents to exercise for less than all the
shares offered. The purchase of the shares following exercise shall be completed
within thirty (30) days of the Company's receipt of notice of the Optionee's
intent to transfer shares, or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares, or as may be
agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")).
7. Terms of Stock Bonuses And Purchases of Restricted Stock.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in a Stock Award Agreement, but in no event shall the
purchase price be less than the stock's Fair Market Value on the date such Stock
Award is made. Notwithstanding the foregoing, the Board or Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
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(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the Stock Award Agreement so provides, pursuant to a
domestic relations order, so long as stock awarded under such Stock Award
Agreement remains subject to the terms of the agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or Committee in its discretion. Notwithstanding the foregoing, the Board
or Committee to which administration of the Plan has been delegated may award
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit. In addition, to the extent
the Company is then incorporated in Delaware, the "par value," as defined in the
Delaware General Corporation Law, may not be paid pursuant to a deferred payment
arrangement.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee. Prior to
the Listing Date, the applicable agreement shall provide (i) that the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Stock Award
was granted (except that a Stock Award granted to an Officer, Director or
Consultant may become fully vested, subject to reasonable conditions such as
continued employment, at any time or during any period established by the
Company or of any of its Affiliates), and (ii) such right shall be exercisable
only (A) within the ninety (90)-day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the holder of the Stock Award (for
example, for purposes of satisfying the requirements of Section 1202(c)(3) of
the Code (regarding "qualified small business stock")), and (iii) such right
shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares.
(e) Termination of Continuous Service. In the event a participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
11.
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8. Cancellation And Re-Grant Of Options.
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than the Fair Market Value or, in the case of a 10% Stockholder (as
described in subsection 5(b)), not less than one hundred ten percent (110%) of
the Fair Market Value) per share of stock on the new grant date.
Notwithstanding the foregoing, the Board or the Committee may grant an Option
with an exercise price lower than that set forth above if such Option is granted
as part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
9. Covenants Of The Company.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
10. Use Of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11. Miscellaneous.
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(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d) or 7(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Throughout the term of any Stock Award, the Company shall deliver to
the holder of such Stock Award, not later than one hundred twenty (120) days
after the close of each of the Company's fiscal years during the term of such
Stock Award, a balance sheet and an income statement. This subsection shall not
apply (i) after the Listing Date, or (ii) when issuance is limited to key
employees whose duties in connection with the Company assure them access to
equivalent information.
(d) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue serving as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause, the right of the Company's Board of Directors
and/or the Company's Stockholders to remove any Director as provided in the
Company's Bylaws and the provisions of the applicable laws of the state of the
Company's incorporation, or the right to terminate the relationship of any
Consultant subject to the terms of such Consultant's agreement with the Company
or Affiliate.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
the Plan and all other plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such
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person's own account and not with any present intention of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (iii) the issuance of the
shares upon the exercise or acquisition of stock under the Stock Award has been
registered under a then currently effective registration statement under the
Securities Act, or (iv) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Company's
common stock.
12. Adjustments Upon Changes In Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any twelve (12) month period pursuant to subsection
5(c), and the outstanding Stock Awards will be appropriately adjusted in the
type(s) and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company".)
(b) In the event of a dissolution or liquidation of the Company, then all
outstanding Stock Awards shall terminate immediately prior to such event.
(c) In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a sale by the stockholders
of the Company of the voting stock of the Company to another corporation and/or
its subsidiaries that results in the ownership by such corporation and/or its
subsidiaries of eighty percent (80%) or more of the combined voting power of all
classes of the voting stock of the Company entitled to vote; (iii) a merger or
consolidation in which the Company is not the surviving corporation or (iv) a
reverse merger in which the
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Company is the surviving corporation but the shares of common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 12(c)) for those outstanding under the
Plan. In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by persons
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full, and the Stock Awards shall terminate if not
exercised (if applicable) at or prior to such event. With respect to any other
Stock Awards outstanding under the Plan, such Stock Awards shall terminate if
not exercised (if applicable) prior to such event.
(d) Notwithstanding any other provisions of this Plan to the contrary, in
the event of a Change in Control (as such term is defined below) and if within
thirteen (13) months after the date of such Change in Control the Continuous
Service of a person terminates due to an involuntary termination (not including
death or Disability) without Cause (as such term is defined below) or a
voluntary termination by the person due to a Constructive Termination (as such
term is defined below), then the vesting and exercisability of all Stock Awards
held by such person shall be accelerated, or any reacquisition or repurchase
rights held by the Company with respect to a Stock Award shall lapse, as
follows. With respect to those Stock Awards held by a person who is a Designated
Grantee (as such term is defined below) at the time of such termination, fifty
percent (50%) of the unvested shares covered by such Stock Awards shall vest and
become exercisable (or reacquisition or repurchase rights held by the Company
shall lapse with respect to fifty percent (50%) of the shares still subject to
such rights, as appropriate) as of the date of such termination. With respect to
those Stock Awards held by all other persons, twenty-five percent (25%) of the
unvested shares covered by such Stock Awards shall vest and become exercisable
(or reacquisition or repurchase rights held by the Company shall lapse with
respect to twenty-five percent (25%) of the unvested shares still subject to
such rights, as appropriate) as of the date of such termination. Notwithstanding
the foregoing, however, if such potential acceleration of the vesting and
exercisability of Stock Awards (or lapse of reacquisition or repurchase rights
held by the Company with respect to Stock Awards) would cause a contemplated
Change in Control transaction that would otherwise be eligible to be accounted
for as a "pooling-of-interests" transaction to become ineligible for such
accounting treatment under generally accepted accounting principles as
determined by the Company's independent public accountants (the "Accountants")
prior to the Change of Control, such acceleration shall not occur.
For the purposes of this subsection 12(d) only, Cause means (i) conviction
of, a guilty plea with respect to, or a plea of nolo contendere to a charge that
a person has committed a felony under the laws of the United States or of any
state or a crime involving moral turpitude, including, but not limited to,
fraud, theft, embezzlement or any crime that results in or is
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intended to result in personal enrichment at the expense of the Company or an
Affiliate; (ii) material breach of any agreement entered into between the person
and the Company or an Affiliate that impairs the Company's or the Affiliate's
interest therein; (iii) willful misconduct, significant failure of the person to
perform the person's duties, or gross neglect by the person of the person's
duties; or (iv) engagement in any activity that constitutes a material conflict
of interest with the Company or any Affiliate.
For purposes of this subsection 12(d) only, prior to the Listing Date,
Change in Control means: (i) a dissolution or liquidation of the Company; (ii) a
sale of all or substantially all of the assets of the Company; (iii) a sale by
the stockholders of the Company of the voting stock of the Company to another
corporation or its subsidiaries that results in the ownership by such
corporation and/or its subsidiaries of eighty percent (80%) or more of the
combined voting power of all classes of the voting stock of the Company entitled
to vote; (iv) a merger or consolidation in which the Company is not the
surviving corporation and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed; or (v) a reverse
merger in which the Company is the surviving corporation but the shares of
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, and in which beneficial ownership of securities of the
Company representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of Directors has changed. For purposes of this
subsection 12(d) only, after the Listing Date, Change in Control means in
addition to an event, transaction or series of transactions described in (i)
through (v) above; (vi) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or subsidiary of the Company or other
entity controlled by the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
Directors; or (vii) in the event that the individuals who, as of the Listing
Date, are members of the Company's Board (the "Incumbent Board"), cease for any
reason to constitute at least fifty percent (50%) of the Board. (If the
election, or nomination for election by the Company's stockholders, of any new
Director is approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new Director shall be considered to be a member of the Incumbent
Board in the future.) For purposes of this subsection 12(d), Change in Control
does not include the initial public offering of the securities of the Company
(the "IPO"), nor does it include any event, transaction or series of
transactions constituting part of the IPO or an attempted IPO.
For purposes of this subsection 12(d) only, Constructive Termination means
the occurrence of any of the following events or conditions: (i) (A) a change in
the person's status, title, position or responsibilities (including reporting
responsibilities) which represents an adverse change from the person's status,
title, position or responsibilities as in effect at any time within ninety (90)
days preceding the date of a Change in Control or at any time thereafter; (B)
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the assignment to the person of any duties or responsibilities which are
inconsistent with the person's status, title, position or responsibilities as in
effect at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; or (C) any removal of the person from or
failure to reappoint or reelect the person to any of such offices or positions,
except in connection with the termination of the person's Continuous Service for
Cause, as a result of the person's Disability or death or by the person other
than as a result of Constructive Termination; (ii) a reduction in the person's
annual base compensation or any failure to pay the person any compensation or
benefits to which the person is entitled within five (5) days of the date due;
(iii) the Company's requiring the person to relocate to any place outside a
fifty (50) mile radius of the person's current work site, except for reasonably
required travel on the business of the Company or its Affiliates which is not
materially greater than such travel requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in effect (without reduction in
benefit level and/or reward opportunities) any material compensation or employee
benefit plan in which the person was participating at any time within ninety
(90) days preceding the date of a Change in Control or at any time thereafter,
unless such plan is replaced with a plan that provides substantially equivalent
compensation or benefits to the person, or (B) provide the person with
compensation and benefits, in the aggregate, at least equal (in terms of benefit
levels and/or reward opportunities) to those provided for under each other
employee benefit plan, program and practice in which the person was
participating at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter; (v) any material breach by the Company of
any provision of an agreement between the Company and the person, whether
pursuant to this Plan or otherwise, other than a breach which is cured by the
Company within fifteen (15) days following notice by the person of such breach;
or (vi) the failure of the Company to obtain an agreement, satisfactory to the
person, from any successors and assigns to assume and agree to perform the
obligations created under this Plan.
For purposes of this subsection 12(d) only, Designated Grantee means an
employee of the Company or an Affiliate with the title of Vice President or
higher. For purposes of this subsection 12(d) only, the term Designated Grantee
includes all Directors (regardless of title) of the Company and its Affiliates,
including all Non-Employee Directors.
(e) In the event that the acceleration of the vesting and exercisability
of the Stock Awards or lapse of reacquisition or repurchase rights held by the
Company with respect to Stock Awards provided for in subsection 12(d) and
benefits otherwise payable to a person (i) constitute "parachute payments"
within the meaning of Section 280G (as it may be amended or replaced) of the
Code, and (ii) but for this subsection 12(e) would be subject to the excise tax
imposed by Section 4999 (as it may be amended or replaced) of the Code (the
"Excise Tax"), then such person's benefits hereunder shall be delivered to such
lesser extent which would result in no portion of such benefits being subject to
the Excise Tax; provided, however, that the benefits hereunder shall be reduced
only to the extent necessary after all cash amounts otherwise payable to such
person and which constitute "parachute payments" have been returned. Unless the
Company and such person otherwise agree in writing, any determination required
under this subsection 12(e) shall be made in writing in good faith by the
Accountants. For purposes of
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making the calculations required by this subsection 12(e), the Accountants may
make reasonable assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning the application of
the Code. The Company and such persons shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this subsection 12(e). The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this subsection 12(e).
13. Amendment Of The Plan and Stock Awards.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the Stockholders of
the Company to the extent Stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for Stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
14. Termination Or Suspension Of The Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on September 30, 2007, which is the day
prior to the tenth anniversary of the date the Initial Plan was adopted by the
Board. No Stock Awards may be granted under the Plan while the Plan is suspended
or after it is terminated.
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(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.
15. Effective Date Of Plan.
The Plan shall become effective on the date adopted by the Board.
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EXHIBIT 10.4
TiVo Inc.
1999 Employee Stock Purchase Plan
Adopted by Board of Directors July 14, 1999
Approved by Stockholders July 14, 1999
Termination Date: None
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "Company" means TiVo Inc., a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "Employee" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
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(i) "Employee Stock Purchase Plan" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(j) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(m) "Offering" means the grant of Rights to purchase Shares under the Plan
to Eligible Employees.
(n) "Offering Date" means a date selected by the Board for an Offering to
commence.
(o) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "Participant" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
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(q) "Plan" means this 1999 Employee Stock Purchase Plan.
(r) "Purchase Date" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "Right" means an option to purchase Shares granted pursuant to the
Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "Securities Act" means the United States Securities Act of 1933, as
amended.
(v) "Share" means a share of the common stock of the Company.
3. Administration.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the
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Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
4. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate six hundred thousand (600,000)
Shares. If any Right granted under the Plan shall for any reason terminate
without having been exercised, the Shares not purchased under such Right shall
again become available for the Plan.
(b) The aggregate number of Shares that may be sold pursuant to Rights
granted under the Plan as specified in paragraph 4(a) hereof automatically shall
be increased as follows:
(i) On the last day of each fiscal year of the Company (the
"Calculation Date") for ten (10) years, commencing on December 31, 1999 and
ending on December 31, 2008, the aggregate number of Shares specified in
paragraph 4(a) hereof shall be increased by the least of (1) that number of
Shares equal to five percent (5%) of the Diluted Shares Outstanding, (2) five
hundred thousand (500,000) Shares, or (3) a smaller number of Shares as
determined by the Board.
(ii) For purposes of paragraph 4(b)(i) hereof, "Diluted Shares
Outstanding" shall mean, as of any date, (1) the number of outstanding Shares on
such Calculation Date, plus (2) the number of Shares issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.
(c) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through
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incorporation of the provisions of this Plan by reference in the document
comprising the Offering or otherwise) the period during which the Offering shall
be effective, which period shall not exceed twenty-seven (27) months beginning
with the Offering Date, and the substance of the provisions contained in
paragraphs 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an earlier-
granted Right (or a Right with a lower exercise price, if two Rights have
identical grant dates) will be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if two Rights have
identical grant dates) will be exercised.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designated as provided in subparagraph 3(b), to Employees of an
Affiliate. Except as provided in subparagraph 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but in no event shall the required period of continuous employment be equal to
or greater than two (2) years.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which
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such Employee may purchase under all outstanding rights and options shall be
treated as stock owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase Shares of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such Shares (determined
at the time such Rights are granted) for each calendar year in which such Rights
are outstanding at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
Shares purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that, as
the Board determines for a particular Offering, (1) shall be withheld, in whole
or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate
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amount, the Board shall make a pro rata allocation of the Shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(d) The purchase price of Shares acquired pursuant to Rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Purchase Date.
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board in the Offering. Upon such withdrawal from the Offering by
a Participant, the Company shall distribute to such Participant all of his or
her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the Participant) under the
Offering, without interest unless otherwise specified in the Offering, and such
Participant's interest in that Offering shall be automatically terminated. A
Participant's withdrawal from an Offering will have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan
but such Participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee
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all of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Shares for the terminated Employee)
under the Offering, without interest unless otherwise specified in the Offering.
If the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
9. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of Shares that is equal to the amount required to purchase
one or more whole Shares on the final Purchase Date of the Offering shall be
distributed in full to the Participant at the end of the Offering, without
interest. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subparagraph 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
(c) No Rights granted under the Plan may be exercised to any extent unless
the Shares to be issued upon such exercise under the Plan (including Rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act and the Plan is in material compliance with all applicable
state, foreign and other securities and other laws applicable to the Plan. If on
a Purchase Date in any Offering hereunder the Plan is not so registered or in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the Plan is subject to such an effective registration statement and such
compliance, except that the Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If, on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and
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in such compliance, no Rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless otherwise specified in
the Offering. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subparagraph 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of Shares pursuant to Rights granted under the Plan
shall constitute general funds of the Company.
12. Rights as a Stockholder.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Shares subject to Rights granted under
the Plan unless and until the Participant's Shares acquired upon exercise of
Rights under the Plan are recorded in the books of the Company.
13. Adjustments upon Changes in Securities.
(a) If any change is made in the Shares subject to the Plan, or subject to
any Right, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of Shares subject to the Plan pursuant to subparagraph 4(a), and the
outstanding Rights will be appropriately adjusted in the class(es), number of
Shares and purchase limits of such outstanding Rights. The Board shall make such
adjustments, and its determination shall be final, binding and
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conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction that does not involve the receipt of
consideration by the Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders in the transaction described in this
subparagraph 13(b)) for those outstanding under the Plan, or (2) in the event
any surviving or acquiring corporation refuses to assume such Rights or to
substitute similar rights for those outstanding under the Plan, then, as
determined by the Board in its sole discretion such Rights may continue in full
force and effect or the Participants' accumulated payroll deductions (exclusive
of any accumulated interest which cannot be applied toward the purchase of
Shares under the terms of the Offering) may be used to purchase Shares
immediately prior to the transaction described above under the ongoing Offering
and the Participants' Rights under the ongoing Offering thereafter terminated.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder
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relating to Employee Stock Purchase Plans and/or to bring the Plan and/or Rights
granted under it into compliance therewith.
(c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares subject to the Plan's reserve, as increased and/or adjusted from time
to time, have been issued under the terms of the Plan. No Rights may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
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17. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board, which date may be prior to the
effective date set by the Board.
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TiVo Inc.
1999 Employee Stock Purchase Plan
Offering
Adopted July 14, 1999
1. Grant of Rights.
(a) The Board of Directors ("Board") of TiVo Inc., a Delaware corporation
(the "Company"), pursuant to the Company's 1999 Employee Stock Purchase Plan
(the "Plan"), hereby authorizes the grant of Rights to purchase Shares of the
Company to all Eligible Employees (an "Offering"). Defined terms not explicitly
defined in this Offering but defined in the Plan shall have the same definitions
as in the Plan. In the event of any conflict between the provisions of an
Offering and those of the Plan (including interpretations, amendments, rules and
regulations that may from time to time be promulgated and adopted pursuant to
the Plan), the provisions of the Plan shall control.
(b) An "Offering Date" is the first day of an Offering. An Offering may
consist of one purchase period or may be divided into shorter purchase periods
("Purchase Periods"). A "Purchase Date" is the last day of a Purchase Period or
the Offering, as the case may be.
(c) Except as otherwise provided, each Offering hereunder shall be divided
into two (2) shorter Purchase Periods approximately six (6) months in length,
with Purchase Periods ending on April 30 and October 31.
(d) The first Offering shall begin on the effective date of the initial
public offering of the Shares and end on October 31, 2000 (the "Initial
Offering"). The Initial Offering will be divided into two (2) shorter Purchase
Periods of approximately six (6) months in length, with the initial Purchase
Period ending on April 30, 2000 and the second Purchase Period ending on October
31, 2000.
(e) Thereafter, Offerings shall begin on November 1, 2000 and on each
subsequent anniversary of the most recent Offering Date, and Purchase Periods
shall begin on each November 1 and May 1; provided, however, that if on the
first Purchase Date during an Offering the fair market value of the Shares is
less than it was on the Offering Date for that Offering, the day after such
Purchase Date shall become the next Offering Date and the Offering that would
otherwise have continued in effect shall immediately terminate. Each Offering
after the Initial Offering shall end on the day prior to the first anniversary
of its Offering Date unless sooner terminated as provided above.
(f) Prior to the commencement of any Offering, the Board may change any or
all terms of such Offering and any subsequent Offerings. The granting of Rights
pursuant to each Offering hereunder shall occur on each respective Offering Date
unless, prior to such date (i) the
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Board determines that such Offering shall not occur, or (ii) no Shares remain
available for issuance under the Plan in connection with the Offering.
(g) Notwithstanding any other provisions of an Offering, if the terms of an
Offering as previously established by the Board would, as a result of a change
to applicable accounting standards, generate a charge to earnings, such Offering
shall terminate effective as of the day prior to the date such change to
accounting standards would otherwise first apply to the Offering (the "Offering
Termination Date"), and such Offering Termination Date shall be the final
Purchase Date of such Offering. A subsequent Offering shall commence on such
date and on such terms as shall be provided by the Board.
2. Eligible Employees.
(a) All employees of the Company and each of its Affiliates incorporated in
the United States shall be granted Rights to purchase Shares under each Offering
on the Offering Date of such Offering, provided that each such employee
otherwise meets the employment requirements of subparagraph 6(a) of the Plan and
has been continuously employed for at least ten (10) days on the Offering Date
of such Offering (an "Eligible Employee"); however, the 10-day eligibility
requirement shall be waived with respect to the Initial Offering only.
(b) Notwithstanding the foregoing, the following employees shall not be
Eligible Employees or be granted Rights under an Offering: (i) part-time or
seasonal employees whose customary employment is twenty (20) hours or less per
week or not more than five (5) months per calendar year or (ii) 5% stockholders
(including ownership through unexercised options) described in subparagraph 6(c)
of the Plan.
(c) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee ten (10) or more days prior to the end of the first Purchase
Period of an Offering may, as of the first day of the second Purchase Period
during that Offering, receive a Right under such Offering, which Right shall
thereafter be deemed to be a part of the Offering. Such Right shall have the
same characteristics as any Rights originally granted under the Offering except
that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right; and
(ii) the Offering for such Right shall begin on its Offering Date and
end coincident with the end of the ongoing Offering.
3. Rights.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the Right to purchase the
number of Shares purchasable with up to fifteen percent (15%) of such Eligible
Employee's Earnings paid during such Offering after the Eligible Employee first
commences participation; provided, however, that no employee may purchase Shares
on a particular Purchase Date that would result in more than fifteen percent
(15%) of such employee's Earnings in the period from the Offering Date to such
Purchase Date
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having been applied to purchase Shares under all ongoing Offerings under the
Plan and all other Company plans intended to qualify as "employee stock purchase
plans" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) For this Offering, "Earnings" means the total compensation paid to an
employee, including all salary, wages (including amounts elected to be deferred
by the employee, that would otherwise have been paid, under any cash or deferred
arrangement established by the Company), overtime pay, commissions, bonuses, and
other remuneration paid directly to the employee, but excluding profit sharing,
the cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation.
(c) Notwithstanding the foregoing, the maximum number of Shares an Eligible
Employee may purchase on any Purchase Date in an Offering shall be such number
of Shares as has a fair market value (determined as of the Offering Date for
such Offering) equal to (x) $25,000 multiplied by the number of calendar years
in which the Right under such Offering has been outstanding at any time, minus
(y) the fair market value of any other Shares (determined as of the relevant
Offering Date with respect to such Shares) which, for purposes of the limitation
of Section 423(b)(8) of the Code, are attributed to any of such calendar years
in which the Right is outstanding. The amount in clause (y) of the previous
sentence shall be determined in accordance with regulations applicable under
Section 423(b)(8) of the Code based on (i) the number of Shares previously
purchased with respect to such calendar years pursuant to such Offering or any
other Offering under the Plan, or pursuant to any other Company plans intended
to qualify as "employee stock purchase plans" under Section 423 of the Code, and
(ii) the number of Shares subject to other Rights outstanding on the Offering
Date for such Offering pursuant to the Plan or any other such Company plan.
(d) The maximum aggregate number of Shares available to be purchased by all
Eligible Employees under an Offering shall be the number of Shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
Shares upon exercise of Rights granted under the Offering would exceed the
maximum aggregate number of Shares available, the Board shall make a pro rata
allocation of the Shares available in a uniform and equitable manner.
4. Purchase Price.
(a) The purchase price of the Shares under the Offering shall be the lesser
of eighty-five percent (85%) of the fair market value of the Shares on the
Offering Date or eighty-five percent (85%) of the fair market value of the
Shares on the Purchase Date, in each case rounded up to the nearest whole cent
per Share.
(b) For the Initial Offering, the fair market value of the Shares at the
time when the Offering commences shall be the price per Share at which Shares
are first sold to the public in
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the Company's initial public offering as specified in the final prospectus with
respect to that offering.
5. Participation.
(a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering or such later date specified in subparagraph 2(c).
(b) A Participant who is enrolled in an Offering automatically will be
enrolled in the next Offering that commences after the current Offering ends.
(c) An Eligible Employee shall become a Participant in an Offering by
delivering an agreement authorizing payroll deductions. Such deductions must be
in whole percentages, with a minimum percentage of one percent (1%) and a
maximum percentage of fifteen percent (15%) of Earnings. A Participant may not
make additional payments into his or her account. The agreement shall be made
on such enrollment form as the Company provides, and must be delivered to the
Company at least ten (10) days before the Offering Date, or before such later
date specified in subparagraph 2(c), in advance of the date of participation to
be effective, unless a later time for filing the enrollment form is set by the
Board for all Eligible Employees with respect to a given Offering Date. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering may be after the Offering Date, as determined by the
Company and communicated to such Eligible Employees.
(d) If the agreement authorizing payroll deductions is required to be
delivered to the Company or designated Affiliate a specified number of days
before the Offering Date to be effective, then an employee who becomes eligible
during the required delivery period shall not be considered to be an Eligible
Employee at the beginning of the Offering but may elect to participate during
the Offering as provided in subparagraph 2(c).
6. Changing Participation Level during Offering; Withdrawal from Offering.
(a) A Participant may not increase his or her deductions during the course
of a Purchase Period. A Participant may increase or decrease his or her
deductions prior to the beginning of a new Purchase Period or a new Offering, to
be effective at the beginning of such new Purchase Period or new Offering. A
Participant shall make a change in his or her participation level by delivering
a notice to the Company in such form and at such time as the Company provides.
(b) A Participant may reduce (including to zero) his or her deductions once
(and only once) during a Purchase Period, effective as soon as administratively
practicable. A Participant shall make a change in his or her participation
level by delivering a notice to the Company in such form and at such time as the
Company provides.
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(c) Except as otherwise specifically provided herein, a Participant may not
increase or decrease his or her participation level during the course of an
Offering.
(d) Notwithstanding the foregoing, a Participant may withdraw from an
Offering and receive his or her accumulated payroll deductions from the Offering
(reduced to the extent, if any, such deductions have been used to acquire Shares
for the Participant on any prior Purchase Dates), without interest, at any time
prior to the end of the Offering, excluding only each ten (10) day period
immediately preceding a Purchase Date (or such shorter period of time determined
by the Company and communicated to Participants) by delivering a withdrawal
notice to the Company in such form as the Company provides.
7. Purchases.
Subject to the limitations contained herein, on each Purchase Date, each
Participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole Shares, up to the maximum number of
Shares permitted under the Plan and the Offering.
8. Notices and Agreements.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
9. Exercise Contingent on Stockholder Approval.
The Rights granted under an Offering are subject to the approval of the
Plan by the Shareholders as required for the Plan to obtain treatment as a tax-
qualified employee stock purchase plan under Section 423 of the Code.
10. Offering Subject to Plan.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan.
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EXHIBIT 10.5
TiVo Inc.
1999 Non-Employee Directors' Stock Option Plan
Adopted by the Board of Directors July 14, 1999
Approved By Stockholders July 14, 1999
Effective Date: July 14, 1999
Termination Date: July 13, 2009
1. Purposes.
(a) Eligible Option Recipients. The persons eligible to receive Options
are the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of its Non-Employee Directors, to secure and retain the services of
new Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to subsection 6(b) of the
Plan.
(c) "Annual Meeting" means the annual meeting of the stockholders of the
Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" means the common stock of the Company.
(f) "Company" means TiVo Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the
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term "Consultant" shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors of the
Company who are merely paid a director's fee by the Company for their services
as Directors.
(i) "Continuous Service" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(ii) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
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(iii) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(o) "Initial Grant" means an Option granted to a Non-Employee Director who
meets the specified criteria pursuant to subsection 6(a) of the Plan.
(p) "IPO Date" means the effective date of the initial public offering of
the Common Stock.
(q) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(r) "Non-Employee Director" means a Director who is not an Employee.
(s) "Nonstatutory Stock Option" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(t) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(u) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(w) "Plan" means this TiVo Inc. 1999 Non-Employee Directors' Stock Option
Plan.
(x) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(y) "Securities Act" means the Securities Act of 1933, as amended.
(z) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan. The
Board may not delegate administration of the Plan to a committee.
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(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not
specified in the Plan.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate Five Hundred Thousand (500,000) shares
of Common Stock.
(b) Additional Shares. Commencing on December 31, 1999, the aggregate
number of shares of Common Stock that may be issued pursuant to Options granted
under the Plan as specified in subsection 4(a) shall automatically be increased
each December 31 by one hundred thousand (100,000) shares of Common Stock.
(c) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Option shall revert to and
again become available for issuance under the Plan.
(d) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
(e) Share Reserve Limitation. Prior to the Listing Date and to the extent
then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
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Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made./1/
5. Eligibility. Nondiscretionary Options as set forth in section 6 shall be
granted under the Plan to all Non-Employee Directors.
6. Non-Discretionary Grants.
(a) Initial Grants.
(i) Each person who is a Non-Employee Director on the July 14, 1999
automatically shall be granted an Initial Grant to purchase Twenty Thousand
(20,000) shares of Common Stock on the terms and conditions set forth herein.
(ii) Each person who is elected or appointed for the first time to be
a Non-Employee Director after July 14, 1999 automatically shall, upon the date
of his or her initial election or appointment to be a Non-Employee Director by
the Board or stockholders of the Company, be granted an Initial Grant to
purchase Twenty Thousand (20,000) shares of Common Stock on the terms and
conditions set forth herein.
(b) Annual Grants. On the day following each Annual Meeting commencing
with the Annual Meeting in 2001, each person who is then a Non-Employee Director
and has been a Non-Employee Director for at least six (6) months automatically
shall be granted an Annual Grant to purchase Ten Thousand (10,000) shares of
Common Stock on the terms and conditions set forth herein; provided, however,
that, with respect to the first Annual Grant made to any Non-Employee Director,
at least eighteen (18) months must have elapsed between the Initial Grant to
such person and the first Annual Grant to such person.
7. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
__________________
/1/ Section 260.140.45 generally provides that the total number of shares
issuable upon exercise of all outstanding options (exclusive of certain rights)
and the total number of shares called for under any stock bonus or similar plan
shall not exceed a number of shares which is equal to 30% of the then
outstanding shares of the issuer (convertible preferred or convertible senior
common shares counted on an as if converted basis), exclusive of shares subject
to promotional waivers under Section 260.141, unless a percentage higher than
30% is approved by at least two-thirds of the outstanding shares entitled to
vote.
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(b) Exercise Price.
(i) General. Subject to subsection 6(b)(ii) below, the exercise price
of each Option shall be one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(ii) Ten Percent Stockholders. Prior to the Listing Date, the exercise
price of each Option granted to a Ten Percent Stockholder shall be (i) one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant or (ii) subject to subsection 6(b)(i) above, such lower percentage
of the Fair Market Value of the Common Stock at the date of grant as is
permitted by Section 260.140.41 of Title 10 of the California Code of
Regulations at the time of the grant of the Option.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check, (ii) delivery to the
Company of other Common Stock, (ii) deferred payment or (iv) any other form of
legal consideration that may be acceptable to the Board and provided in the
Option Agreement; provided, however, that at any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) Transferability. An Option is not transferable, except (i) by will or
by the laws of descent and distribution, (ii) by instrument to an inter vivos or
testamentary trust, in a form accepted by the Company, in which the Option is to
be passed to beneficiaries upon the death of the trustor (settlor) and (iii) by
gift, in a form accepted by the Company, to a member of the "immediate family"
of the Optionholder as that term is defined in 17 C.F.R. 240.16a-1(e). In
addition, Optionholder may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e) Vesting. Initial Grants shall vest at the rate of 1/24/th/ of the
shares subject to the Initial Grant per month over two (2) years from the date
of grant. Annual Grants shall be fully vested and exercisable on the date of
grant.
(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option but only within
such period of time ending on the earlier of (i) the date three (3) months
following the termination of the Optionholder's Continuous Service, or (ii)
6
<PAGE>
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.
(g) Extension of Termination Date. If the exercise of the Option following
the termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 7(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(h) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option, but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified herein, the Option shall terminate.
(i) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised by the Optionholder's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the Option upon the Optionholder's death, but only within the period
ending on the earlier of (1) the date eighteen (18) months following the date of
death or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
7
<PAGE>
9. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
10. Miscellaneous.
(a) Stockholder Rights. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(c) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the Option has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) Withholding Obligations. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition
8
<PAGE>
of stock under the Option; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(e) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Optionholders at
least annually. This subsection 10(e) shall not apply to Optionholders whose
duties in connection with the Company assure them access to equivalent
information.
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject both to the Plan pursuant to
subsection 4(a) and to the nondiscretionary Options specified in Section 5, and
the outstanding Options will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Options. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then the vesting and exercisability
of outstanding Options shall accelerate immediately prior to such event, and all
outstanding Options shall terminate immediately prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a sale by the stockholders
of the Company of the voting stock of the Company to another corporation and/or
its subsidiaries that results in the ownership by such corporation and/or its
subsidiaries of eighty percent (80%) or more of the combined voting power of all
classes of the voting stock of the Company entitled to vote; (iii) a merger or
consolidation in which the Company is not the surviving corporation or (iv) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation shall
assume any Options outstanding under the Plan or shall substitute similar
options (including an option to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c)) for those
outstanding under the Plan. Whether or not any surviving corporation or
acquiring corporation assumes such Options or substitutes similar options for
those outstanding under the Plan, the vesting and exercisability of outstanding
Options shall accelerate ten (10) days prior to such event. In the event any
surviving corporation
9
<PAGE>
or acquiring corporation refuses to assume such Options or to substitute similar
options for those outstanding under the Plan, then such Options shall terminate
if not exercised prior to such event.
12. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10/th/) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. Effective Date of Plan.
The Plan shall become effective upon adoption by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
10
<PAGE>
15. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of Delaware, without regard
to such state's conflict of laws rules.
11
<PAGE>
EXHIBIT 10.6
HARD DISK DRIVE SUPPLY AGREEMENT
by and between
Quantum Corporation
and
TiVo Inc.
November 6, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 CONSTRUCTION AND DEFINITIONS............................ 1
Section 1.1 Construction........................................ 1
Section 1.2 Definitions......................................... 2
ARTICLE 2 TWO CENTER DEVELOPMENT.................................. 4
Section 2.1 Development Management.............................. 4
Section 2.2 Quantum Development Support......................... 4
Section 2.3 Support Procedures.................................. 4
Section 2.4 Facilities.......................................... 5
Section 2.5 Quantum Environmental Test Chambers................. 5
Section 2.6 Ownership of Intellectual Property Rights........... 5
Section 2.7 Trade Secret Licenses............................... 6
Section 2.8 No Other License.................................... 6
ARTICLE 3 HARD DISK DRIVE PURCHASES............................... 7
Section 3.1 Development Units................................... 7
Section 3.2 Production Units.................................... 7
Section 3.3 Hard Disk Drive Ordering Procedures................. 7
Section 3.4 Hard Disk Drive Use Restrictions.................... 7
Section 3.5 Future Hard Disk Drive Purchases.................... 7
ARTICLE 4 HARD DISK DRIVE PRICING................................. 7
Section 4.1 Generally........................................... 7
Section 4.2 Milestone 1 Discount................................ 8
Section 4.3 Milestone 2 Discount................................ 8
Section 4.4 Periodic Payments................................... 8
Section 4.5 Periodic Payment Reporting.......................... 9
Section 4.6 Inspection Rights................................... 9
Section 4.7 TiVo Licensee Rebate................................ 10
ARTICLE 5 EXCLUSIVITY............................................. 10
Section 5.1 Exclusivity......................................... 10
ARTICLE 6 TRADEMARK LICENSES...................................... 11
Section 6.1 License to TiVo..................................... 11
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 6.2 License to Quantum.................................. 11
Section 6.3 TiVo Usage.......................................... 12
Section 6.4 Other Usage......................................... 12
Section 6.5 Trademark Usage Approval Process.................... 12
Section 6.6 Ownership........................................... 13
Section 6.7 Challenge........................................... 13
Section 6.8 Ouality Control..................................... 14
Section 6.9 Policing............................................ 14
Section 6.10 Registered User Filings............................. 14
ARTICLE 7 PROMOTIONAL ACTIVITIES................................ 14
Section 7.1 PR References....................................... 14
Section 7.2 Quantum Promotion................................... 14
Section 7.3 Manufacturer Relationships.......................... 15
Section 7.4 Corporate Publicity................................. 15
Section 7.5 TiVo End-User Mailing List.......................... 15
Section 7.6 TiVo Recommendation................................. 15
ARTICLE 8 INFORMATION REPORTING................................. 16
Section 8.1 Information Reporting............................... 16
ARTICLE 9 CONFIDENTIAL INFORMATION.............................. 16
Section 9.1 Confidential Information and Exclusions............. 16
Section 9.2 Confidentiality Obligation.......................... 16
Section 9.3 Confidentiality of Agreement........................ 16
Section 9.4 Compelled Disclosure................................ 17
Section 9.5 Remedies............................................ 17
ARTICLE 10 WARRANTIES, DISCLAIMERS AND INDEMNITIES............... 17
Section 10.1 General Warranty.................................... 17
Section 10.2 No Conflict......................................... 17
Section 10.3 Disclaimer.......................................... 17
Section 10.4 Third-Party Contracts............................... 17
Section 10.5 Intellectual Property Warranties.................... 18
</TABLE>
<PAGE>
Table of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 10.6 Quantum Indemnity...................................... 18
Section 10.7 TiVo Indemnity......................................... 18
ARTICLE 11 LIABILITY LIMITATIONS.................................... 19
Section 11.1 Quantum Liability...................................... 19
Section 11.2 Exclusion of Damages................................... 19
Section 11.3 Failure of Essential Purpose........................... 19
ARTICLE 12 TERM AND TERMINATION..................................... 19
Section 12.1 Term................................................... 19
Section 12.2 Default................................................ 20
Section 12.3 Breach of Auxiliary Agreements......................... 20
Section 12.4 Termination for Insolvency............................. 20
ARTICLE 13 SECURITY INTEREST........................................ 20
Section 13.1 Grant of Security Interest............................. 20
Section 13.2 Obligations Secured.................................... 20
Section 13.3 Representations and Warranties and Covenants of TiVo... 21
Section 13.4 Covenants of TiVo...................................... 21
Section 13.5 Events of Default...................................... 21
Section 13.6 Rights of Quantum Upon Default......................... 22
ARTICLE 14 MISCELLANEOUS............................................ 22
Section 14.1 [*].................................................... 22
Section 14.2 Governing Law.......................................... 23
Section 14.4 Assignment............................................. 23
Section 14.5 Amendment.............................................. 23
Section 14.6 No Waiver.............................................. 23
Section 14.7 Severability........................................... 24
Section 14.8 Notices................................................ 24
Section 14.9 Titles and Subtitles................................... 24
Section 14.10 Entire Agreement....................................... 24
Section 14.11 Counterparts........................................... 25
</TABLE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
HARD DISK DRIVE SUPPLY AGREEMENT
This Agreement (the "Agreement") is entered into effective as of November
6, 1998 (the "Effective Date"), by and between Quantum Corporation ("Quantum"),
a Delaware corporation having a place of business at 500 McCarthy Boulevard,
Milpitas, CA 95052-8062 and Tivo, Inc. ("TiVo"), a Delaware corporation having
an office at 894 Ross Drive, Suite 100, Sunnyvale, CA 94089 (each of Quantum and
TiVo, a "Party"; together, the "Parties").
Witnesseth:
Whereas, Quantum is, among other things, a manufacturer of [*] and [*] hard
disk drives that Quantum sells under its [*] trademark;
Whereas, TiVo intends to develop a set-top-box product (the "TiVo Center"
as further defined below) containing such a hard disk drive;
Whereas, Quantum is willing to provide to TiVo assistance in the
development of the TiVo Center as set forth herein;
Whereas, Quantum is willing to sell up to [*] of such hard disk drives to
TiVo in accordance with an initial-payment-plus-periodic-payment arrangement as
set forth herein; and
Whereas, the Parties have entered into the "Auxiliary Agreements" (as
defined herein).
Now, Therefore, in consideration of the mutual covenants and promises
contained herein, the Parties hereby agree as follows:
ARTICLE 1
CONSTRUCTION AND DEFINITIONS
Section 1.1 Construction.
------------
(a) All references in this Agreement to "Articles," "Sections" and
"Exhibits" refer to the articles, sections and exhibits of this Agreement.
(b) As used in this Agreement, neutral pronouns and any variations
thereof shall be deemed to include the feminine and masculine and all terms used
in the singular shall be deemed to include the plural, and vice versa, as the
context may require.
(c) The words "hereof," "herein" and "hereunder" and other words of
similar import refer to this Agreement as a whole, as the same may from time to
time be amended or supplemented, and not to any subdivision contained in this
Agreement.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
(d) The word "including" when used herein is not intended to be
exclusive and means "including, without limitation."
Section 1.2 Definitions. As used herein:
------------
(a) "Auxiliary Agreements" means that certain "Warrant Purchase and
--------------------
Equity Rights Agreement," that certain "Warrant to Purchase Shares of Series C
Preferred Stock" and that certain "Warrant to Purchase Shares of Series D
Preferred Stock," all of even date herewith.
(b) "Bankruptcy Event" means any of the following events or
----------------
circumstances with respect to a Party: such Party (i) ceases conducting its
business in the normal course; (ii) makes a general assignment for the benefit
of its creditors; (iii) petitions, applies for, or suffers or permits with or
without its consent the appointment of a custodian, receiver, trustee in
bankruptcy or similar officer for all or any substantial part of its business or
assets; or (iv) avails itself or becomes subject to any proceeding under the
U.S. Bankruptcy Code or any similar state, federal or foreign statute relating
to bankruptcy, insolvency, reorganization, receivership, arrangement, adjustment
of debts, dissolution or liquidation, which proceeding is not dismissed within
[*] of commencement thereof.
(c) "Change of Control" means, with respect to a Party: (A) the
-----------------
direct or indirect acquisition of either (i) the majority of the voting stock of
such Party or (ii) all or substantially all of the assets of such Party, by
another entity in a single transaction or series of related transactions; or (B)
such Party is merged with, or into, another entity.
(d) "Confidential Information" means (i) any information disclosed by
------------------------
one Party (the "Disclosing Party') to the other (the "Receiving Party'), which,
if in written, graphic, machine-readable or other tangible form is marked as
"Confidential" or "Proprietary," or which, if disclosed orally or by
demonstration, is identified at the time of initial disclosure as confidential
and reduced to a writing marked "Confidential" and delivered to the Receiving
Party within [*] of such disclosure; and the terms of this
Agreement as set forth in Section 9.3.
(e) "Discounted Price" means [*] of the OEM Price.
----------------
(f) "Design Maturity Test" means a test of a TiVo Center's readiness
--------------------
to be put into commercial production, the specification for which test is set
forth in Exhibit F.
(g) "Equivalent Drive" means one or both of the following, as the
----------------
context may require: (i) with respect to a [*] hard disk drive, a Quantum
desktop personal computer hard disk drive [*]; or (ii) with respect to a [*]
hard disk drive, a Quantum desktop personal computer hard disk drive [*]. An
Equivalent Drive may have the same or a different shape and size as its
corresponding [*] hard disk drive; provided that such Equivalent Drive is a
commercially practicable substitute for its corresponding [*] hard disk drive.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
(h) "Hard Disk Drive" means one or more of the following, as the context
---------------
may require: (i) Quantum [*] hard disk drive, (ii) Quantum [*] hard disk drive
or (iii) an Equivalent Drive.
(i) "Initial Payment" means the portion of the price of a Hard Disk Drive
---------------
other than the amount payable to Quantum in accordance with Section 4.4. The
Initial Payment for a Hard Disk Drive shall equal [*] therefore unless set equal
to [*] of the OEM Price pursuant to Section 4.2 or Section 4.3.
(j) "Integration" means TiVo's integration of the Hard Disk Drives into the
-----------
first TiVo Center design.
(k) "Intellectual Property Rights" means all rights of a Person in, to, or
----------------------------
arising out of: (i) any [*] patent or any application therefor and any and all
reissues, divisions, continuations, renewals, extensions and continuations-in-
part thereof; (ii) inventions (whether patentable or not in any country),
invention disclosures, improvements, trade secrets, proprietary information,
know-how, technology and technical data; (iii) copyrights, copyright
registrations, mask works, mask work registrations, and applications therefor in
the [*], and all other rights corresponding thereto throughout the [*] (iv)
trademarks, trade names, trade dress and similar product source identifiers and
(v) any other proprietary rights anywhere in the [*].
(l) "OEM Price" means the amount [*] in accordance with Exhibit E.
---------
(m) "Person" means any legal person or entity, including any individual,
------
corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated association, limited liability corporation, governmental
entity, or other person or entity of similar nature.
(n) "Qualified" shall describe a particular Hard Disk Drive during a
---------
particular calendar month if (i) either (1) TiVo's Initial Payment with respect
to such Hard Disk Drive was the Discounted Price or (2) Quantum has paid a
Rebate with respect to such Hard Disk Drive; and (ii) such Hard Disk Drive was
sold or otherwise distributed by TiVo or a third party in or for use in a TiVo
Center or third-party device that receives the TiVo Service to a customer who
subscribes to the TiVo Service at any time during such month, whether such
customer has continually subscribed to the TiVo Service since his or her
initiation thereof or such customer has, one (1) or more times, terminated and
reinitiated his or her TiVo Service subscription.
(o) "Quantum Trademark" means the trademark of Quantum shown on Exhibit D
-----------------
attached hereto.
(p) "Quantum Trademark Territory" means the territory described under the
---------------------------
heading "Quantum Trademark Territory" in Exhibit C.
(q) "Rebate" means an amount equal to [*], paid by Quantum, directly or
------
indirectly through TiVo, to a third party pursuant to Section 4.7.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
(r) "Support" shall mean the technical advice and consultation
-------
provided by Quantum to TiVo in accordance with Section 2.1.
(s) "Term" means the term of this Agreement as set forth in Section
----
12.1.
(t) "TiVo Center" means a TiVo hardware product containing a Hard Disk
-----------
Drive which product (i) implements the features of the TiVo Service and (ii) is
intended for commercial sale.
(u) "TiVo-Center-Compatible Product" means a device that is capable of
------------------------------
operating with, and exploiting the features of, the TiVo Service.
(v) "TiVo Service" means a personalizable television viewing service
------------
offered to end-user consumers; for example, a service having the features set
forth in Exhibit A.
(w) "TiVo Trademark" shall mean the TiVo mark shown on Exhibit D.
--------------
(x) "TiVo Trademark Territory" means the territory described under the
------------------------
heading "TiVo Trademark Territory" in Exhibit C.
ARTICLE 2
TWO CENTER DEVELOPMENT
Section 2.1 Development Management. Quantum and TiVo shall cause [*] and
----------------------
[*], respectively, or their successors, to meet not less than [*] times each
[*] to agree on Quantum development support deliverables and schedule and to
discuss all other matters relating to the Integration (each such meeting, a
"Development Meeting") during the period described in Section 2.2.
Section 2.2 Quantum Development Support. During the period commencing on
---------------------------
the Effective Date and ending upon the sooner of (i) [*] or (ii) the [*],
Quantum shall provide to TiVo, in accordance with the procedures set forth in
Section 2.3, technical advice and consultation (the "Support") in the following
areas, in connection with the Integration:
(a) Hard Disk Drive [*] with the TiVo Center;
(b) [*] on Hard Disk Drive [*], including by [*] of a Hard Disk Drive
[*]; and
(c) Integration of the Hard Disk Drives into the TiVo Center
generally, including with regard to [*].
In addition, Quantum shall make mutually acceptable modifications to the Hard
Disk Drives that enhance Hard Disk Drive performance in the TiVo Center
environment.
Section 2.3 Support Procedures.
------------------
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
(a) Quantum shall provide the Support as set forth in Section 2.2 via
[*] engineers (the "Engineers") each devoting up to [*] to the provision of the
Support. The Engineers shall have experience in the following areas:
(i) Hard Disk Drive [*]; and
(ii) Hard Disk Drive [*] considerations including [*].
(b) With respect to the Support, the Engineers shall report to [*] or
his successor.
(c) If TiVo desires that Quantum assign engineers in addition to the
Engineers to provide Support, TiVo shall notify Quantum during the next-to-occur
Development Meeting and Quantum shall, if Quantum reasonably believes that such
assignment is reasonably necessary to fulfill Quantum's obligation to provide
Support hereunder, make such an assignment.
Section 2.4 Facilities. TiVo shall provide to the Engineers reasonable
----------
office space within TiVo's facilities and all facilities, materials and
assistance reasonably necessary to permit the Engineers to perform Quantum's
obligations set forth in Section 2.2.
Section 2.5 Quantum Environmental Test Chambers. Prior to the first TiVo
-----------------------------------
Center's passing the Design Maturity Test, and within a reasonable time
following TiVo's written request, and subject to the availability of Quantum's
environmental hard disk drive test chambers, Quantum shall, [*], test the Hard
Disk Drives as integrated into the first TiVo Center in Quantum's environmental
hard disk drive test chambers. Quantum shall perform such tests using test
scripts and procedures jointly developed by the Parties. TiVo shall have the
right to observe the performance of such tests.
Section 2.6 Ownership of Intellectual Property Rights.
-----------------------------------------
(a) Underlying Inventions and Works of Authorship. Neither the
---------------------------------------------
Parties' creation of joint inventions or joint works of authorship nor the
provisions of this Section 2.6 shall grant to a Party any right or license to
any invention or work of authorship of the other Party with respect to which
such joint inventions or joint works of authorship are improvements or
derivative works, as the case may be.
(b) Joint Ownership. Except as set forth in Section 2.6(c), each Party
---------------
shall jointly own all inventions and works of authorship invented or authored,
as the case may be, pursuant to this Agreement by one (1) or more employees of
each Party, without a duty to account to the other joint owner (such inventions
and works of authorship, "Joint Developments").
(C) Filings. The Parties shall confer on (i) protection of Joint
-------
Developments through, as appropriate, filings ("Filings") in the United States
Copyright Office, the United States Patent and Trademark Office or otherwise,
and/or through maintenance of the Joint Development as a trade secret, and (ii)
preparation, filing, prosecution and maintenance of Filings and rights related
to Joint
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
Developments. With respect to each country in which either Party desires to make
a Filing, the Parties shall designate one Party as responsible for such Filing.
If both Parties share the expense of such Filing, then the Filing shall be made
on behalf of both Parties and shall name each Party as joint and equal owner in
such country of the Joint Development and of the resulting associated rights. If
one Party does not share the expense of such Filing, then the Party that does
not make such Filing shall assign all its right, title and interest in and to
the relevant Joint Development to the Party that does make such Filing, and the
Party which makes such Filing shall be deemed to have granted the other Party a
nonexclusive, irrevocable, perpetual, fully paid, royalty-free license, without
right to sublicense, under the Filing Party's rights in and to the relevant
Joint Development, except as set forth below in this section, to use that Joint
Development without restriction, including without limitation to practice any
process, method, or procedure and to make, use, have made, and sell or otherwise
dispose of any product or item. If either Party does not pay its one-half share
of maintenance expenses with respect to the patent or other rights associated
with a Joint Development, then sole ownership of such rights shall be
transferred and assigned to the other Party, and the license set forth above
shall be terminated.
(d) Licensing and Infringement Prosecution. Neither Party shall
--------------------------------------
license to any third party, or bring any suit, action or proceeding against any
third party for the infringement of, any intellectual property right in any
Joint Development without the prior written consent of the other Party, which
consent shall not be unreasonably denied. A Party from whom such consent is
requested in writing shall provide or deny such consent in writing within [*]
following such request. If such consent is denied, the denying Party shall
furnish to the requesting Party a detailed explanation of the basis for such
denial along with such denial. The Parties agree that reasonable bases for
denying such consent shall include the fact that the denying Party is in
litigation with, or otherwise has an adverse relationship with, a third party to
whom the requesting Party wishes to grant a license.
Section 2.7 Trade Secret Licenses.
---------------------
(a) Quantum hereby grants to TiVo a [*] license under Quantum's trade
secret rights in the information provided to TiVo by Quantum pursuant to this
Agreement to make, have made, use, sell, offer for sale and import the TiVo
Center.
(b) TiVo hereby grants to Quantum a [*] license under TiVo's trade
secret rights in the information provided by TiVo to Quantum pursuant to this
Agreement to make, have made, use, sell, offer for sale and import any product.
(c) Each Party may sublicense to third parties the rights granted to
such Party pursuant to this Section 2.7 in connection with the licensing of
other of its Intellectual Property Rights to third parties.
Section 2.8 No Other License. Neither Party grants to the other any
----------------
license to any of such Party's Intellectual Property Rights except as expressly
set forth herein. Nothing set forth herein prohibits or shall be construed to
prohibit either Party from independently making any invention or
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
creating any work of authorship, and, as between the Parties, each Party shall
exclusively own all inventions and works of authorship so created, except as may
be expressly licensed hereunder.
ARTICLE 3
HARD DISK DRIVE PURCHASES
SEction 3.1 Development Units. Upon TiVo's written request, Quantum shall
-----------------
provide to TiVo, [*], as reasonably required by TiVo in connection with the
Integration, up to [*] [*] Hard Disk Drives and up to [*] [*] Hard Disk Drives.
Such Hard Disk Drives may be used by TiVo solely for [*] of the TiVo Center and
not for any other purpose, including [*].
Section 3.2 Production Units. During the Term, TiVo may order from Quantum
----------------
Hard Disk Drives under the terms, conditions and procedures set forth herein.
Section 3.3 Hard Disk Drive Ordering Procedures. The terms and conditions
-----------------------------------
governing the placement and amendment of purchase orders for Hard Disk Drives
hereunder and terms and conditions relating to Hard Disk Drive shipments and
Hard Disk Drive warranties are set forth in Exhibit B attached hereto.
Section 3.4 Hard Disk Drive Use Restrictions. Except in connection with
--------------------------------
TiVo's provision of a replacement Hard Disk Drive to a TiVo Center customer in
exchange for an under-warranty, damaged or defective Hard Disk Drive contained
in such TiVo Center, TiVo shall not resell or otherwise provide to any third
party, alone or incorporated into any product, any Hard Disk Drive purchased
hereunder for which the Initial Payment equaled the Discounted Price except as
incorporated into a new TiVo Center sold to a customer who subscribes, at the
time of purchase of such TiVo Center, to the TiVo Service for a period of not
less than [*]. In the event that TiVo resells or otherwise provides to any third
party any Hard Disk Drive other than as incorporated into a new TiVo Center sold
to a customer who subscribes, at the time of purchase of such TiVo Center, to
the TiVo Service for a period of not less than [*], including upgrading the hard
disk drive in a TiVo Center previously sold or otherwise distributed to a third
party, TiVo shall promptly notify Quantum thereof and pay to Quantum [*] of the
OEM Price for such Hard Disk Drive.
Section 3.5 Future Hard Disk Drive Purchases. At a mutually agreeable
--------------------------------
time, but not later than TiVo's purchase of [*] Hard Disk Drives hereunder, the
Parties shall meet and renegotiate in good faith the terms and conditions upon
which TiVo would continue to purchase Hard Disk Drives from Quantum.
ARTICLE 4
HARD DISK DRIVE PRICING
Section 4.1 Generally. The price to TiVo for Hard Disk Drives ordered
---------
hereunder shall equal the Initial Payment. Notwithstanding the foregoing, if
the Initial Payment for a Hard Disk Drive
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Excahnge
Commission.
7
<PAGE>
equals the Discounted Price thereof pursuant to Section 4.2 or Section 4.3, then
the price to TiVo for such Hard Disk Drive shall equal the Initial Payment plus
the periodic payments as set forth in Section 4.4.
Section 4.2 Milestone 1 Discount. The Initial Payment for the first
--------------------
(1/st/) [*] Hard Disk Drives purchased hereunder shall equal the Discounted
Price if:
(a) TiVo has completed development of the TiVo Center having the
features and functionality set forth in the relevant portion of Exhibit A, as
evidenced by such product's passing the Design Maturity Test; and
(b) TiVo has completed development of the TiVo Service having the
features and functionality set forth in the relevant portion of Exhibit A, as
evidenced by TiVo's successful delivery of such service to a TiVo Center or a
prototype thereof, and
(c) TiVo has completed development of the viewer interface required to
control the TiVo Service, and such interface is ready for shipment to end-user
customers; and
(d) TiVo has successfully completed a TiVo Center and TiVo Service
pilot program, as evidenced by survey data convincingly demonstrating that
customers value the TiVo Center and the TiVo Service and are willing to pay a
monthly fee for such Service; and
(e) TiVo has entered into a written agreement with not less than one
(1) third party pursuant to which the other party thereto has agreed to
distribute not less than [*] TiVo Centers during the Term; and
(f) TiVo is not in breach of any provision of this Agreement.
Section 4.3 Milestone 2 Discount. The Initial Payment for the [*] Hard
--------------------
Disk Drives purchased hereunder immediately following the first (1/st/) [*] Hard
Disk Drives purchased hereunder shall be equal to the Discounted Price if
Quantum, in its commercially reasonable discretion, taking into account (a) [*]
and (b) Quantum's discussions with TiVo commencing not less than [*] prior to
TiVo's expected placement of a Purchase Order hereunder for Hard Disk Drives,
such that TiVo's aggregate purchase of Hard Disk Drive hereunder exceeds [*]
Hard Disk Drives, determines to sell such Hard Disk Drives to TiVo under such
terms, provided TiVo gives to Quantum reasonable advance written notice of
TiVo's intention to submit such a Purchase Order.
Section 4.4 Periodic Payments.
-----------------
(a) With respect to [*], TiVo shall pay to Quantum [*] for each
Qualified [*] Hard Disk Drive and
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
each Qualified Equivalent Drive of a [*] Hard Disk Drive. With respect to each
[*] Hard Disk Drive and each Equivalent Drive thereof sold to TiVo or a third
party hereunder, TiVo shall pay such amount to Quantum for each of the [*]
commencing with the [*] TiVo or such third party [*] such Hard Disk Drive,
irrespective of whether such Hard Disk Drive is Qualified. TiVo shall pay the
amounts set forth above for each [*] Hard Disk Drive and each Equivalent Drive
thereof whether or not such Hard Disk Drive is returned to Quantum as defective
pursuant to the warranty provisions hereof; provided that TiVo shall have no
obligation to pay any amount pursuant to this Section 4.4(a) with respect to any
Hard Disk Drive provided by Quantum as a replacement for any such defective Hard
Disk Drive.
(b) With respect to [*], TiVo shall pay to Quantum [*] for each
Qualified [*] Hard Disk Drive and each Qualified Equivalent Drive of a [*] Hard
Disk Drive. With respect to each [*] Hard Disk Drive and each Equivalent Drive
thereof sold to TiVo or third party hereunder, TiVo shall pay such amount to
Quantum for each of the [*] commencing with the [*] TiVo or such third party [*]
such Hard Disk Drive, irrespective of whether such Hard Disk Drive is Qualified.
TiVo shall pay the amounts set forth above for each [*] Hard Disk Drive and each
Equivalent Drive thereof whether or not such Hard Disk Drive is returned to
Quantum as defective pursuant to the warranty provisions hereof; provided that
TiVo shall have no obligation to pay any amount pursuant to this Section 4.4(b)
with respect to any Hard Disk Drive provided by Quantum as a replacement for any
such defective Hard Disk Drive.
(c) Within [*] days of the last day of each [*], TiVo shall pay to
Quantum all amounts due to Quantum pursuant to Section 4.4(a) and Section 4.4(b)
[*].
Section 4.5 Periodic Payment Reporting. Within [*] of the last day of each
--------------------------
[*], TiVo shall deliver to Quantum a detailed written report, certified as
accurate by an officer of TiVo, indicating the amount due to Quantum pursuant to
Section 4.4, the basis for such amount and any other related information
reasonably requested by Quantum.
Section 4.6 Inspection Rights. TiVo shall make and maintain at TiVo's
-----------------
principal place of business, during the Term and for a period of [*] thereafter,
true and complete books of account containing an accurate record of all data
necessary for the verification of TiVo's performance under this Agreement,
including the making of any payments to Quantum required hereunder, and Quantum
may cause, at Quantum's expense except as below provided, an independent,
certified public accountant selected by Quantum and acceptable to TiVo in its
reasonable discretion to examine such books at all reasonable times (but not
more than [*] times in each calendar year) upon no less than [*] advance written
notice. Such examination shall be made during normal business hours at the
principal place of business of TiVo. In the event that any such examination
reveals, for any period, payment by TiVo to Quantum of less than the amount TiVo
is obligated to pay to Quantum hereunder, TiVo shall promptly pay to Quantum all
amounts due to Quantum hereunder, plus interest thereon, from the date such
payment was originally due to Quantum to the date of payment thereof to Quantum,
at the rate of [*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
9.
<PAGE>
[*] per year or [*], whichever is [*]. In the
event that any such examination reveals, for any period, payment by TiVo to
Quantum of less than [*] of the amount TiVo is obligated to pay
to Quantum hereunder, TiVo shall promptly reimburse Quantum for all costs and
expenses actually and reasonably incurred in connection with such examination.
Subject to Section 9.1, Quantum shall treat all information learned by Quantum
in connection with the conduct of such examination as TiVo's Confidential
Information. If such examination reveals, for any period, payment by TiVo to
Quantum of more than the amount of examination reveals, for any period, payment
by TiVo to Quantum of more than the amount TiVo in obligated to pay Quantum
hereunder, Quantum shall promptly pay to TiVo the amount of such overpayment.
Section 4.7 TiVo Licensee Rebate. To the extent TiVo has the right to
--------------------
purchase Hard Disk Drives hereunder having an Initial Payment equal to the
Discounted Price, Quantum shall in its commercially reasonable discretion, upon
TiVo's written request, sell directly to a third-party TiVo technology licensee
a portion of such Hard Disk Drives at the OEM Price. If such a third party
enters into a written agreement with Quantum: (i) providing that such Hard Disk
Drives may only be resold as incorporated into a TiVo-Center-Compatible Product
to a customer who subscribes, at the time of purchase of such product, to the
TiVo Service for a period of not less than [*]; (ii) providing that such Hard
Disk Drives may only be resold as incorporated into a TiVo-Center-Compatible-
Product bearing the Quantum Trademark under terms and conditions substantially
similar to those set forth in Article 6 and (iii) otherwise having terms and
conditions reasonably acceptable to Quantum; then Quantum shall pay to such
third party, [*] an amount equal to [*] of the OEM Price of each Hard Disk Drive
sold by such third party during the relevant quarter incorporated into a TiVo
Center-Compatible product to a customer who subscribes, at the time of purchase
of such product, to the TiVo Service for a period of not less than [*].
ARTICLE 5
EXCLUSIVITY
Section 5.1 Exclusivity. Except as expressly set forth in Exhibit B
-----------
attached hereto, prior to TiVo's purchase of [*] Hard Disk Drives hereunder, for
so long as Quantum is obligated hereunder or otherwise willing to sell Hard Disk
Drives to TiVo at a price having an initial payment component equal to [*] of
the OEM Price, TiVo shall not purchase except as set forth herein any hard disk
drive from any Person for incorporation into any TiVo product having a hard disk
drive, provided that Quantum is willing to supply to TiVo a hard disk drive
product that Quantum is willing to supply to TiVo a hard disk drive product
that, with or without reasonable modification thereto at TiVo's expense, meets
TiVo's commercially reasonable needs. TiVo's cost to make such a modification
and the technical feasibility of making such a modification shall be considered
among other factors in determining whether such modification is "reasonable."
Notwithstanding the foregoing, TiVo shall not be relieved of its exclusivity
obligations set forth above if Quantum does not ship Hard Disk Drives hereunder
pursuant to the provisions of Exhibit B in response to TiVo's breach hereof.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
10.
<PAGE>
ARTICLE 6
TRADEMARK LICENSES
Section 6.1 License to TiVo.
---------------
(a) Quantum hereby grants to TiVo a [*] license to use the Quantum
Trademark, under Quantum's rights in the Quantum Trademark, in the Quantum
Trademark Territory, during the Term and solely in connection with (i) the
packaging, labeling, promotion, advertising, and distribution of the TiVo Center
and the TiVo Service, (ii) TiVo's performance of its obligations hereunder and
(iii) such activities as Quantum may permit in its sole discretion from time to
time. All such use shall be strictly in accordance with any reasonable
standards, specifications and instructions that may be supplied by Quantum from
time to time.
(b) If TiVo desires to use the Quantum Trademark as set forth above in
a territory outside the Quantum Trademark Territory, TiVo shall so notify
Quantum in writing and Quantum shall determine whether to register the Quantum
Trademark or undertake similar formalities in such territory. Following the
sooner of (i) Quantum's completion of such registration or undertaking, as
applicable, (ii) Quantum's written notification to TiVo that Quantum does not
wish to undertake such a registration or such formalities with respect to the
Quantum Trademark in such territory or (iii) [*] from the date of TiVo's
notification of Quantum as set forth above, such territory shall be considered a
part of the Quantum Trademark Territory hereunder.
(c) Quantum may modify the Quantum Trademark from time to time in
Quantum's sole discretion by delivering to TiVo a modified Quantum Trademark;
provided that TiVo shall remain licensed as set forth herein to, and shall be
permitted to fulfill its obligations hereunder using, the unmodified Quantum
Trademark for [*] following such delivery.
Section 6.2 License to Quantum.
------------------
(a) TiVo hereby grants to Quantum a [*] license to use the TiVo
Trademark, under TiVo's rights in the TiVo Trademark, in the TiVo Trademark
Territory, during the Term and solely in connection with Quantum's performance
of its obligations hereunder. All such use shall be strictly in accordance with
any reasonable standards, specifications and instructions that may be supplied
by TiVo from time to time.
(b) If Quantum desires to use the TiVo Trademark as set forth above in
a territory outside the TiVo Trademark Territory, Quantum shall so notify TiVo
in writing and TiVo shall determine whether to register the TiVo Trademark or
undertake similar formalities in such territory. Following the sooner of (i)
TiVo's completion of such registration or undertaking, as applicable, (ii)
TiVo's written notification to Quantum that TiVo does not wish to undertake such
a registration or such formalities with respect to the TiVo Trademark in such
territory, or (iii) [*] from the date of Quantum's notification to TiVo as set
forth above, such territory shall be considered a part of the TiVo Trademark
Territory hereunder.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
11.
<PAGE>
(c) TiVo may modify the TiVo Trademark from time to time in TiVo's
sole discretion by delivering to Quantum a modified TiVo Trademark; provided
that Quantum shall remain licensed as set forth herein to, and shall be
permitted to fulfill its obligations hereunder using, the unmodified TiVo
Trademark for [*] following such delivery.
Section 6.3 TiVo Usage. TiVo shall ensure that each of the following bears
----------
the Quantum Trademark in accordance herewith:
(a) as commercially reasonable, all TiVo Center and TiVo Service
documentation, including manuals, except as Quantum may otherwise direct or
agree;
(b) as commercially reasonable, all TiVo Center and TiVo Service
promotional material, including [*], except as Quantum may otherwise direct or
agree;
(c) all TiVo Center and TiVo Service exterior retail product
packaging, such that the Quantum Trademark is visible to a retail customer when
such products are on the retail shelf;
(d) the front of the TiVo Center, in the form of a silk screen or not-
easily-removable-by-an-end-user sticker; provided that Quantum shall pay to TiVo
[*] to so affix the Quantum Trademark, including [*] not to exceed [*] per TiVo
Center bearing such silk screen or sticker;
(e) the [*] of the TiVo Service; and
(f) the [*] of the TiVo Center and the TiVo Service.
Section 6.4 Other Usage. The Parties shall work together in good faith
-----------
throughout the Term to identify appropriate locations for TiVo's display of the
Quantum Trademark in addition to those locations described in Section 6.3. Upon
the Parties' mutual agreement on any such appropriate locations, TiVo shall
display the Quantum Trademark in such locations in accordance herewith.
Section 6.5 Trademark Usage Approval Process.
--------------------------------
(a) Notwithstanding any other provision of this Agreement, TiVo shall
not make any use of the Quantum Trademark prior to Quantum's written approval of
the product and other materials bearing the Quantum Trademark. TiVo shall send
samples of such products and materials to Quantum, to the attention of [*] or
his successor, in the Quantum Law Department.
(b) Quantum will use commercially reasonable efforts to approve or
reject in writing any product or other material bearing the Quantum Trademark
within [*] of Quantum's receipt of a sample thereof. TiVo shall deliver to
Quantum, along with each such sample delivered to Quantum hereunder, a
memorandum detailing the differences in product characteristics and trademark
usage between such sample and products previously approved by Quantum pursuant
to this Section 6.5(b). In the event that Quantum does not so approve or reject
within such time, such product or other material shall be deemed rejected by
Quantum pursuant to this Section 6.5(b).
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
12.
<PAGE>
(c) Notwithstanding any other provision of this Agreement, Quantum
shall not make any use of the TiVo Trademark prior to TiVo's written approval of
the product and other materials bearing the TiVo Trademark. Quantum shall send
samples of such products and materials to TiVo to the attention of [*] or his
successor as the TiVo Vice President of Marketing and Business Development.
(d) TiVo will use commercially reasonable efforts to approve or reject
in writing any product or other material bearing the TiVo Trademark within [*]
of TiVo's receipt of a sample thereof Quantum shall deliver to TiVo, along with
each such sample delivered to TiVo hereunder, a memorandum detailing the
differences in product characteristics and trademark usage between such sample
and products previously approved by TiVo pursuant to this Section 6.5(d). In the
event that TiVo does not so approve or reject within such time, such product or
other material shall be deemed rejected by TiVo pursuant to this Section 6.5(d).
Section 6.6 Ownership.
---------
(a) TiVo acknowledges and agrees that Quantum is the sole owner of the
Quantum Trademark and that TiVo's right to use the Quantum Trademark is derived
solely from the license thereto granted by Quantum pursuant to this Agreement.
TiVo acknowledges and agrees that all of its use of the Quantum Trademark and
any goodwill established thereby shall inure to Quantum's exclusive benefit.
(b) Quantum acknowledges and agrees that TiVo is the sole owner of the
TiVo Trademark and that Quantum's right to use the TiVo Trademark is derived
solely from the license thereto granted by TiVo pursuant to this Agreement.
Quantum acknowledges and agrees that all of its use of the TiVo Trademark and
any goodwill established thereby shall inure to TiVo's exclusive benefit.
Section 6.7 Challenge.
---------
(a) If TiVo challenges or contests in any way Quantum's ownership of
the Quantum Trademark, Quantum's registration of the Quantum Trademark, or the
validity of the Quantum Trademark, Quantum shall have the right to terminate
this Agreement immediately. TiVo shall neither use, register nor attempt to
register any trademark confusingly similar to the Quantum Trademark in any
jurisdiction.
(b) If Quantum challenges or contests in any way TiVo's ownership of
the TiVo Trademark, TiVo's registration of the TiVo Trademark, or the validity
of the TiVo Trademark, TiVo shall have the right to terminate this Agreement
immediately. Quantum shall neither use, register nor attempt to register any
trademark confusingly similar to the TiVo Trademark in any jurisdiction.
Section 6.8 Quality Control.
---------------
(a) TiVo shall deliver to Quantum, at no cost, from time to time as
reasonably requested by Quantum, representative samples of any and all items
bearing the Quantum Trademark. If, at any time, any item made or assembled by
TiVo and bearing the Quantum Trademark shall, in the
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
13.
<PAGE>
TiVo Center and the TiVo Service, in every place appropriate in Quantum's
reasonable discretion, in Quantum's Consumer Electronic Storage Business Unit
("CESBU") advertising and promotional material. Where appropriate in Quantum's
reasonable discretion, CESBU shall reference TiVo as a customer thereof in
connection with CESBU's consumer electronics industry tradeshow activities.
reasonable opinion of Quantum, fail to conform to the standards of quality set
by Quantum for any use of the Quantum Trademark, TiVo immediately shall take
such steps as are necessary to conform such item to Quantum's standards of
quality.
(b) Quantum shall deliver to TiVo, at no cost, from time to time as
reasonably requested by TiVo, representative samples of any and all items
bearing the TiVo Trademark. If, at any time, any item made or assembled by
Quantum and bearing the TiVo Trademark shall, in the reasonable opinion of TiVo,
fail to conform to the standards of quality set by TiVo for any use of the TiVo
Trademark, Quantum immediately shall take such steps as are necessary to conform
such item to TiVo's standards of quality.
Section 6.9 Policing.
--------
(a) As reasonable, TiVo shall aid Quantum in policing the use of the
Quantum Trademark and shall otherwise provide Quantum at Quantum's expense with
all reasonable cooperation in protecting the Quantum Trademark. TiVo shall
immediately notify Quantum of any apparent infringement of the Quantum Trademark
that comes to TiVo's attention.
(b) As reasonable, Quantum shall aid TiVo in policing the use of the
TiVo Trademark and shall otherwise provide TiVo at TiVo's expense with all
reasonable cooperation in protecting the TiVo Trademark. Quantum shall
immediately notify TiVo of any apparent infringement of the TiVo Trademark that
comes to Quantum's attention.
Section 6.10 Registered User Filings. The Parties shall cooperate to make
-----------------------
any filings or registrations that may be required in any jurisdiction in
connection with a Party's use of the other Party's trademarks therein as
authorized herein, at the sole expense of the Party using such other Party's
trademarks.
ARTICLE 7
PROMOTIONAL ACTIVITIES
Section 7.1 PR References. Each Party shall use commercially reasonable
-------------
efforts to assist the other Party in connection with its public relations
activities, including interviews and press releases, in connection with the
Integration.
Section 7.2 Quantum Promotion. During the [*] following the Effective
-----------------
Date and for so long thereafter as TiVo is purchasing not less than [*] Hard
Disk Drives from Quantum hereunder per [*], Quantum shall reference the TiVo
Center and the TiVo Service, in every place appropriate in Quantum's reasonable
discretion, in [*]. Where appropriate in Quantum's reasonable discretion, [*].
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
14.
<PAGE>
Section 7.3 Manufacturer Relationships. Quantum shall use commercially
--------------------------
reasonable efforts to [*].
Section 7.4 Corporate Publicity. Quantum and TiVo shall publicly announce
-------------------
the business arrangement set forth in this Agreement at a time that is mutually
acceptable to the Parties. The content of such announcement shall be mutually,
reasonably acceptable to the Parties. Quantum and TiVo shall jointly make
future public announcements as the Parties deem advisable in their respective
discretions. Except as otherwise required by law, neither Party shall make any
public announcement or advertisement regarding this Agreement or the activities
hereunder without the prior consent of the other, which consent shall not be
unreasonably withheld.
[*]
Section 7.6 TiVo Recommendation. TiVo shall, with respect to each current
-------------------
and prospective TiVo technology licensee, (i) [*], respectively, in all printed
materials and electronic materials provided to such licensee or prospective
licensee, including presentation materials and technical specifications and
documentation required by such licensee or prospective licensee to develop its
products; and (ii) include Quantum, as reasonably appropriate, in initial and
ongoing technology licensing discussions with such licensee or prospective
licensee. TiVo shall use commercially reasonable efforts to cause its licensees
to whom Quantum offers an appropriate Quantum Trademark license to agree to use
the Quantum Trademark in the manner set forth in Section 6.3; provided that TiVo
shall have no obligation to ensure that such licensees actually use the Quantum
Trademark in any particular manner.
ARTICLE 8
INFORMATION REPORTING
Section 8.1 Information Reporting. TiVo shall provide to Quantum copies of
---------------------
TiVo internal reports covering the sale of TiVo Centers containing Hard Disk
Drives and TiVo's revenue by source (e.g., TiVo Service subscription,
advertising, product sales, etc.). TiVo shall prepare such reports not less
frequently than [*] and each report shall cover the time period from the date of
the last similar report until the date of such report. Notwithstanding the
foregoing sentence, TiVo
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
15.
<PAGE>
shall prepare and deliver such reports as set forth above not less frequently
than [*] as soon as commercially practicable.
ARTICLE 9
CONFIDENTIAL INFORMATION
Section 9.1 Confidential Information and Exclusions. Notwithstanding
---------------------------------------
Section 1.2(d), Confidential Information shall exclude information that the
Receiving Party can demonstrate: (i) was independently developed by the
Receiving Party without any use of the Disclosing Party's Confidential
Information or by the Receiving Party's employees or other agents (or
independent contractors hired by the Receiving Party) who have not been exposed
to the Disclosing Party's Confidential Information; (ii) becomes known to the
Receiving Party, without restriction, from a source other than the Disclosing
Party without breach of this Agreement and that had a right to disclose it;
(iii) was in the public domain at the time it was disclosed or becomes. in the
public domain through no act or omission of the Receiving Party; or (iv) was
rightfully known to the Receiving Party, without restriction, at the time of
disclosure. All confidential information of either Party pursuant to that
certain "Non-Disclosure Agreement" between the Parties dated as of December 8,
1997 shall be considered such Party's Confidential Information hereunder.
Section 9.2 Confidentiality Obligation. The Receiving Party shall treat as
--------------------------
confidential all of the Disclosing Party's Confidential Information. Without
limiting the foregoing, the Receiving Party shall use at least the same degree
of care which it uses to prevent the disclosure of its own confidential
information of like importance, but in no event with less than reasonable care,
to prevent the disclosure of the Disclosing Party's Confidential Information.
Notwithstanding the foregoing, each Party may disclose Confidential Information
of the other Party to a third-party sublicensee pursuant to Section 2.7 to the
minimum extent reasonably necessary to permit such sublicensee to exploit its
sublicense hereunder, provided that such sublicensee enters into a fully
executed written agreement with the relevant Receiving Party, pursuant to which
agreement such sublicensee is obligated to maintain the confidentiality of such
Confidential Information as set forth herein.
Section 9.3 Confidentiality of Agreement. Each Party agrees that the terms
----------------------------
and conditions, but not the existence, of this Agreement shall be treated as the
other's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto can be made in
any form of public or commercial advertising without the prior written consent
of the other Party; provided, however, that each Party may disclose the terms
and conditions of this Agreement: (i) as required by any court or other
governmental body; (ii) as otherwise required by law; (iii) to legal counsel of
the Parties; (iv) in connection with the requirements of an initial public
offering or securities filing; (v) in confidence, to accountants, banks, and
financing sources and their advisors; (vi) in confidence, in connection with the
enforcement of this Agreement or rights under this Agreement; or (vii) in
confidence, in connection with a merger or acquisition or proposed merger or
acquisition, or the like.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
16.
<PAGE>
Section 9.4 Compelled Disclosure. If a Receiving Party believes that it
--------------------
will be compelled by a court or other authority to disclose Confidential
Information of the Disclosing Party, it shall give the Disclosing Party prompt
written notice so that the Disclosing Party may take steps to oppose such
disclosure.
Section 9.5 Remedies. Unauthorized use by a Party of the other Party's
--------
Confidential Information will diminish the value of such information.
Therefore, if a Party breaches any of its obligations with respect to
confidentiality or use of Confidential Information hereunder, the other Party
shall be entitled to seek equitable relief to protect its interest therein,
including injunctive relief, as well as money damages.
ARTICLE 10
WARRANTIES, DISCLAIMERS AND INDEMNITIES
Section 10.1 General Warranty. Each Party hereby represents and warrants to
----------------
the other that: (i) all corporate action on the part of such Party, its
officers, directors and shareholders necessary for the authorization of this
Agreement and the performance of all obligations of such Party hereunder has
been taken; and (ii) this Agreement, when executed and delivered, will be a
valid and binding obligation of such Party enforceable in accordance with its
terms.
Section 10.2 No Conflict. Each Party hereby represents and warrants to the
-----------
other that such Party's making of this Agreement and performance hereunder does
not and will not violate any agreement existing between such Party and any third
party.
Section 10.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER
----------
PARTY MAKES ANY WARRANTIES OR CONDITIONS, EXPRESS, STATUTORY, IMPLIED, OR
OTHERWISE, WITH RESPECT TO ANY PRODUCT OR SERVICE PROVIDED HEREUNDER, AND EACH
PARTY HEREBY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OF NONINFRINGEMENT
OF THIRD PARTY RIGHTS, SATISFACTORY QUALITY, MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT THERETO.
Section 10.4 Third-Party Contracts.
---------------------
(a) TiVo shall, in any contract with any third party for the sale,
lease or other transaction in connection with any product sold or licensed
hereunder, entirely in capital letters in text no smaller than the largest text
in such contract, (i) disclaim on Quantum's behalf all warranties disclaimed
herein to the full extent disclaimed herein, including the implied warranties of
noninfringement, merchantability and fitness for a particular purpose; and (ii)
exclude Quantum's liability to such third party for any indirect, special,
incidental or consequential damages, whether or not Quantum has been advised of
the possibility of such damages.
(b) TiVo shall include, with each TiVo product containing any Quantum
product, a warranty card that, entirely in capital letters in text no smaller
than the largest text on such card
17.
<PAGE>
(i) disclaims on Quantum's behalf all warranties disclaimed herein to the full
extent disclaimed herein, including the implied warranties of non-infringement,
merchantability and fitness for a particular purpose; and (ii) excludes
Quantum's liability to such third party for any indirect, special, incidental or
consequential damages, whether or not Quantum has been advised of the
possibility of such damages.
Section 10.5 Intellectual Property Warranties.
--------------------------------
(a) Quantum hereby represents and warrants to TiVo that (i) Hard Disk
Drives sold to TiVo hereunder, except to the extent that any such Hard Disk
Drive is modified by TiVo or by Quantum hereunder, and (ii) information and
materials, as provided by Quantum to TiVo hereunder, do not infringe or
misappropriate any third party's Intellectual Property Rights.
(b) TiVo hereby represents and warrants to Quantum that information
and materials, as provided by TiVo to Quantum hereunder, do not infringe any
third party's Intellectual Property Rights.
Section 10.6 Quantum Indemnity. Quantum shall defend, indemnify and hold
-----------------
harmless TiVo, its employees and directors, from and against all cost, loss,
liability, damage and expense any of them may incur to a third party as a result
of Quantum's breach of the warranty set forth in Section 10.5(a) or the warranty
set forth in Section 10.1; provided that (i) Quantum is permitted to control the
defense and, at Quantum's option, settlement, of any claim, action, suit or
proceeding (any "Claim") brought by such third party in connection therewith;
(ii) Quantum is promptly notified by TiVo of such Claim; and (iii) TiVo provides
to Quantum all reasonable cooperation in connection with Quantum's defense or
settlement of such Claim. Quantum shall reimburse TiVo's reasonable out-of-
pocket expenses incurred in the provision of such cooperation. THE PROVISIONS
OF THIS SECTION 10.6 STATE QUANTUM'S SOLE AND EXCLUSIVE OBLIGATION AND
LIABILITY, AND TIVO'S SOLE REMEDY FROM QUANTUM, IN CONNECTION WITH ANY
INFRINGEMENT OR MISAPPROPRIATION OF THIRD PARTY RIGHTS OR ANY CLAIM THEREOF.
Section 10.7 TiVo Indemnity. TiVo shall defend, indemnify and hold harmless
--------------
Quantum, its employees and directors from and against all cost, loss, liability,
damage and expense incurred or suffered by any of them arising out of (i) TiVo's
sale or other distribution of any product sold or licensed by Quantum to TiVo
hereunder, except to the extent such cost, loss, liability, damage and expense
arises out of (X) Quantum's breach of the warranty set forth in Section 10.5(a)
or (Y) any product liability claims for personal injury or property damage to
the extent such claims arise out of a defect in a Hard Disk Drive sold to TiVo
hereunder or (ii) any breach by TiVo of (a) any representation or warranty set
forth in Section 10.5(b) or in Section 10.1 or (b) any provision of Section
10.4; provided that (i) TiVo is permitted to control the defense and, at TiVo's
option, settlement, of any third-party Claim in connection therewith; (ii) TiVo
is promptly notified by Quantum of such Claim; and (iii) Quantum provides to
TiVo all reasonable cooperation in connection with TiVo's defense or settlement
of such Claim. TiVo shall reimburse Quantum's reasonable out-of-pocket expenses
incurred in the provision of such cooperation. THE PROVISIONS OF THIS SECTION
10.7 STATE TIVO'S SOLE AND EXCLUSIVE OBLIGATION AND LIABILITY, AND QUANTUM'S
SOLE REMEDY FROM TIVO, IN
18.
<PAGE>
CONNECTION WITH ANY INFRINGEMENT OR MISAPPROPRIATION OF THIRD PARTY RIGHTS OR
ANY CLAIM THEREOF.
ARTICLE 11
LIABILITY LIMITATIONS
Section 11.1 Quantum Liability. QUANTUM'S TOTAL LIABILITY TO TIVO FOR ANY
-----------------
KIND OF LOSS, DAMAGE OR LIABILITY ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT, UNDER ANY THEORY OF LIABILITY, SHALL NOT EXCEED THE AMOUNTS ACTUALLY
PAID BY TIVO TO QUANTUM BY THE EXPRESS TERMS OF THIS AGREEMENT IN THE [*] PERIOD
IMMEDIATELY PRECEDING THE DATE ON WHICH THE CAUSE OF ACTION GIVING RISE TO SUCH
LIABILITY AROSE.
Section 11.2 Exclusion of Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE
--------------------
TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT
LIABILITY, OR OTHERWISE, AND WHETHER OR NOT THE PARTY AGAINST WHOM LIABILITY IS
SOUGHT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
Section 11.3 Failure of Essential Purpose. The limitations specified in
----------------------------
this ARTICLE 11 shall survive and apply even if any limited remedy specified in
this Agreement is found to have failed of its essential purpose.
ARTICLE 12
TERM AND TERMINATION
Section 12.1 Term. This Agreement shall commence on the Effective Date and
----
continue in full force and effect until the earlier to occur of (i) the second
(2/nd/) anniversary of the First Shipment or (ii) Quantum's shipment to TiVo of
[*] Hard Disk Drives (such period, the "Term") unless earlier terminated in
accordance with the express provisions of this Agreement; provided, however,
that Articles I and 9-14 (except Section 14.1), Sections 2.6-2.8, 3.4, 4.4-4.6,
6.2, 6.4-6.9 and 6.11, Sections K, L and M of Exhibit B, and all rights and
obligations thereunder, shall survive the expiration or any termination of this
Agreement and shall continue in perpetuity, unless such provisions expire or
terminate by their terms. Following any expiration of this Agreement or any
termination of this Agreement for other than a material breach hereof by TiVo
(i) Quantum shall be obligated to deliver to TiVo, in accordance with the terms
and conditions hereof, Hard Disk Drives ordered hereunder pursuant to Purchase
Orders accepted by Quantum in accordance herewith; and (ii) TiVo shall be
obligated to pay for such Hard Disk Drives in accordance with the terms and
conditions hereof. Following any termination of this Agreement for a material
breach hereof by TiVo (i) Quantum shall have the right to deliver to TiVo, in
accordance with the terms and conditions hereof, Hard Disk Drives ordered
hereunder pursuant to Purchase
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
19.
<PAGE>
Orders accepted by Quantum in accordance herewith; and (ii) TiVo shall be
obligated to pay in accordance with the terms and conditions hereof for any Hard
Disk Drives so delivered.
Section 12.2 Default. If either Party defaults in the performance of any of
-------
its material obligations hereunder, such Party shall use its best efforts to
correct such default within [*] (or such additional time as the Parties may
agree) after written notice thereof from the other Party. If any such default
cannot be, or is not, corrected within such [*] period, then the non-
defaulting Party shall have the right, in addition to any other remedies it may
have, to terminate this Agreement and all rights and licenses granted by the
non-defaulting Party hereunder by giving written notice to the Party in default.
Section 12.3 Breach of Auxiliary Agreements. If TiVo breaches any provision
------------------------------
of any of the Auxiliary Agreements, such breach shall be deemed a TiVo default
in the performance of a material TiVo obligation hereunder and Quantum shall
have the right to terminate this Agreement in accordance with Section 12.2.
Section 12.4 Termination for Insolvency. Either Party may terminate this
--------------------------
Agreement if a Bankruptcy Event occurs with respect to the other Party.
ARTICLE 13
SECURITY INTEREST
Section 13.1 Grant of Security Interest. To secure the prompt and punctual
--------------------------
payment and performance of all of the Obligations (as defined below), (i) TiVo
hereby grants to Quantum a purchase money security interest in and lien on, and
hereby assigns as collateral and pledges to Quantum, all of TiVo's right, title
and interest in or to all of the Hard Disk Drives sold hereunder and (ii) TiVo
hereby grants to Quantum a security interest in and lien on, and hereby assigns
as collateral and pledges to Quantum all accounts, accounts receivables and
rights to payment of every kind and description related to or arising from the
TiVo Service, in each case, wherever located, whether now owned or existing or
hereafter acquired or arising, and all proceeds thereof of every kind and
nature, however evidenced, whether consisting of money or deposit accounts or
evidenced by documents, instruments, letters of credit chattel paper or
otherwise (all of the foregoing being hereinafter collectively called the
"Collateral"). Notwithstanding anything to the contrary, Quantum acknowledges
that it must take and perform certain actions under the Uniform Commercial Code
as enacted and in effect in the State of California (the "UCC") in order to
perfect its purchase money security interest in the Hard Disk Drives. Until
Quantum has taken and performed such actions, TiVo makes no representation or
warranty as to the priority of the security interest granted hereby in
connection with the Hard Disk Drives.
Section 13.2 Obligations Secured. "Obligations" shall mean all
------------------- -----------
indebtedness, obligations, and liabilities of TiVo to Quantum, direct or
indirect, absolute or contingent, liquidated or unliquidated, now existing or
hereafter arising, in connection with the payment of the Initial Payment for
each Hard Disk Drive sold hereunder or, as the case may be, the Discounted Price
therefor and the periodic payments described in Sections 4.4(a) and (b) hereof,
and all interest, costs, fees and
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
20.
<PAGE>
expenses (including attorneys' fees) incurred by Quantum in connection with the
interpretation and enforcement of this Agreement, and of protecting, preserving
and enforcing its rights with respect to, the Collateral.
Section 13.3 Representations and Warranties and Covenants of TiVo. TiVo
----------------------------------------------------
represents and warrants that (i) TiVo has title to the Collateral free and clear
of all liens and encumbrances other than (a) the liens of Quantum granted
hereunder, (b) any liens existing as of the date hereof in favor of Silicon
Valley Bank, (c) liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which adequate reserves therefor have been set
aside in connection with generally accepted accounting principles, (d) liens
arising from judgments, decrees or attachments to the extent and only so long as
such judgment, decree or attachment has not caused or resulted in an Event of
Default (as defined below), (e) liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods, (f) liens arising solely by virtue of
any statutory or common law provision relating to banker's liens, rights of
setoff or similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution, and (g) liens incurred in
connection with the extension, renewal, refunding, refinancing, modification,
amendment or restatement of the indebtedness secured by liens described in
clauses (a) and (b) above; provided that any extension, renewal or replacement
lien shall be limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase (the liens in clauses (a) through (g) collectively, "Permitted
Liens"); and (ii) the Collateral will be kept at the addresses set forth on the
attached Exhibit G, and will not be moved to any other location without [*]
prior written notice to Quantum except sales of inventory and similar
transactions in the ordinary course of business.
Section 13.4 Covenants of TiVo. TiVo absolutely and unconditionally agrees
-----------------
to pay and perform all of the Obligations promptly as and when due and payable.
TiVo further covenants and agrees that it will (a) not transfer or encumber any
of the Collateral, except sales of inventory and similar transactions in the
ordinary course of business and Permitted Liens, without Quantum's prior written
consent, which consent shall not be unreasonably withheld, (b) maintain the
Collateral in good repair, ordinary wear and tear excepted, (c) insure the
Collateral in accordance with industry standards, and (d) take any other action,
including without limitation the delivery of documents and instruments, which
may from time to time be requested by Quantum to effectuate the purposes of this
Agreement, and TiVo hereby grants to Quantum an irrevocable power of attorney,
which is power coupled with an interest and full powers of substitution, to do
any act and deed in the name of TiVo that Quantum may deem necessary to enforce
any Collateral or perfect or continue perfection of Quantum's security interest
therein; provided, however, that such power of attorney shall be exercisable
only upon the occurrence and during the continuance of an Event of Default.
Section 13.5 Events of Default. The occurrence of each of the following
-----------------
events shall constitute an Event of Default hereunder: (a) TiVo shall fail to
pay any of the Obligations when due and payable, or fail to perform or observe
in any material respect any of its covenants under this Agreement with respect
to the Collateral, or make any representation or warranty with respect to the
Collateral which is false in any material respect, which failure or falsity is
not cured within three days of receipt of notice; (b) a material default under
any credit facility with Silicon Valley Bank
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
21.
<PAGE>
existing as of the date hereof shall have occurred entitling Silicon Valley Bank
to accelerate the indebtedness thereunder or otherwise enforce its rights; (c)
TiVo shall (i) make an assignment for the benefit of creditors, (ii) admit in
writing its inability to pay or generally fail to pay its debts as they become
due, (iii) petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of all or any substantial part of its assets,
(iv) commence or have commenced against it any case or proceeding under any
bankruptcy, reorganization, arrangement, insolvency, dissolution or similar law
of any jurisdiction; provided, that any such case or proceeding commenced
against TiVo shall constitute an Event of Default hereunder only if such case or
proceeding remains undismissed or unstayed for a period of [*], or (v) consent
to or acquiesce in any of the foregoing; or (d) there shall remain in force,
discharged or unsatisfied for more than thirty days, any judgment lien against
TiVo in excess of [*].
Section 13.6 Rights of Quantum Upon Default. Upon the occurrence of an
------------------------------
Event of Default, Quantum may declare all Obligations to be immediately due and
payable upon written notice to TiVo; provided, that in the event of any Event of
Default specified in Section 13.5(c), Quantum may declare the Obligations to be
immediately due and payable automatically without any notice thereof to TiVo. As
against the Collateral, upon the occurrence of an Event of Default, Quantum
shall have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a purchase
money secured party under the UCC. Quantum shall give to TiVo at least five
business days' prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. TiVo hereby acknowledges that [*] prior written
notice of such sale or sales shall be reasonable notice. In addition, TiVo
waives any and all rights that it may have to judicial hearing in advance of the
enforcement of any of Quantum's rights hereunder, including, without limitation,
its right following demand to take immediate possession of the Collateral and
exercise its rights with respect thereto. Notwithstanding the foregoing, TiVo
and Quantum each agree that it shall be bound by the provisions of the UCC.
ARTICLE 14
MISCELLANEOUS
Section 14.1 [*]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
22.
<PAGE>
[*]
Section 14.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES. Each Party hereby irrevocably consents
to the exclusive jurisdiction and venue of the Superior Court of Santa Clara
County and/or the United States District Court for the Northern District of
California in connection with any dispute hereunder or the enforcement of any
right or obligation hereunder. The Parties hereby exclude the application hereto
of the United Nations Convention on Contracts for the International Sale of
Goods.
Section 14.3 Independent Contractors. The Parties are independent
-----------------------
contractors. Nothing contained herein or done pursuant to this Agreement shall
constitute either Party the agent of the other Party for any purpose or in any
sense whatsoever, or constitute the Parties as partners or joint venturers.
Section 14.4 Assignment. TiVo shall not assign or delegate this Agreement,
----------
or any of its rights or duties hereunder, directly, indirectly, by operation of
law, in connection with a Change of Control or otherwise, and any such purported
assignment or delegation shall be void, except with the express written
permission of Quantum in its sole discretion. Notwithstanding the foregoing,
prior to any TiVo Change of Control, TiVo shall notify Quantum thereof and
Quantum shall either (i) consent to the assignment of this Agreement in
connection therewith or (ii) have the right to terminate, and terminate, this
Agreement effective immediately following such Change in Control. Without
limiting the foregoing, any permitted assigns or successors hereof shall be
bound by all terms and conditions of this Agreement.
Section 14.5 Amendment. 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 assented to in writing by both Parties.
Section 14.6 No Waiver. The failure of either Party to enforce at any time
---------
any of the provisions of this Agreement, or the failure to require at any time
performance by the other Party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the validity of either Party to enforce each and every such
provision thereafter. The express waiver by either Party of any provision,
condition or requirement of this Agreement shall not constitute a waiver of any
future obligation to comply with such provision, condition or requirement.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
23.
<PAGE>
Section 14.7 Severability. If, for any reason, a court of competent
------------
jurisdiction finds any provision of this Agreement, or portion thereof, to be
invalid or unenforceable, such 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. The
Parties agree to negotiate in good faith an enforceable substitute provision for
any invalid or unenforceable provision that most nearly achieves the intent and
economic effect of such provision.
Section 14.8 Notices. All notices, requests, demands, waivers, and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given: (i) when delivered by hand or confirmed
facsimile transmission; (ii) one day after delivery by receipted overnight
delivery; or (iii) four days after being mailed by certified or registered mail,
return receipt requested, with postage prepaid to the following, or to such
other person or address as either Party shall furnish to the other Party in
writing pursuant to the above:
(a) in the case of notices to Quantum, to the General Counsel the Vice
President and General Manager of Quantum's Hard Disk Drive division at the
relevant address set forth at the beginning of this Agreement, with a copy to
Selwyn B. Goldberg, Esq., Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, CA 94304.
(b) in the case of notices to TiVo, to the Chief Executive Officer at
the relevant address set forth at the beginning of this Agreement, with a copy
to Alan C. Mendelson, Esq., Cooley Godward LLP, Five Palo Alto Square, 3000 El
Camino Real, Palo Alto, CA 94306-2155.
Section 14.9 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 14.10 Entire Agreement. The terms and conditions herein contained
----------------
and the referenced Exhibits which are hereby incorporated herein by reference
constitute the entire agreement between the Parties with respect to the subject
matter hereof and supersede all previous and contemporaneous agreements and
understandings, whether oral or written, between the Parties with respect to the
subject matter hereof, including without limitation that certain nondisclosure
agreement between them dated as of December 8, 1997.
***Remainder of this page intentionally blank.***
24.
<PAGE>
Section 14.11 Counterparts. This Agreement may be executed in counterparts
------------
or duplicate originals, both of which shall be regarded as one and the same
instrument, and which shall be the official and governing version in the
interpretation of this Agreement.
In Witness Whereof, the Parties have caused this Agreement to be executed
by duly authorized officers or representatives to be effective as of the date
first above written.
QUANTUM CORPORATION Tivo, Inc.
By: /s/ Young Sohn By: /s/ Michael Ramsay
---------------------- ---------------------
Name: Young Sohn Name: Michael Ramsay
------------------ -------------------
Title: President, EPSG Title: CEO, President
------------------ ------------------
25.
<PAGE>
Exhibit A
TiVo Center Technical and Performance Characteristics
CPU: [*]
RAM: [*]
[*]
TiVo Media Switch custom ASIC--[*]
[*]
Operating System: [*]
Outputs: [*]
Inputs: [*]
[*]
Universal remote control.
[*]
Hardware enables trick play modes-pause, fastforward, rewind, etc. of live TV
programming as well as programming stored on the hard drive.
TiVo Service Personal Television Features
Pick programs-by name, by station, by timer.
Season pass-enables viewer to capture a particular program each time it occurs
with a single request at the beginning of a season.
"Thumbs up/Thumbs down" metaphor which allows viewers to rate the programs they
are watching and affect future programs captured by TiVo.
Teach TiVo what you like by actor, genre
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
Preference engine-gathers and reports box and service usage and viewing info
which can later be used for marketing and data mining purposes.
"Showcases"-collections of programming being promoted by a network on the TiVo
Service such as HBO's "Friday Night at the Fights" collection of boxing matches.
TiVo recommended programming.
Mechanism for filtering shows according to person's viewing preferences.
TV show conflict resolution-forces the viewer to choose which show to capture if
TiVo has been told to capture 2 shows at the same time.
GIF icons to display partner logos throughout the TiVo service.
Sound effects and background music in service.
Bookmarking allows a viewer to mark a show and have it captured in its entirety
for later viewing.
Mechanism for the remote update of operating software and viewer interface.
2.
<PAGE>
Exhibit B
Certain Terms
A. Rolling Forecast. Within [*] of the first day of each month during the
----------------
Term, TiVo shall supply to Quantum a good-faith, [*] rolling forecast of TiVo's
estimated Hard Disk Drive purchases hereunder.
B. Purchase Orders. Within [*] of the first day of each month during. the
---------------
Term, TiVo shall deliver to Quantum a purchase order (a "Purchase Order") that
orders (i) not fewer than [*] of the number of Hard Disk Drives (the "Forecasted
Amount") forecast in the previous month pursuant to Section A of this Exhibit to
be purchased in such month and (ii) not more than [*] of the Forecasted Amount.
Each Purchase Order shall specify whether TiVo desires [*] Hard Disk Drives, [*]
Hard Disk Drives or a particular combination thereof. All Purchase Orders shall
be in writing, provided however, that an order may be initially placed orally,
by telecopy or fax if a confirmational written Purchase Order is received by
Quantum within [*] of such oral, telecopy or fax order. Each Purchase Order
shall request a shipping date (a "Shipping Date") of the Hard Disk Drives
ordered thereby not earlier than [*] (or such sooner time as Quantum may approve
in writing following TiVo's request) from the date of such Purchase Order and
not later than [*] following the last day of the Term. Purchase Orders submitted
to Quantum from time to time hereunder shall be governed by the terms of this
Agreement only, and nothing contained in any such Purchase Order shall in any
way modify this Agreement or add any term or condition hereto. TiVo shall not
deliver to Quantum any Purchase Order that orders a number of Hard Disk Drives
whose aggregate cost hereunder exceeds the credit limit established by Quantum
with respect to TiVo, and Quantum shall have no obligation with respect to any
Purchase Order delivered in breach of the foregoing obligation. Quantum shall
notify TiVo of the amount of such credit limit upon request.
C. Quantum Shipping. Quantum shall deliver to TiVo a written
----------------
confirmation of each Purchase Order submitted hereunder. Quantum shall ship the
Hard Disk Drives ordered pursuant to each Purchase Order, or, at Quantum's sole
discretion, corresponding Equivalent Drives, on or within [*] of the relevant
Shipping Date. Quantum's sole liability, and TiVo's sole remedy, for any breach
of the foregoing obligation shall be to permit TiVo, notwithstanding the
provisions of Section 5.1, to purchase from a third party a number of hard disk
drives equal to [*] pursuant to a confirmed Purchase Order delivered to Quantum
in accordance herewith and (ii) [*] to TiVo on or within [*] of the relevant
Shipping Date. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION C, QUANTUM SHALL
HAVE NO LIABILITY FOR ANY FAILURE TO SHIP HARD DISK DRIVES THAT MAY BE ORDERED
HEREUNDER. Notwithstanding any other provision of this Agreement, Quantum shall
have no obligation to ship any product hereunder if TiVo is in breach of any
provision of this Agreement. Quantum shall promptly notify TiVo if Quantum
elects not to ship a product hereunder in accordance with the foregoing
sentence. Without limiting any of the foregoing, Quantum shall have the
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
right to ship Hard Disk Drives in partial fulfillment of a Purchase Order, and
TiVo shall pay for such Hard Disk Drives when invoiced therefor in accordance
herewith.
D. Quantum Notification. If, at any time during the Term, Quantum
--------------------
believes that it will be unable to provide Hard Disk Drives hereunder, whether
or not a Purchase Order for any quantity of Hard Disk Drives has been delivered
or confirmed in accordance herewith, Quantum may notify TiVo thereof. Following
such notification, (i) Quantum shall have no obligation to ship Hard Disk Drives
hereunder to the extent set forth in such notification and (ii) TiVo shall have
the right, notwithstanding the provisions of Section 5.1, to purchase hard disk
drives from a third party to such extent.
E. Purchase Order Alteration.
-------------------------
a. More than [*] prior to the relevant Shipping Date, TiVo may,
upon Written notice to Quantum, vary the number of Hard Disk Drives to be
shipped to TiVo on such Shipping Date such that the number of Hard Disk Drives
to be so shipped is not more than [*] of the number of Hard Disk Drives
forecasted to be ordered by the forecast immediately preceding the submission
hereunder of the relevant Purchase Order and not fewer than [*] of the number of
Hard Disk Drives so forecasted. Quantum shall provide TiVo with written
confirmation of any such written notice.
b. TiVo shall have no right to vary the quantity of Hard Disk
Drives to be shipped by Quantum hereunder within [*] of the relevant Shipping
Date.
F. Shipment/Risk of Loss. Hard Disk Drives delivered pursuant to the
---------------------
terms of this Agreement shall be marked for shipment to the destination
specified in TiVo's Purchase Order, and delivered to the carrier agent FOB
Quantum's designated facility, at which time risk of loss and title shall pass
to TiVo. All freight, insurance, and other shipping expenses, as well as
expenses for any special packing provided by Quantum, shall be paid by TiVo. All
shipment and freight charges will be deemed correct unless Quantum receives from
TiVo, no later than [*] after the date of TiVo's receipt of the relevant
shipment, a written notice (addressed to the attention of Quantum's shipping and
legal departments) specifying the shipment, the purchase order number, and the
exact nature of the discrepancy between the order and the shipment in number or
type of products shipped, or freight or other charges, as the case may be.
G. Export of Products. Notwithstanding any other provision of this
------------------
Agreement, TiVo and not Quantum shall be responsible for the export of Hard Disk
Drives from the United States.
H. Limited Warranty. Quantum represents and warrants to TiVo that all
----------------
Hard Disk Drives sold to TiVo hereunder will be free from defects in material
and workmanship and will materially conform to the relevant product data sheet
therefor attached hereto as Exhibit H (or, in the case of Equivalent Drives, to
the relevant, equivalent product data sheet therefor published by Quantum) (any
such data sheet a "Data Sheet" for a period of [*] commencing upon Quantum's
shipment thereof. Notwithstanding any other provision of this Agreement, Quantum
shall have no obligation or liability, and TiVo shall have no remedy, in
connection with the foregoing warranty with respect to any
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
nonconformity of a Hard Disk Drive to the relevant Data Sheet caused by a
modification of such Hard Disk Drive by TiVo or by Quantum hereunder. Quantum's
sole liability and TiVo's sole remedy, in the event of a breach of the foregoing
warranty, shall be, at Quantum's option, Quantum's prompt repair or replacement,
consistent with Quantum's standard business practices, of, or issuance to TiVo
of a credit (applicable to future purchases hereunder only) (a "Credit") for,
the Hard Disk Drive for which the foregoing warranty is breached. TiVo shall at
its expense return any Hard Disk Drive for which the foregoing warranty is
breached to Quantum in accordance with Quantum's standard return materials
authorization policies and procedures then in effect. Following any expiration
or termination of this Agreement, Quantum shall pay to TiVo an amount equal to
TiVo's Credit not yet applied to purchases hereunder.
I. TiVo Warrant Only. Nothing set forth in this Agreement is or shall be
-----------------
construed as a warranty by Quantum to any third party, including any TiVo
customer or subscriber.
J. Acceptance and Rejection. Without limiting the warranty set forth in
------------------------
Section F of this Exhibit, TiVo shall inspect all Hard Disk Drives shipped by
Quantum hereunder and accept or reject as nonconforming such Hard Disk Drives
within [*] of TiVo's receipt thereof Any Hard Disk Drive not so inspected and
accepted or rejected shall be deemed accepted by TiVo hereunder. If TiVo so
rejects Hard Disk Drives shipped hereunder and returns such Hard Disk Drives to
Quantum, and if such rejection is not based upon damage suffered by such Hard
Disk Drives in shipping, Quantum shall refund TiVo's reasonable shipping expense
in connection with any such return if, in Quantum's reasonable discretion, such
Hard Disk Drive was properly rejected. Quantum shall use commercially reasonable
efforts to promptly deliver to TiVo, via a mutually acceptable means, which may
include Air Freight, Hard Disk Drives to replace Hard Disk Drives properly
rejected by TiVo as set forth above.
K. Invoicing. Quantum will issue an invoice to TiVo for the Initial
---------
Payment of each Hard Disk Drive sold hereunder upon Quantum's shipment of such
Hard Disk Drive. TiVo shall pay all such invoices within [*] of invoice date.
L. Payment Mechanics. All payments made pursuant to this Agreement shall
-----------------
be made by telegraphic transfer to the designated account of Quantum in United
States Dollars, without any deduction or withholding of taxes or charges of any
kind. TiVo will pay interest to Quantum, from the date due until the date paid,
at the rate of [*], on any amounts not paid when due hereunder.
M. Post-Warranty Support. Quantum shall give TiVo the opportunity to
---------------------
receive the post-warranty support offered to all Quantum OEM customers.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
Exhibit C
Quantum Trademark Territory
- ---------------------------
[*]
TiVo Trademark Territory
- ------------------------
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
Exhibit D
Quantum Trademark
[LOGO APPEARS HERE]
1.
<PAGE>
Tivo Trademark
[PICTURE APPEARS HERE]
2.
<PAGE>
Exhibit E
OEM Price
A. For each Hard Disk Drive ordered hereunder having a requested delivery
date prior to [*],the OEM Price therefor shall be [*].
B. For each Hard Disk Drive ordered hereunder having a requested delivery
date during [*], the OEM Price therefor shall be [*] per [*] Hard Disk Drive and
[*] per [*] Hard Disk Drive.
C. Beginning with the [*], [*] prior to the [*], the OEM Price for a
Hard Disk Drive to be delivered to TiVo during such calendar quarter shall be
[*].
D. Notwithstanding the foregoing, if, as of [*] prior to the first
(1/st/) day of a particular calendar quarter, [*], the OEM Price therefor for
such Quarter shall be [*] and the [*].
E. With respect to a particular Hard Disk Drive, if Quantum notifies its
customers thereof that Quantum is designating such Hard Disk Drive "End-of-Life"
the OEM Price for such Hard Disk Drive shall thereafter be [*].
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
Exhibit F
Design Maturity Test Specification
CONTROL NUMBER = 11
HARDWARE
DESIGN VERIFICATION TEST
PROCEDURE AND REPORT
(By Shawn Babrnasseb)
1.
<PAGE>
Exhibit G
Address at which Collateral Must Be Kept
Ionics
1933 Milmont Ave.
Milpitas, CA 95035
Avex-San Jose
2100 Senter Rd.
San Jose, California 95112
Avex-Huntsville
4807 Bradford Drive
Huntsville, Alabama 35805
Yaes Technology, Inc.
2141 Third St.
San Francisco, CA 94107
1.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.7
Confidential
PHILIPS BUSINESS ELECTRONICS B.V. - TIVO INC.
MASTER AGREEMENT
This Master Agreement is between Philips Business Electronics B.V.,
Business Unit Digital Video Systems, having its principal place of business at
Building OAN-4, 5600 JB Eindhoven, The Netherlands ("Philips") and Tivo Inc.,
having its principal place of business at 894 Ross Drive, Sunnyvale California,
USA 94089 ("TiVo") and is effective as of March 31, 1999 (the "Effective Date")
and consists of this Master Agreement and following attached Addenda, which are
incorporated in full by this reference:
Addendum A: Purchase Addendum
Addendum B: Marketing Addendum
This Master Agreement and its Addenda are collectively referred to as the
"Agreement".
Recitals
Whereas, TiVo has designed and developed a Personal TV System based on
the TiVo Enabling Technology which enables the TiVo Service;
Whereas, TiVo has informed Philips that it is sufficiently advanced in
the development of a Personal TV System and the TiVo Service, that a TiVo Stand-
alone Box will meet consumer quality expectations so as to be available for
Commercial Release prior to July 1, 1999;
Whereas, assuming the foregoing is true, Philips intends to launch a
Philips-branded TiVo Stand-alone Box into the Territory through retail
distribution in the second half of calendar year 1999 and support such launch
with an appropriate marketing campaign;
Whereas, Philips and TiVo desire to enter into a commercial
relationship regarding the development, manufacture, marketing and distribution
of Philips-branded Personal TV System Boxes, incorporating the TiVo Enabling
Technology, which will enable the TiVo Service;
Whereas, Philips and TiVo acknowledge that Philips-branded Personal TV
Systems may include Philips Personal TV System Technology or Third Party
Technology and may enable: (i) Philips Personal TV Services and/or Third Party
Personal TV Services; and/or (ii) Value-added Services provided by Philips
and/or third parties;
Whereas, Philips and TiVo desire to additionally enter into a
commercial relationship with DIRECTV regarding the development, manufacture,
marketing and distribution of DTV Combination Boxes;
Whereas, Philips and TiVo desire to additionally enter into commercial
relationships with other Network Operators regarding the development,
manufacture, marketing and distribution of Philips-branded Combination Boxes
which will incorporate the TiVo Enabling Technology and enable the TiVo Service;
and
1.
<PAGE>
Whereas, Philips intends to market and sell Philips-branded systems
and services throughout the world and TiVo intends to market and sell TiVo-
branded services throughout the world;
Now, Therefore, in consideration of the foregoing and the mutual
covenants, promises and undertakings set forth in the Agreement, Philips and
TiVo agree as follows:
Master Agreement
1. Scope. This Master Agreement sets forth the basic terms and conditions
applicable to the relationship between Philips and TiVo. Additional and
different terms and conditions applicable to the manufacturing and marketing
aspects of Philips' and TiVo's relationship are set forth in the attached
addenda. Additional addenda may be added from time to time upon mutual
agreement of the parties. The capitalized terms in the Agreement shall have the
meanings set forth in Exhibit A ("Definitions") to this Master Agreement.
2. Business Relationship.
2.1 Implementation of Commercial Relationship. In order to achieve time
to market advantages for Philips-branded Personal TV System Boxes and to
establish the TiVo Service, the parties will initially focus their efforts on
the manufacture and distribution of Philips-branded TiVo Stand-alone Boxes and
Philips-branded DTV Combination Boxes; provided, however, except as otherwise
specifically provided in the Agreement, nothing shall preclude Philips from
developing, manufacturing or distributing Stand-alone Boxes, Combination Boxes,
Personal TV Systems, or Personal TV Services, either alone or together with any
other person, at any time. In addition, nothing shall preclude Philips from
offering other services in conjunction with Personal TV Services or by means of
Personal TV Systems. At all times and subject to Sections 3.2 and 5, Philips
shall have the flexibility to introduce Personal TV Systems and Personal TV
Services which may or may not incorporate TiVo Technology or enable the TiVo
Service. The parties' participation with one another in any development of any
Combination Boxes shall be pursuant to joint development agreements to be
negotiated in good faith between the parties at the time such development
efforts are contemplated.
3. Exclusivity.
3.1 Business Development Exclusivity.
(a) Territory Activities. From [*] until [*], the parties shall
jointly identify and pursue business development activities with Network
Operators to provide Personal TV Systems and Personal TV Services in the
Territory which would result in the manufacture and distribution of Philips-
branded Personal TV System Boxes which would enable the TiVo Service. During
such period, neither party shall pursue such development activities without the
participation of the other. Notwithstanding the foregoing:
(i) TiVo may separately pursue such business development
activities and execute agreements with Network Operators only if Philips and
TiVo agree, in good faith,
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
that Philips is: (a) [*]; (b) [*]; (c) [*]; or (d) after introduction and due
consideration of Philips' participation, [*]. Upon notification by TiVo of a
proposed business development activity subject to this provision, Philips shall
have [*] days to respond to TiVo in writing confirming Philips' ability and
willingness to participate in the proposed activity. If Philips does not provide
such confirmation within such [*] day period, TiVo may separately pursue such
activity.
(ii) TiVo may separately pursue such business development
activities within the Territory with the third party consumer electronics
manufacturer referred to in Section 3.2. TiVo shall keep Philips reasonably
informed of such business development activities except where TiVo is prevented
from doing so by requirement of such third party.
(iii) Philips may separately pursue such business development
activities and execute agreements with Network Operators only if Philips and
TiVo agree, in good faith, that TiVo is: (a) [*]; (b) [*]; (c) [*]; (d) after
introduction and due consideration of TiVo's participation, [*]. Upon
notification by Philips of a proposed business development activity subject to
this provision, TiVo shall have [*] to respond to Philips in writing confirming
TiVo's ability and willingness to participate in the proposed activity. If TiVo
does not provide such confirmation within such [*] period, Philips may
separately pursue such activity.
(b) [*] Activities. From [*] until [*], the parties shall jointly
identify and pursue business development activities with Network Operators to
provide Personal TV Systems and Personal TV Services [*] which would result in
the manufacture and distribution of Philips-branded Personal TV System Boxes
which would enable the TiVo Service. During such period, neither party shall
pursue such development activities without the participation of the other. The
provisions of this Section 3.1.b do not apply to the business development
activities of the parties within the Territory. Notwithstanding the foregoing,
(i) TiVo may separately pursue such business development
activities [*] with the third party consumer electronics manufacturer referred
to in Section 3.2. TiVo shall keep Philips reasonably informed of such business
development activities except where TiVo is prevented from doing so by
requirement of such third party.
(ii) TiVo may separately pursue such business development
activities and execute agreements with Network Operators if: (a) Philips is [*];
(b) Philips is [*]; (c) Philip is [*]; (d) after introduction and due
consideration of
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
Philips' participation, Philips is [*];or (e) within [*] days from the Effective
Date of this Master Agreement, Philips fails to commit in writing to the terms
and conditions under which it will develop and market a [*] (provided, however,
that such terms and conditions shall provide for the Commercial Release and
launch of a [*] within such [*] exclusivity period). Philips' written terms and
conditions shall include a description of [*]. Philips acknowledges that such
description shall include [*] for TiVo as agreed by the parties. Upon
notification by TiVo of a proposed business development activity, Philips
shall have [*] days to respond to TiVo in writing confirming Philips' ability
and willingness to participate in the proposed activity. If Philips does not
provide such confirmation within such [*] period, TiVo may separately pursue
such activity.
In the event that Philips so commits pursuant to 3.1.b.(ii)(e), TiVo shall
commit, in writing, to making the TiVo Services available in [*] within such [*]
exclusivity period and the terms and conditions under which such TiVo Services
will be provided. In the event that Philips does not so commit, Philips shall
have a right of first refusal to participate with any Network Operator contacted
by TiVo, in the same manner as specified in Section 3.1.c, below. In the event
that TiVo does not provide a TiVo Service in [*] within the [*] period
referenced in this Section 3.1.b, Philips' exclusive right to participate with
TiVo in [*] business development activities shall be extended until such time as
TiVo makes the TiVo Services available in [*].
(iii) Philips may separately pursue such business development
activities and execute agreements with Network Operators if: (a) TiVo is [*];
(b) TiVo is [*]; (c) TiVo is [*]; (d) after introduction and due consideration
of TiVo's participation, TiVo is [*]; or (e) within [*] days from the Effective
Date of this Master Agreement, TiVo fails to commit in writing to make TiVo
Services available in [*] sufficient to support a Commercial Release of a [*]
and to provide technical support to Philips in the development of a [*]. Upon
notification by Philips of a proposed business development activity, TiVo shall
have [*] days to respond to Philips in writing confirming TiVo's ability and
willingness to participate in the proposed activity. If TiVo does not provide
such confirmation within such [*] day period, Philips may separately pursue such
activity.
(c) Right of First Refusal. For a period of [*] each party, in
approaching any Network Operator within [*] (but subject to the same exceptions
set forth above), will identify the other party as its preferred supplier for
the providing of Personal TV System Boxes or Personal TV Services, as applicable
and shall give such other party the first right to participate in any
development activities with any such Network Operator. Prior to executing an
agreement with a third party for such business development activity, the party
proposing such activity (the
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
"Proposing Party"), shall offer to the other party (the "Non-Proposing Party")
the right to enter into such agreement on substantially the same terms and
conditions. Such offer will be contained in a notice that has attached to it a
copy of the proposed agreement with such third party and that contains the name
and address of such third party (the "Proposed Development Notice"). The Non-
Proposing Party may accept such offer (with such nonmaterial changes therein as
are appropriate) by written notice to the Proposing Party within [*] days of
receipt of the Proposed Development Notice. If the Non-Proposing Party does not
provide such a written acceptance notice within [*] days, the Proposing Party
shall be free to enter into such agreement, only with the named third party, on
terms no more favorable to such third party than those contained in the Proposed
Development Notice.
3.2 Product Exclusivity.
(a) TiVo Stand-alone Boxes. From [*] until [*], Philips shall have
the exclusive right, even as to TiVo, to market and sell TiVo Stand-alone Boxes
in the Territory. Notwithstanding the foregoing, unless TiVo otherwise allows,
in the event that, prior to [*], Philips releases a Stand-alone Personal TV
System Box with a third party, with which it has an existing business
relationship, which is a Competitive Device for sale to end-users within the
Territory, TiVo shall have the right to market and sell Stand-alone Personal TV
System Boxes [*] third parties; [*]. Prior to [*], Philips shall not release
such a Personal TV System Box which is a Competitive Device with a third party
with which it does not have an existing business relationship. Notwithstanding
the provisions of this Section 3.2.a, TiVo shall have the right to manufacture,
have manufactured, market, distribute and sell third-party branded TiVo Stand-
alone Boxes with [*].
Unless sales of Philips-branded TiVo Stand-alone Boxes are less than [*]
units in the month immediately preceding the date on which Philips' TiVo Stand-
alone Box exclusivity expires or terminates (including pursuant to this
Section), TiVo shall not manufacture, have manufactured, market, distribute and
sell a TiVo-branded Personal TV System Box sooner than [*] after the date on
which such exclusivity expires or terminates. TiVo may manufacture, have
manufactured, market, distribute and sell a TiVo-branded Personal TV System Box
after [*].
(b) Combination Boxes. From [*] until [*], Philips shall have the
exclusive right, even as to TiVo, to market and sell DTV Combination Boxes in
the Territory; provided, however (i) Philips must have a development plan
(including without limitation staffing, schedule, milestones and resources) and
be ready to begin implementation of such plan by [*]. Notwithstanding the
foregoing, unless TiVo otherwise allows, in the event that [*], TiVo shall have
the right to market and sell a DTV Combination Box [*];
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
[*]. During this exclusivity period, Philips shall not release such Philips-
branded DTV Combination Box which is a Competitive Device with a third party
with which it does not have an existing business relationship. Notwithstanding
the provisions of this Section 3.2.b, TiVo shall have the right to manufacture,
have manufactured, market, distribute and sell [*] third-party branded DTV
Combination Box with [*], and TiVo shall not authorize [*] to commence [*] of
any [*] DTV Combination Box prior to [*].
(c) [*]. Provided that Philips has the right to business development
exclusivity for [*] activities [*], as provided in Section 3.1.b above, from
[*] until [*], Philips shall have the exclusive right to manufacture, have
manufactured, market, distribute and sell [*] in [*]. Notwithstanding the
provisions of this Section 3.2.c, TiVo shall have the right to manufacture, have
manufactured, market, distribute and sell [*] third-party branded [*] with [*].
(d) Existing Business Relationships. Notwithstanding any provision
of Section 3.2, Philips shall have the right to release a Competitive Device
with any third party having an existing business relationship with Philips as of
the Effective Date of this Master Agreement. As of the Effective Date, Philips
represents and warrants that it does not have an existing business relationship
with Replay Networks, or any other company whose primary business is the
delivery of Personal TV Services.
(e) Additional Consumer Electronics Manufacturer. It is agreed by the
parties that in all cases, the third party consumer electronics manufacturer
referenced in Sections 3.2.(a), (b), and (c) is the same third party consumer
electronics manufacturer.
3.3 Additional Obligations. The parties shall have the following
additional obligations during the respective exclusivity periods for the TiVo
Stand-alone Box and the DTV Combination Box:
(a) Sales Calls. TiVo shall, at its own expense and upon reasonable
request by Philips, participate in sales calls with potential Philips
distributors and dealers.
4. TiVo Deliverables.
4.1 Stand-alone Box. No later than May 15, 1999, TiVo shall provide
commercially reasonable training and technical support, and all technical
documentation necessary to enable Philips to modify [*] of the TiVo Stand-alone
Box. TiVo shall bear the cost of such training, technical support, and technical
documentation for the first generation of the TiVo Stand-alone Box. Such
training, technical support and documentation shall enable Philips: (i) to
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
make reasonable modifications of the [*]; (ii) to [*]; and (iii) to [*];
provided, however, that all such modifications shall meet TiVo minimum
requirements, when specified, or be subject to the written approval of TiVo,
which shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, TiVo shall, prior to Commercial Release,
modify the user interface of the TiVo Stand-alone Box to comply with the
requirements of Exhibit C (Commercial Release Branding Requirements). Philips
shall pay [*] in connection with such modification, subject to Philips prior
written approval, which approval shall not be unreasonably withheld or delayed.
This Section 4.1 is subject to the provisions of Section 9.2.
4.2 Combination Boxes. No later than [*], TiVo and Philips shall work
together in good faith and jointly develop an interface, comprising both
hardware and software components, to enable communications between the DIRECTV
components and the TiVo Stand-alone Box components of a Philips-branded DTV
Combination Box (hereinafter the "Interface"). Such Interface shall be [*]. In
any event each party retains exclusive ownership of any Technology such party
independently develops.
(a) Patents. In the case where the Interface is or comprises an
invention jointly-made by Philips and TiVo that will be protected by one or more
patents, the parties agree that each party will be listed as the joint assignees
on each patent application filed.
(b) Copyrights. In the case where the Interface is or comprises a
copyrighted work jointly created or authored by Philips and TiVo, the parties
agree that the work was intended to be jointly owned and that each party
intended its contributions to such work to be merged into inseparable or
interdependent parts or a unitary whole.
(c) Procedures Relating to Proprietary Rights. Exhibit F sets forth
the procedures relating solely to the parties' jointly held Proprietary Rights
in the Interface.
4.3 [*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
7.
<PAGE>
4.4 Modifications and Upgrades. For so long as this Master Agreement is
in effect:
(a) TiVo Software Specification Upgrades. Subject to the payment
provision in Section 4.4.c, TiVo shall deliver all modifications and upgrades to
the Software Specification (excluding modifications and upgrades subject to
third party Proprietary Rights to the extent TiVo has no license under such
right to deliver such modifications and upgrades) and for use in or for Philips-
branded Personal TV System Boxes that enable the TiVo Service to Service
Subscribers and to Philips. TiVo shall deliver such modifications and upgrades
no later than it delivers such modifications and upgrades to any other person or
incorporates such modifications or upgrades into its own products or services.
To the extent that such modifications and upgrades are intended for end-users
who have already purchased Philips-branded Personal TV System Boxes, TiVo shall
provide such modifications and upgrades directly to such end-users over the TiVo
Service.
(b) TiVo Hardware Specification Upgrades. Subject to the payment
provision in Section 4.4.c, TiVo shall deliver all modifications and upgrades to
the Hardware Specification (excluding modifications and upgrades subject to
third party Proprietary Rights to the extent TiVo has no license under such
right to deliver such modifications and upgrades) and for use in or for Philips-
branded Personal TV System Boxes that enable the TiVo Service to Philips. TiVo
shall deliver such modifications and upgrades no later than it delivers such
modifications and upgrades to any other person or incorporates such
modifications or upgrades into its own products or services.
(c) Payment for Upgrades. Modifications and upgrades to the Software
Specification and the Hardware Specification shall be paid as follows: [*].
5. Manufacturing and Distribution License.
5.1 Patent License. Subject to the terms and conditions of the Agreement,
TiVo hereby grants to Philips a [*] right and license under its patents and
patent rights in the TiVo Enabling Technology (including modifications and
upgrades developed by TiVo and available for release) solely to [*] Philips-
branded Personal TV System Boxes which enable the TiVo Service. Philips shall
not attempt to reverse engineer, disassemble, decompile or similarly manipulate
all or any portion of the TiVo Technology for any purpose.
5.2 Copyright License. Subject to the terms and conditions of the
Agreement, TiVo hereby grants to Philips a [*] right and license under its
copyrights in the TiVo Enabling Technology (including modifications and upgrades
developed by TiVo and available for release, and developed by or for Philips
(pursuant to Section 4.1 and Section 5.3)) solely to [*] in the Philips-branded
Personal TV System Boxes which enable the TiVo Service manufactured by, or for,
or marketed, distributed, or sold by Philips. Philips shall not attempt to
reverse engineer,
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
disassemble, decompile or similarly manipulate all or any portion of the TiVo
Technology for any purpose.
5.3 User Interface License. Subject to the terms and conditions of the
Agreement, TiVo hereby grants to Philips a [*] right and license under its
copyrights in and to the user interface of the TiVo Service to [*] the TiVo
background screens and images and user navigation displays, delivered to Philips
pursuant to Sections 4.1 and 9.2 of this Master Agreement, solely for the
purpose of manufacturing, having manufactured, marketing, distributing or
selling Philips-branded Personal TV System Boxes which enable the TiVo Service.
5.4 Exclusive License. Notwithstanding the foregoing, during the
exclusivity periods specified in Sections 3.1 and 3.2 above, and subject to any
restrictions or conditions contained therein, TiVo shall not grant a right or
license to any person, except the third party consumer electronics manufacturer
referenced in Section 3.2.e, which allows for the marketing, distribution or
sale of TiVo Stand-alone Boxes or DTV Combination Boxes prior to the expiration
or termination of the applicable exclusivity period.
5.5 Source Code License Option.
(a) Subject to the terms and conditions of the Agreement, TiVo hereby
grants Philips an option to obtain a [*] right and license [*] to [*] those
components of TiVo's Source Code implemented in the Philips-branded Personal TV
System Boxes that enable the TiVo Service, solely as necessary to [*], and to
[*]; provided such Personal TV System Boxes: (i) enable the TiVo Service; and
(ii) do not enable the Personal TV Services of any third party, except as
allowed by TiVo. The parties hereby agree to negotiate in good faith additional
terms and conditions [*] pursuant to which TiVo shall grant such a license to
Philips in the event Philips chooses to execute its option under this Section
5.5(a). The terms and conditions shall be reflected in a separate licensing
agreement to be entered into by the parties.
(b) In the event the parties cannot agree in good faith to additional
terms and conditions for a license to be granted pursuant to Section 5.5(a),
TiVo shall grant pursuant to a license agreement to Philips a [*] right and
license [*] to [*] those components of TiVo's Source Code embedded in the
Philips-branded Personal TV System Boxes that enable the TiVo Service solely as
necessary to [*], and to [*]; provided that:
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
9.
<PAGE>
(i) [*];
(ii) [*];
(iii) [*];
(iv) [*];
(v) [*]; and
(vi) [*].
5.6 New Technology License Option. Subject to the terms and conditions of
the Agreement, TiVo hereby grants Philips an option to a [*] right and license
to new technology relating to Personal TV System Boxes [*].
6. TiVo Manufacturing. Until such time as Philips commences manufacturing of
the Philips-branded TiVo Stand-alone Box under the licenses granted in the
Agreement or Commercial Release of the Philips-branded TiVo Stand-alone Box,
whichever is earlier, TiVo shall sell to Philips, and Philips shall purchase
from TiVo, such Boxes on the terms and conditions set forth in that certain
Purchase Addendum entered into by the parties on March 31, 1999. Beginning no
later than Commercial Release of the Philips-branded TiVo Stand-alone Box, TiVo
shall sell to Philips and Philips shall purchase from TiVo, Philips-branded TiVo
Stand-alone Boxes pursuant to a more comprehensive OEM Purchase Agreement which
shall replace the Purchase Addendum in its entirety. Such OEM Purchase Agreement
shall be negotiated by the parties in good faith.
7. Tivo Continuing Development Activities. No later than [*] TiVo and Philips
shall [*] which will [*] from Commercial Release, with such [*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
10.
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[*] targeted for Commercial Release no later than [*].
8. Philips Manufacturing.
8.1 Commencement of Philips Manufacturing. Philips shall commence
manufacturing the Philips-branded TiVo Stand-alone Box as soon as commercially
practicable.
8.2 TiVo Deliverables. Prior to commencement of manufacturing by Philips,
TiVo shall provide Philips with all reasonably necessary documentation in TiVo's
possession relating to the manufacture and servicing of the TiVo Stand-alone Box
for the purpose of enabling Philips to manufacture and service, or have
manufactured and serviced, a Philips-branded TiVo Stand-alone Box which allows
end-users to access all functionality and features of the TiVo Service which are
available to end-users. Such documentation provided by TiVo shall include, but
shall not be limited to, the applicable bill of materials; material, component,
and sub-assembly suppliers; product specifications; schematics; manufacturing
processes; test routines; vendor contacts; authorizations; software in Object
Code form only; rights and licenses (to the extent commercially reasonable);
and/or such other materials reasonable and necessary to purchase materials,
component parts and subassemblies and to manufacture, assemble, market, and
service the Philips-branded TiVo Stand-alone Box. (Hereinafter, these materials
shall be referred to collectively as the "Manufacturing Package").
Notwithstanding the foregoing, the parties agree to work together in good faith
to make reasonable modifications to finalize the Specifications of the TiVo
Stand-alone Box prior to Commercial Release.
TiVo shall provide Philips with notice of all upgrades and modifications to
such Manufacturing Package not less than [*] days prior to completion and shall
provide Philips with any such upgrade or modification no later than it: (i)
provides the Manufacturing Package or upgrades and modifications to the
Manufacturing Package (excluding modifications and upgrades subject to third
party Proprietary Rights) to any other person; or (ii) implements the
Manufacturing Package or upgrades and modifications to the Manufacturing Package
(excluding modifications and upgrades subject to third party Proprietary Rights)
for its own use. Philips may make a reasonable number of copies of the
Manufacturing Package or upgrades and modifications to the Manufacturing Package
(excluding modifications and upgrades subject to third party Proprietary
Rights), but shall not distribute or disclose the Manufacturing Package, or any
portion thereof, to any third party except as necessary to make or have made
Personal TV System Boxes or to incorporate brief excerpts, if necessary, into
Philips' user guides and technical documentation.
8.3 Third Party Components. The parties acknowledge that the
Specifications for the TiVo Stand-alone Box provide for certain TiVo and third
party components, parts, and/or subassemblies. Philips shall enter into its own
agreements with the suppliers of those parts; provided, however, Philips shall
have the right to purchase such components, parts, and/or subassemblies subject
to availability [*] from TiVo at cash prices which are no less favorable than
those now or hereafter offered to TiVo. In the event that TiVo controls the
supply of any such components, parts, and/or subassemblies, TiVo shall take
reasonable steps necessary to ensure an adequate supply of such parts to
Philips, including, without limitation, the purchase and resale to Philips
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
11.
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[*] of any such components, parts, and/or subassemblies. In the event that
TiVo controls the pricing of any such components, parts, and/or subassemblies,
TiVo shall arrange for pricing [*].
8.4 Transition and Technical Support. TiVo shall provide, [*] technical
support sufficient: (i) to enable Philips to transition the manufacturing
process from TiVo to itself and to ensure proper functioning of Philips-branded
Personal TV System Boxes which enable the TiVo Service; and (ii) to enable
Philips to manufacture products in conformance with any Quality Plans. TiVo and
Philips have each designated initial Coordinators regarding such transition and
Philips' ramp-up of its manufacturing process.
8.5 Philips Design Changes. Subject to Section 4.4.c, Philips reserves
the right to request reasonable changes and modifications to the Specifications
of the Philips-branded Personal TV System Boxes enabling the TiVo Service
manufactured by or on behalf of Philips at any time and from time to time;
provided, however, that any such changes and modifications: (i) shall not affect
the ability of such Boxes to receive and provide Service Subscribers with all
functionality and features of the TiVo Service; and (ii) shall meet or exceed
all requirements of the original Specifications. Upon written approval by TiVo,
which shall not be unreasonably withheld or delayed, TiVo shall provide such
requested changes and modifications in a timely manner, and in conformance with
the procedures agreed to between the parties from time to time. In the event
that such design change results in an increase to the Cost of Goods Sold and
Philips requests an associated increase in Manufacturing Subsidy, TiVo will not
be liable for the associated increase in Manufacturing Subsidy, or TiVo may
reject such change.
8.6 TiVo Design Changes. Subject to Section 4.4.c, TiVo reserves the
right to request reasonable changes and modifications to the Specifications of
the Philips-branded Personal TV System Boxes enabling the TiVo Service at any
time and from time to time; provided, however, that any such changes and
modifications: (i) shall not result in an increase in the cost of manufacturing;
and (ii) shall meet or exceed all requirements of the original Specifications.
Upon written approval by Philips, which shall not be unreasonably withheld or
delayed, Philips shall provide such requested changes and modifications in a
timely manner, and in conformance with the procedures agreed to by the parties
from time to time. In the event that such design change results in an increase
to the Cost of Goods Sold and Philips requests an associated increase in
Manufacturing Subsidy. If TiVo refuses to increase such Manufacturing Subsidy,
Philips may reject such change.
8.7 Testing and Certification. Prior to shipping any configuration of
Philips-branded Personal TV System Boxes, Philips will provide such
configuration to TiVo solely for testing and certification. Within [*] of
receipt, TiVo shall test the configuration to verify that it conforms to the
Specifications and properly enables the TiVo Service. If TiVo determines that
such configuration does not so conform or enable, TiVo shall deliver prompt
notice to Philips, in writing, setting forth the discovered nonconformities.
TiVo shall provide all technical support, at no cost to Phillips, as necessary,
to correct (or enable Philips to correct) such nonconformities. The process
shall continue until such time as TiVo certifies that the configuration so
conforms and enables.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
12.
<PAGE>
8.8 Philips End User License. Philips shall take all commercially
reasonable steps necessary to protect TiVo's interest in the TiVo Software and
to ensure that each copy of the TiVo Software distributed by Philips is
accompanied by a copy of an applicable TiVo or Philips' software license
agreement. Such license shall include terms and conditions substantially
equivalent to those set forth in Exhibit D.
9. Branding.
9.1 Box Branding.
(a) Subject to Section 9.1.b., Philips shall have the right to
determine branding on all Philips-branded Personal TV System Boxes; provided,
however, Philips shall place one designated TiVo Mark (as agreed by the parties)
on the front bezel of all Philips-branded Personal TV System Boxes that enable
the TiVo Service manufactured, and distributed by Philips. Philips shall also
place no fewer than one TiVo Mark on all external packaging for such Boxes. In
all cases, the Philips Marks shall have overall prominence over all other
trademarks, service marks, trade names, and logos of other persons. Philips
shall collaborate with TiVo on the relative appearance and placement of the
Philips Marks and TiVo Marks; provided, however, final determination as to the
appearance and placement of such Marks on all Philips-branded Personal TV System
Boxes shall be made by Philips, which shall not be unreasonably withheld or
delayed.
(b) Philips shall not brand TiVo Stand-alone Boxes or the DTV
Combination Boxes with any trademarks, service marks, trade names or logos other
than those of Philips, TiVo, Quantum, or DIRECTV, except as mutually agreed by
the parties, in writing.
9.2 User Interface Branding. For all Philips-branded Personal TV System
Boxes which enable the TiVo Service, the following user interface branding
provisions shall apply:
(a) Philips Exclusive Screens. Philips shall have the exclusive right
to determine the branding, including without limitation, the look and feel and
creative content, of screens relating to Philips Value-added Services.
(b) TiVo Exclusive Screens. TiVo shall have the exclusive right to
determine the branding, including without limitation, the look and feel and
creative content, of the following classes of screens: (i) TiVolution; (ii)
Showcases; (iii) non-Philips' Shopping Malls; and (iv) non-Philips intermissions
and interstitials.
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
13.
<PAGE>
(d) Other Screens. For screens not specified above, the parties will
work together, in good faith, to agree upon the presence of designated Philips
Marks, determined by Philips, on [*]. For all of the foregoing, Philips
placement of the Philips Marks on all such screens, or any other overlay or
modification of such sequences or screens shall be subject to the approval of
TiVo, which approval shall not be unreasonably withheld or delayed.
(e) Commonality and Control. The parties will work together with the
goal to achieve a commonality in the creative look, feel, operation,
functionality, features and content of their respective Personal TV Services;
provided, however, each party shall retain exclusive control over such creative
look, feel, functionality, features and content of their respective Personal TV
Services, however delivered or provided.
(f) Interference with Functionality. Neither party shall denigrate
nor disable the Personal TV Services, Value-added Services, other services, or
functionality of the other party.
(g) Prominence. In determining prominence and branding presence, the
size, luster, color, relative placement, etc., of such Marks shall be
considered.
(h) Corporate Identity Policies. Use of each party's Marks shall at
all times comply with each such party's corporate identity policies.
10. Manufacturing Subsidy.
10.1 Paid on Each Box. TiVo shall pay Philips a Manufacturing Subsidy on
each Philips-branded TiVo Stand-alone Box [*] manufactured by Philips (or
manufactured by a third party for Philips). For as long as TiVo is paying a
Manufacturing Subsidy to Philips the parties acknowledge that the Manufacturing
Subsidy on [*] may be zero or negative depending on [*]. The total of such
negative subsidies shall not exceed TiVo's total subsidy liability to Philips,
and shall be paid in the form of a credit to TiVo's Manufacturing Subsidies paid
to Philips.
10.2 Fixed Amount. The Manufacturing Subsidy shall be a fixed amount on
each Philips-branded TiVo Stand-alone Box [*] manufactured by Philips (or
manufactured for Philips by a third party). For [*], the Manufacturing Subsidy
shall be [*] per unit for the [*], and shall be [*] on a per unit basis for the
[*]. On or prior to the dates specified in Section 10.3 and upon TiVo's written
request, Philips shall provide TiVo with cost and other relevant data (e.g.,
BOM) relating to the manufacture of Philips-branded Personal TV System Boxes by
or for Philips. In the event that the [*] during [*] for the [*] is different
than [*], then the [*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
14.
<PAGE>
[*] will be paid or credited to the appropriate party at [*]. Adjustments to the
Manufacturing Subsidy for the [*] for [*] will be agreed by the parties.
The Manufacturing Subsidy for [*] the Philips-branded TiVo Stand-alone Box
and [*] manufactured by Philips (or manufactured by a third party for Philips)
shall be an amount determined [*] and [*], based on [*], as reasonably agreed by
the parties.
10.3 Semi-Annual Basis. For Manufacturing Subsidies paid after [*],
the Manufacturing Subsidy shall be, based on [*].
10.4 [*]. Unless agreed otherwise in writing, Manufacturing Subsidies on
the Philips-branded TiVo Stand-alone Box and [*] paid after [*], shall be that
fixed dollar amount, per unit, which results in [*] that is equal to [*].
Notwithstanding the foregoing, during [*], the Manufacturing Subsidy on such [*]
shall be that fixed dollar amount, per unit, which results in [*] that is equal
to [*].
10.5 [*]. In connection with the manufacture of Personal TV System Boxes
which enable the TiVo Service, the parties acknowledge that Philips shall have
an option to purchase [*] from [*] at [*]. In such event, Philips shall credit
an amount [*] against the Manufacturing Subsidy due from TiVo.
10.6 Payment. An amount equal to [*] of the Manufacturing Subsidy due on
each Personal System TV Box shall be due and payable within [*] of the end of
the [*]. The remaining [*] of such manufacturing subsidy shall be payable within
[*] of the end of the [*]. TiVo shall pay Philips interest at the rate of [*],
compounded [*], on all late payments.
10.7 Most Favored Status. Until [*], provided Philips is manufacturing
(or having manufactured) Philips-branded Personal TV System Boxes which enable
the TiVo Service, TiVo shall not give any Manufacturing Subsidy to any third
party which is greater than the Manufacturing Subsidy given to Philips; provided
that such
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
15.
<PAGE>
Manufacturing Subsidy paid to such third party is paid on a Personal TV System
Box which is substantially similar to the Personal TV System Box(es)
manufactured by or for Philips. In the event TiVo pays a higher subsidy to any
such third party, TiVo shall pay Philips the difference in subsidy amounts
[*].
10.8 Direct Sales. In any given calendar year, if total direct sales of
Philips-branded TiVo Stand-alone Boxes to consumers exceed [*], Philips will
credit against sums due Philips from TiVo an amount equal to [*] for each such
Box sold in excess of the above percentage. Credits for [*] sales shall be
determined based on [*]. Credits shall be posted within [*] days of the end of
each calendar year.
10.9 Suggested [*] Retail Price. For all Philips-branded TiVo Stand-alone
Boxes [*] manufactured or subsidized by TiVo, TiVo shall have the right, at its
sole discretion, to [*] the manufacturer's suggested retail price, [*]: [*].
After [*], and based on a suggested retail price agreed to by the parties,
Philips shall [*]. Except for the foregoing, Philips is free to unilaterally
establish the manufacturers suggested retail pricing for the Philips-branded
Stand-alone Personal TV System Boxes and Philips-branded DTV Combination Boxes
to its customers.
10.10 Guaranty. At any time prior to the commencement of manufacturing by
Philips (or for Philips by third parties) of Philips-branded TiVo Stand-alone
Boxes, TiVo shall provide, for the benefit of Philips: (i) an irrevocable letter
of credit; (ii) other credit facility; or (iii) a guaranty from a third party;
in each case, from a financial institution with a minimum S&P rating of A+, any
other financial provider reasonably acceptable to Philips, which acceptance
shall not be unreasonably withheld, or any financial institution pre-approved by
Philips in the amount of [*] (the "Guaranty Facility"). Such Guaranty Facility
shall provide that Philips shall have the right, in its sole discretion, to
directly draw against the Guaranty Facility in the event that TiVo is [*]
delinquent in its payment to Philips of the Manufacturing Subsidy set forth in
this Section 10. In no case may the amount drawn by Philips exceed the
Manufacturing Subsidy for which TiVo has failed to pay. Such Guaranty Facility
shall expire upon the earlier of an initial public offering of TiVo common stock
with gross proceeds to TiVo of at least Fifteen Million Dollars (US$15,000,000),
or December 31, 2001.
Philips acknowledges that it has pre-approved Comdisco Inc. (not an
affiliate or subsidiary thereof) for such Guaranty.
The amount available under such Guaranty Facility shall be reevaluated no
later than October 1, 1999. Such reevaluation shall be based on the product of
the total volume of Philips-branded TiVo Personal TV System Boxes shipped in the
previous quarter and the [*] Manufacturing Subsidy due to Philips from TiVo. For
the purposes of
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
16.
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this calculation, such per-box Subsidy shall be net of any Quantum subsidies
paid to TiVo or Philips. In the event the parties cannot agree to a revised
amount, the Guaranty Facility shall remain in place according to the terms of
this Section 10.10.
11. Service Revenue Share.
11.1 Amount. TiVo shall pay Philips a service revenue share (the "Service
Revenue Share") for each [*]. Such Service Revenue Share shall be in the amount
of [*] per [*] for each [*] in which such [*] for a total of [*]. Service
Revenue Share for [*] shall be [*] but in no case will the payment for such [*]
for each [*] in which such [*] for a total of [*].
11.2 Payment Due. Such Service Revenue Share shall be due and payable
within [*] of the end of the [*] in which each [*]; provided, however, payment
of Service Revenue Share for [*] shall be [*], and shall be paid at the [*]
until paid in full.
11.3 Monthly Reports. TiVo shall provide Philips with a monthly report
indicating the number of [*] from [*] and the amount of Service Revenue Share
earned or accrued in each such month.
12. Authentication Codes. In the event any authentication code, identifier, or
password is to be generated in conjunction with the use of any Philips-branded
Personal TV System Box, Philips shall have the right to generate any such code,
identifier, or password.
13. Tivo Services And Support. TiVo shall provide First, Second, and Third
Level Support for all service and software related to the Philips-branded TiVo
Stand-alone Box, the DTV Combination Box, and the TiVo Service. TiVo shall
provide end-users of Philips-branded Personal TV System Boxes (which enable the
TiVo Service) with direct telephone access to TiVo's customer support function.
TiVo customer support shall be provided 24 hours per day, seven days per week as
the market requires. In no event will TiVo offer customer support be provided
less than six days a week, from 9 a.m. to 9 p.m. PT. In the event that TiVo
customer support reasonably determines that the customer problem is a hardware
problem, TiVo support shall refer such customer to Philips for resolution.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
17.
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14. Philips Services.
14.1 Delivery of Value-added Services. TiVo acknowledges that Philips
intends to provide Value-added Services and other services for delivery through
Personal TV Systems. If requested by Philips, TiVo shall provide access to, and
modify the TiVo Service capabilities as necessary (including, without limitation
access to TiVo's servers), subject to the provisions of Section 17, to enable
Philips to provide Value-added Services and other services to end-users of
Philips-branded Personal TV Systems through, or in connection with, the TiVo
Service. Philips shall pay TiVo [*]; provided, however, in no event shall
Philips pay more than the [*].
14.2 Collection and Modifications. In the event that Philips provides
value-added Services to end-users through, or in connection with, the TiVo
Service, TiVo shall, upon request by Philips: (i) bill and collect payment for
the Philips Value-added Services from such end-users; and (ii) provide such
modifications and upgrades to the Philips Value-added Services, as are intended
for end-users who have purchased Philips-branded Personal TV System Boxes,
directly to such end-users over the TiVo Service. TiVo shall remit such payments
to Philips within [*] days of the end of the month in which each such payment is
received by TiVo. TiVo shall pay Philips interest at the rate of [*], compounded
[*], on all late payments.
15. Sales Agency. The parties contemplate that TiVo shall act as Philips'
agent, from time to time, for the purpose of booking direct sales and order
fulfillment for such sales from Philips to end-users of Philips-branded TiVo
Stand-alone Boxes through TiVo's web site. Any such agency shall be granted only
pursuant to a separate agreement containing the terms and conditions which apply
to any such agency. No such agency shall exist, or be created, until the
execution of such an agreement by Philips. At no time shall TiVo have the right
to make sales of Philips-branded products into the retail channel.
Notwithstanding the foregoing, the parties contemplate that, prior to Commercial
Release, TiVo shall purchase from Philips, and Philips shall sell to TiVo, not
more than [*] units of Philips-branded TiVo Stand-alone Boxes for sale directly
to end-users pursuant to the Purchase Addendum. The purchase price of such Boxes
shall be [*] per unit. For sales booked and fulfilled on Philips' behalf after
Commercial Release, Philips shall pay or credit to TiVo a commission equal to
[*] per unit sold. Such commissions shall be paid within [*] days of the end of
each month during which TiVo is booking such sales for which Philips has
received full payment.
16. Audit Rights. The parties shall collect and retain complete, clear and
accurate records regarding the services and obligations performed in connection
with the Agreement. Upon [*] days advance written notice, relevant records
may be audited from time to time to the extent necessary to verify compliance
with the Agreement, but not more than once in each calendar year. Such audit
shall be performed by a reliable, independent, internationally-recognized audit
professional (reasonably acceptable to the other party) chosen and paid by the
auditing party. Such audit shall be conducted during normal business hours and
in such a manner as not to unreasonably interfere with normal business
operations. If an audit discloses that inaccurate information caused a
discrepancy in the amount actually due to the auditing party, payment of
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
18.
<PAGE>
such discrepancy shall promptly be made. In addition, if the discrepancy is of
ten percent (10%) or more of the amount actually due to or paid by the auditing
party, then the audited party will bear the costs of the audit. All information
disclosed by the party being audited during the course of such audit shall be
kept in confidence by the auditor except for such information which must be
disclosed to the other party in order to accomplish the purposes of this Section
16. In no event shall an auditor provide the auditing party with any information
which is confidential or proprietary. This provision will survive any
termination of the Agreement for two (2) years.
17. Confidentiality.
17.1 Confidential Information. Each party (the "Disclosing Party") may,
from time to time during the Term, disclose or make available to the other party
(the "Receiving Party") certain proprietary and/or non-public information of the
Disclosing Party, including, but not limited to Software, hardware, trade
secrets, know-how, formulas, flow charts, diagnostic routines, business
information, forecasts, financial plans and data, customer information,
marketing plans, the Specifications, Manufacturing Package, the TiVo Enabling
Technology and unannounced product information (collectively, "Confidential
Information"). For purposes of the Agreement, Confidential Information includes
all such information disclosed between the parties in the course of negotiating
the Agreement and the Memorandum of Understanding which preceded the Agreement.
If such Confidential Information is in writing, it shall be marked prominently
with the legend "confidential", "proprietary", or with a similar legend, or if
disclosed orally shall be described as Confidential Information at the time of
oral disclosure and confirmed as such in writing within [*] days thereafter.
17.2 Protection. The Receiving Party shall not use or disclose
Confidential Information of the Disclosing Party, except as expressly authorized
by written agreement or in writing by the Disclosing Party, using the same
degree of care which the Receiving Party uses with respect to its own
proprietary information, but in no event with less than with reasonable care.
Disclosure of Confidential Information does not constitute a license with
respect to such Confidential Information.
17.3 Third Parties. The Receiving Party may disclose Confidential
Information only to its employees, consultants and contractors on a need-to-know
basis for purposes of the Agreement, provided such employees, consultants and
contractors are expressly bound by nondisclosure obligations and restrictions
containing terms no less restrictive than those set forth in this Master
Agreement.
17.4 Limitation. Confidential Information shall exclude information the
Receiving Party can demonstrate: (i) was independently developed by the
Receiving Party without any use of the Disclosing Party's Confidential
Information or by the Receiving Party's employees or other agents (or
independent contractors hired by the Receiving Party) who have not been exposed
to the Disclosing Party's Confidential Information; (ii) becomes known to the
Receiving Party, without restriction, from a source (having a right to disclose
such information) other than the Disclosing Party without breach of the
Agreement; (iii) was in the public domain at the time it was disclosed or enters
the public domain through no act or omission of the Receiving Party; (iv) was
rightfully known to the receiving party, without restriction, at the time of
disclosure; (v) was approved for disclosure by the Disclosing Party beforehand
and in writing; or (vi) was
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
19.
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disclosed by Disclosing Party to a competitor of Receiving Party without
obligation of confidentiality.
18. Ownership.
18.1 TiVo's Ownership. TiVo retains exclusive ownership of all
Proprietary Rights in any Technology, proprietary to TiVo, which is incorporated
into Personal TV Systems. Philips shall take reasonable measures to protect
TiVo's Proprietary Rights in such Technology, including giving of such
assistance and measures as are reasonably requested by TiVo from time to time.
Except as expressly granted in the Agreement, Philips is not granted any rights
or licenses with respect to TiVo's Proprietary Rights in any TiVo Technology.
TiVo shall remain the sole and exclusive owner of all of the TiVo-owned features
and functionality of the TiVo Service and related hardware components, including
all of TiVo's Proprietary Rights in the design, architecture and software or
hardware implementation thereof. No licenses or rights with respect to the TiVo
Service or related hardware components are granted in the Agreement.
18.2 Philips' Ownership. Philips retains exclusive ownership of all
Proprietary Rights in any Technology, proprietary to Philips, which is
incorporated into Personal TV Systems. TiVo shall take reasonable measures to
protect Philips' Proprietary Rights in such Technology, including giving of such
assistance and measures as are reasonably requested by Philips from time to
time. Except as expressly granted in the Agreement, TiVo is not granted any
rights or licenses with respect to Philips' Proprietary Rights in the Philips
Technology. Philips shall remain the sole and exclusive owner of all of the
Philips-owned features and functionality of the Philips' Value-added Services
and related hardware components, including all of Philips' Proprietary Rights in
the design, architecture and software implementation thereof. No licenses or
rights with respect to the Value-added Service or related hardware components
are granted in the Agreement.
19. Representations And Warranties.
19.1 By TiVo.
(a) TiVo represents and warrants that the bill of materials (the
"BOM") for the TiVo Stand-alone Box attached hereto as part of the Hardware
Specification shall have the following lead-time breakdown: (a) less than [*] of
the [*] shall be comprised of components having lead times greater than [*]; (b)
less than [*] of the [*] shall be comprised of components having lead times
greater than [*]; and (c) less than [*]of the [*] shall be comprised of
components having lead times greater than [*]. In the event of breach of this
warranty, Philips shall have the right to delay commencement of manufacturing.
(b) TiVo represents and warrants that the TiVo Enabling Technology
and the Specification will be sufficient to ensure that the TiVo Stand-alone Box
and DTV Combination Box shall achieve the Minimum Service Requirements set forth
in Exhibit E. In the event of breach of this warranty, TiVo shall modify the
TiVo Enabling Technology at its sole cost and expense in order that such Boxes
shall achieve the Minimum Service Requirements set forth in Exhibit E.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
20.
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19.2 By Philips. Philips represents and warrants that: (i) for so long as
Philips is manufacturing the Philips-branded TiVo Stand-alone Boxes and DTV
Combination Boxes, Philips shall manufacture or have manufactured, such Boxes in
accordance with the respective Specifications of such Philips-branded TiVo
Stand-alone Boxes and DTV Combination Boxes; and (ii) such Boxes will perform in
substantial accordance with such Specifications. In the event of breach of this
warranty, Philips shall repair or replace such Boxes for the benefit of the
purchasers of such Boxes.
19.3 General Representations and Warranties. Each party hereby represents
and warrants to the other party that:
(a) it has the full corporate power and authority under the laws of
the jurisdiction of its incorporation to enter into the Agreement and to carry
out the provisions hereunder;
(b) it will not take any material action or fail to take any
material action which would be in conflict with its obligations under the
Agreement;
(c) the Agreement is a legal and valid obligation binding upon it
and is enforceable in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance; and
(d) the execution, delivery and performance of the Agreement by it
does not materially conflict with any agreement, oral or written, to which it is
a party or by which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having authority over
it.
(e) TiVo represents and warrants to Philips that, to TiVo's
knowledge, as of the Effective Date of the Agreement, there is not pending
before any U.S. federal or state court of competent jurisdiction any suit,
action or proceeding commenced by any third party against TiVo in which the
Proprietary Rights of TiVo to the TiVo Technology are being challenged by such
third party, nor has TiVo been notified by any third party that such third party
in writing intends to make any such claim.
19.4 Personal TV System Box Warranty. Philips shall not extend to third
parties, on TiVo's behalf, any warranty from TiVo covering defects in materials
or workmanship in the manufacture of the Philips-branded Personal TV System
Boxes, nor shall Philips direct or instruct any third party, including without
limitation retailers or end-users, to contact TiVo directly or indirectly with
respect to such defects. In the event of a defect in materials or workmanship,
in the event that any such third party contacts TiVo, TiVo shall direct such
third party to contact Philips directly. Philips shall indemnify and hold TiVo
harmless from and against any claims, liabilities and expenses (including, but
not limited to, attorneys' fees) asserted against, or incurred by, TiVo
resulting from any representation or warranty made by Philips in breach of the
foregoing.
21.
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19.5 TiVo Service Warranty. TiVo shall not extend to third parties, on
Philips' behalf, any warranty from Philips related to the TiVo Service or
TiVo's. Technology, nor shall TiVo direct or instruct any third party, including
without limitation retailers or end-users, to contact Philips directly or
indirectly with respect to the TiVo Service or use of the TiVo Technology in
operation of the Philips-branded Personal TV System Boxes. In the event of a
failure in the operation of the TiVo Service or in the operation of TiVo's
Technology, in the event that any such third party contacts Philips, Philips
shall direct such third party to contact TiVo directly. TiVo shall indemnify and
hold Philips harmless from and against any claims, liabilities and expenses
(including, but not limited to, attorneys' fees) asserted against, or incurred
by, Philips resulting from any representation or warranty made by TiVo in breach
of the foregoing.
19.6 Product Defect Warranties.
(a) Philips Authority to Authorize Recall. In the event of any
defects materially impacting end users, TiVo and Philips shall work together in
good faith to determine appropriate methods of addressing such defects but
Philips shall have the right, in its sole and reasonable discretion, to
determine the mitigation efforts involved in addressing any such defects
including, but not limited to, in the event of an Epidemic Defect or a Safety
Hazard, authorization and undertaking of a recall. For a period of [*] after
Commercial Release, in the event of a recall due to Epidemic Defect or Safety
Hazard of the first generation TiVo Stand-alone Box, if the parties determine
that the cause of such Epidemic Defect or Safety Hazard is a TiVo design defect,
TiVo shall cover all reasonably necessary costs involved in such recall. If the
parties determine that the cause of such Epidemic Defect or Safety Hazard is a
Philips manufacturing defect, Philips shall cover all reasonably necessary costs
involved in such recall. For purposes of this Section 19.6, Epidemic Defect
shall mean a defect materially impacting end users occurring within the same
Philips-branded Personal TV System Box configuration enabling the TiVo Service
with a recurrence rate of [*]. For purposes of this Section 19.6, Safety Hazard
shall mean a defect of any Philips-branded Personal TV System Box configuration
enabling the TiVo Service that could result in injury to person or damage to
property.
(b) Parties to Allocate Costs. For a period of [*] after the
applicable Commercial Release, for all other defects in all future jointly-
developed Personal TV System Boxes (including next-generation TiVo Stand-alone
Boxes and the DTV Combination Box), Philips and TiVo shall work together in good
faith to determine the cause of such defect. In the event the parties determine
that the cause of such defect is a design defect, the parties shall negotiate in
good faith to allocate all reasonably necessary costs involved in the mitigation
of such defect based on the respective amounts of design contribution each party
made to such design. If the parties determine that the cause of such defect is a
manufacturing defect, Philips shall cover all reasonably necessary costs
involved in the mitigation of such defect. In the event such defect is a hybrid
of a design defect and manufacturing defect, the parties shall work together in
good faith to allocate all reasonably necessary costs involved in the mitigation
of such defect between the parties. In the event the parties cannot reasonably
agree upon such allocation of any of the foregoing reasonably necessary costs,
TiVo shall cover half of all reasonably necessary costs involved in the
mitigation of such defect.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
22.
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19.7 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THE
AGREEMENT: (I) ALL TECHNOLOGY, INFORMATION AND SOFTWARE PROVIDED BY EITHER
PARTY TO THE OTHER IS ON AN "AS IS" BASIS; (II) BOTH PARTIES EXPRESSLY DISCLAIM
ANY AND ALL WARRANTIES, EXPRESS, IMPLIED AND STATUTORY WHETHER ARISING FROM
COURSE OF DEALING OR USAGE OF TRADE INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, TITLE, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT; AND (III) NEITHER PARTY REPRESENTS OR WARRANTS THAT SUCH
TECHNOLOGY, INFORMATION OR SOFTWARE WILL MEET THE OTHER PARTY'S NEEDS OR WILL BE
FREE FROM ERRORS OR OMISSIONS.
20. Indemnification.
20.1 Philips Indemnification. With respect to those Philips-branded
Personal TV Systems manufactured by or for Philips (excluding units of the TiVo
Stand-alone Box manufactured by TiVo) which enable the TiVo Service and which,
subject to the Agreement, bear the TiVo Marks, Philips, at its own expense,
shall (i) defend TiVo from and against any claims, suits, and actions
(collectively "Claims") based upon allegations that, the Philips' Value-added
Services, Philips Marks, implementations of the Philips Technology used in such
Philips-branded Personal TV Systems that enable the TiVo Service or any
modifications or additions to, or derivatives of, the TiVo Enabling Technology
made by or for Philips, and portions of the Interface developed by or for
Philips, whether alone or in combination with such Philips-branded TV Systems
manufactured by or for Philips, infringe any third party's patents, copyrights,
trade marks or misappropriate any third party's trade secrets; and (ii)
indemnify and hold TiVo harmless from and against any award or damages or costs
(including, without limitation, attorneys' fees) in any such Claim.
20.2 TiVo Indemnification. TiVo, at its own expense, shall (i) defend
Philips from and against any claims, suits, and actions (collectively "Claims")
based upon allegations that the TiVo Enabling Technology, the TiVo Stand-alone
Box, portions of the Interface developed by or for TiVo, TiVo Marks, in the form
provided to Philips by TiVo and the TiVo Service, whether alone or in
combination with any Philips Branded Personal TV System Box, infringe any third
party's patents, copyrights, trade marks or misappropriate any third parties
trade secret; and (ii) indemnify and hold harmless Philips from and against any
award or damages or costs (including, without limitation, attorneys' fees) in
any such Claim.
20.3 Mutual Manufacturing Product Liability Indemnity. Each party (the
"Indemnifying Party") shall indemnify and defend the other party (the
"Indemnified Party") from and against any and all claims, suits, and actions
(collectively, "Claims") brought against the Indemnified Party arising out of
any defect in the Boxes manufactured by such Indemnifying Party; provided, that
any such Claim (i) is attributable to bodily injury, death or injury to or
destruction of physical property (other than the Box); (ii) that the Indemnified
Party actually pays out damages on such claim to a third party claimant; (iii)
with respect to Claims which arise out of a defect of the Box, that the
Indemnified Party is able to provide to the Indemnifying Party with reasonable
evidence of such Claim, which establishes based on a pursuing third party's
claim that the Indemnified Party is liable to such third party under applicable
product liability law; and (iv) that the Indemnified Party is not liable for the
defect. This obligation on the part of the Indemnifying Party is subject to the
Indemnified Parties obligations to (x) promptly notify the Indemnifying Party,
in writing, of all such Claims; (y) cooperate reasonably with the
23.
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Indemnifying Party (at the Indemnifying Party's expense) in defending such
Claims; and (z) allow the Indemnifying Party the sole right to control the
defense (including the selection of counsel), or at the Indemnifying Party's
sole option, to settle, all such Claims.
20.4 Design Defect Indemnity. TiVo, at its own expense, shall defend
Philips from and against any claims, suits, and actions (collectively "Claims")
based upon allegations that the TiVo Enabling Technology and the first
generation TiVo Stand-alone Box contain any design defect that is shown to have
caused bodily injury including death, or has damaged real property or tangible
personal property. This obligation on the part of TiVo is subject to Philips'
obligations to (x) promptly notify TiVo, in writing, of all such Claims; (y)
cooperate reasonably with TiVo (at TiVo's expense) in defending such Claims; and
(z) allow TiVo the sole right to control the defense (including the selection of
counsel), or at TiVo's sole option, to settle, all such Claims.
20.5 Modify or Obtain the Right to Use. In the event the party liable to
indemnify ("Indemnifying Party") reasonably believes that an infringement is
likely to have occurred, the Indemnifying Party shall be entitled, at
Indemnifying Party's option and expense, to: (a) suitably modify the applicable
Technology, Personal TV System Box or Personal TV Service to be reasonably
equivalent and non-infringing; (b) obtain for the Indemnified Party a license to
continue using the such Technology, Box or Service; or, if the foregoing
alternatives are not commercially practicable, then (c) the parties will
negotiate in good faith to establish a mutually agreeable alternative.
20.6 Conditions. The obligations on the part of the Indemnifying Party
in this Section 20 are subject to the other party's obligations to: (i) promptly
notify the Indemnifying Party, in writing, of all such Claims; (ii) cooperate
reasonably with the Indemnifying Party (at the Indemnifying Party's expense) in
defending such Claims; and (iii) allow the Indemnifying Party the sole right to
control the defense (including the selection of counsel) or settlement of all
such Claims.
20.7 Entire Obligation. The foregoing states the Indemnifying Party's
entire liability, and the other party's sole remedy, with respect to: (i) any
infringement of any patents, copyrights, trademarks, trade secrets or other
Proprietary Rights of any third party whether direct or contributory; and (ii)
any product liability.
21. Term and Termination.
21.1 Term. The term of this Master Agreement shall begin on the Effective
Date and continue seven (7) years therefrom. Subject to the provisions of this
Master Agreement, the Agreement may be terminated prior to end of the Term.
(a) Minimum Volume Requirement During Term. Beginning on the [*]
anniversary of the Effective Date of this Master Agreement, the number of units
sold by Philips of Philips-branded Personal TV System Boxes enabling the TiVo
Service (the "Philips Annual Volume") shall be at least [*] units per year (the
"Minimum Volume Requirement"). The Philips Annual Volume shall be calculated by
TiVo within [*] of the end of each month beginning on the [*] anniversary of the
Effective Date of this Master
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
24.
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Agreement. Such calculation shall based on the average unit volume during the
[*] preceding the month in which the calculation is made. Such calculated
quarterly volume shall be at least [*] units per quarter. In the event the
Philips Annual Volume is less than the Minimum Volume Requirement or [*] units
per quarter, the Agreement may be terminated by TiVo, at TiVo's sole discretion,
upon [*] written notice to Philips.
(b) Minimum Requirements After Term. Unless the Agreement is
terminated for any reason, beginning on the [*] anniversary of the Effective
Date of this Master Agreement:
(i) Base Unit Volume. The Philips Annual Volume shall be greater
than [*] units per year. The Philips Annual Volume shall be calculated by TiVo
within [*] of the end of each month beginning on the [*] anniversary of the
Effective Date of this Master Agreement. Such calculation shall be based on the
average unit volume during the [*] months preceding the month in which the
calculation is made.
(ii) Percentage of TiVo-Enabled Units. The Philips Annual Volume
shall be no less than [*] (the "Base Percentage") of the total unit volume of
Personal TV System Boxes sold for distribution to end users in the Territory in
the preceding year. The Philips Annual Volume and the total unit volume of
Personal TV System Boxes enabling the TiVo Service will be calculated by TiVo
within [*] of the end of each month beginning on the [*] anniversary of the
Effective Date of this Master Agreement based on the respective average unit
volumes during the [*] months preceding the month in which the calculation is
made.
For so long as the conditions in Section 21.1(b)(i) and (ii) are satisfied,
the provisions set forth in Sections 5.1 and 5.2, and the license(s) granted
under Section 5.5 (only to the extent the option to such license(s) has been
exercised prior to the end of the Term), and Section 11 will survive the
expiration of this Master Agreement; provided, with respect to Service Revenue
Share, the provisions of Section 21.l(c) below shall be satisfied.
(c) Service Revenue Share after Term. For so long as the Philips
Annual Volume is greater than [*] units per year, the provisions of Section 11
shall survive expiration of this Master Agreement. The Philips Annual Volume
shall be calculated by TiVo within [*] of the end of each month beginning on the
seventh anniversary of the Effective Date of this Master Agreement. Such
calculation shall be based on the average unit volume during the [*] months
preceding the month in which the calculation is made.
21.2 Termination of Select Provisions.
(a) TiVo shall within [*] after the Effective Date of this Master
Agreement deliver to Philips a preliminary draft of the minimum service
requirement applicable to the TiVo Service. The parties intend for such minimum
service requirements to include customer service, billing and back-office
operations, and service performance and availability requirements. If TiVo fails
to deliver such preliminary draft of the minimum service requirement applicable
to the TiVo Service, Philips shall have the right, in its sole discretion, to
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
25.
<PAGE>
terminate all, but not less than all, of the parties' obligations with respect
to TiVo Stand-alone Box exclusivity, Manufacturing Subsidy payments, and
Marketing Spend. Philips and TiVo shall work together in good faith to agree to
the definitive minimum service requirement applicable to the TiVo Service within
[*] of the Effective Date of this Master Agreement.
In addition to the foregoing, if prior to [*]: (i) Commercial Release of
the Philips-branded TiVo Stand-alone Box has not occurred; (ii) TiVo Service has
not met the minimum service requirements set forth in Exhibit E; or (iii) TiVo
has not entered into a commercial relationship with DIRECTV for the marketing of
Personal TV System Boxes, Philips shall have the right, in its sole discretion,
to terminate all, but not less than all, of the parties' obligations with
respect to TiVo Stand-alone Box exclusivity, Manufacturing Subsidy payments, and
Marketing Spend.
(b) If Philips: (i) has not [*] within [*] from Commercial Release
of such TiVo Stand-alone Box; (ii) has not [*] within [*] days from Commercial
Release of such Philips-manufactured TiVo Stand-alone Box, TiVo shall have the
right, in its sole discretion, to terminate all, but not less than all, of the
parties' obligations with respect to TiVo Stand-alone Box exclusivity,
Manufacturing Subsidy payments, and Marketing Spend.
(c) If cumulative sales of the TiVo Stand-alone Boxes have not
reached [*] units within [*] of Commercial Release, either party shall have the
right, in its sole discretion, to terminate all, but not less than all, of the
parties' obligations with respect to TiVo Stand-alone Box exclusivity,
Manufacturing Subsidy payments, and Marketing Spend.
21.3 Material Breach. The Agreement and all licenses granted by the non-
breaching party hereunder may be terminated, by the non-breaching party, if the
breaching party fails to cure: (i) any material breach within [*] of receipt of
written notice of such breach; or (ii) any breach of Sections 5, 17 or 18 within
[*] of receipt of written notice of such breach.
21.4 Effect of Termination. At the end of the Term or upon termination of
the Agreement under Sections 21.1 except as set forth in Section 21.1(b), 21.2,
and 21.3, notwithstanding any provision set forth in an Addendum hereto, all
provisions of this Master Agreement shall terminate, cease to be binding on the
parties and have no further force or effect. Upon written request by either
party (the "Requesting Party"), the other party shall promptly return or destroy
all Confidential Information and Technology of the Requesting Party in its
possession and existing in tangible form and shall promptly confirm in writing
to the Requesting Party that it has done so.
21.5 Inventory. Notwithstanding the foregoing, upon termination of the
Agreement, Philips shall be entitled to manufacture, and its right and license
shall continue hereunder for the purpose of: (i) manufacturing units of Personal
TV System Boxes to fulfill existing orders placed prior to the termination or
expiration date hereof and then in the process of being manufactured;
* Material has been omitted pursuant to a request for confidential treatment.
Such material has filed separately with the Securities and Exchange Commission.
26.
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(ii) to complete work in process; and (iii) to utilize unique materials unable
to be returned to the supplier. In no event shall such right extend for a period
of more than one (1) year following the date of such termination. Without
limiting the foregoing, Philips shall be entitled to offer for sale and sell any
Personal TV System Boxes in its inventory at the time of termination or
expiration.
21.6 No Liability. Each party understands that the rights of termination
hereunder are absolute. Neither party shall incur any liability whatsoever for
any damage, loss or expenses of any kind suffered or incurred by the other
arising from or incident to the terminating party's exercise of its termination
rights under this Master Agreement. In particular, without in any way limiting
the foregoing, neither party shall be entitled to any damages on account of
prospective profits or anticipated sales.
21.7 Survival. The provisions of Sections 20.1, 20.2, 21, and 24 shall
survive any termination or expiration of this Master Agreement.
22. Limitation Of Liability. In no event will either party be liable under
this Agreement under any contract, negligence, strict liability, tort or other
legal or equitable theory for any incidental, special or consequential damages
of any nature whatsoever, (including without limitation, loss of profits or
other commercial loss), or cost or procurement of substitute goods, technology
or services, arising out of or in connection with the performance of this
Agreement, even if such party has been advised of the possibility of such
damages.
23. Independent Development. Each party (the "Owning Party") acknowledges that
other companies, potentially including the other party to this Master Agreement
(the "Independent Developer"), have developed or will develop Personal TV
Systems and Personal TV Services with or incorporating Technology similar to the
Technology of the parties developed, or to be developed, hereunder. The Owning
Party acknowledges that nothing in the Agreement prohibits the Independent
Developer from creating and/or marketing Personal TV Systems or Personal TV
Services incorporating functionality similar or identical to the functionality
of such Personalized TV Systems. The Owning Party agrees that it will not be
entitled to any compensation because of the Independent Developer's development
or distribution of similar systems or services, unless such systems or services
would infringe the other party's Proprietary Rights (absent a license) or are
otherwise developed, manufactured or distributed in breach of any provision of
the Agreement.
24. General Provisions.
24.1 No Agency. Each party will in all matters relating to the Agreement
act as an independent contractor. Nothing contained in the Agreement, nor the
execution or performance thereof, shall be construed as creating any agency,
partnership, or other form of joint enterprise between the parties. Neither
party will have authority nor represent that it has any authority to assume or
create any obligation, express or implied, on behalf of the other party, or to
represent the other party as agent, employee or in any other capacity.
24.2 Governing Law. The Agreement shall be governed in all respects by
the laws of the United States of America and the State of New York excluding the
application of its conflict
27.
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of laws rules. The parties agree that the United Nations Convention on Contracts
for the International Sale of Goods is specifically excluded from application to
the Agreement.
24.3 Notices. All notices or reports permitted or required under the
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission or by certified or
registered mail, return receipt requested, and shall be deemed given upon
personal delivery, five (5) days after deposit in the mail, or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the address set forth below or such other address as either party may specify in
writing:
To: TiVo To: Philips
Michael Ramsay or General Counsel Jos Swillens
894 Ross Drive CEO Digital Receivers
Sunnyvale, CA 94089 Building OAN-3
Fax (408) 747-5096 PO Box 80002
5600 JB Eindhoven, The Netherlands
With a copy to: With a copy to:
Alan Mendelson Philips Business Electronics B.V.
Cooley Godward LLP Legal Department: Attn General Counsel
Five Palo Alto Square Building SX2
3000 E1 Camino Real Glaslaan 2
Palo Alto, CA 94306 5616 LW
Fax (650) 857-0663 Eindhoven, The Netherlands
24.4 Injunctive Relief. It is understood and agreed that, notwithstanding
any other provision of the Agreement, any breaches of Sections 5, 17 or 18 will
cause irreparable damage for which recovery of money damages would be
inadequate, and that both parties shall therefore be entitled to obtain timely
injunctive relief to protect their respective rights under the Agreement, in
addition to any and all remedies available at law.
24.5 Waiver. The failure of either party to require performance by the
other party of any provision hereof shall not affect the full right to require
such performance at any time thereafter; nor shall the waiver by either party of
a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
24.6 Severability. In the event that any provision of the Agreement shall
be unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity shall not render the
Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
24.7 Headings. The section headings appearing in the Agreement are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such section, or in any way affect the
Agreement.
28.
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24.8 Confidentiality of Agreement. Neither party will disclose any terms
of the Agreement, except pursuant to a mutually agreeable press release or as
otherwise required by law.
24.9 Compliance with Laws; Export Controls. Each party agrees to comply
with all applicable laws, rules and regulations in connection with its
activities under the Agreement. Each party further agrees that it will comply
with all U.S. export control laws and the applicable regulations thereunder, as
well as any other applicable laws of the U.S. affecting the export of
technology.
24.10 Assignment. Neither party shall assign any rights or obligations
arising under the Agreement without the prior written consent of the other
party, except that either party may assign the Agreement in the event of a
merger or acquisition of such party or: (i) to any Affiliate of such party; or
(ii) to a new entity as a spin-off of the business of such party.
Notwithstanding the foregoing, TiVo shall not assign any rights or obligations
arising under the Agreement without the prior written consent of Philips where
such assignment is to a third party consumer electronics manufacturer. Subject
to the above restriction on assignment, the Agreement shall inure to the benefit
of and bind the successors and assigns of the parties. Any assignment in
violation of this provision will be void. In any event, neither party shall
assign the right to use the Marks of the other party without that party's prior
written consent and the Agreement shall not, in any event, be construed to
include such right to assign the Marks.
24.11 Entire Agreement. The Agreement and Exhibits hereto constitute the
entire agreement between the parties with respect to the subject matter hereof.
The Agreement supersedes, and the terms of the Agreement govern, any prior or
collateral agreements with respect to the subject matter hereof. The Agreement
may only be changed by mutual agreement of authorized representatives of the
parties in writing.
Rest Of Page Intentionally Left Blank
29.
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In Witness Whereof, the parties hereto have duly executed this Master
Agreement by their respective duly authorized officers. This Master Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same original.
TiVo Inc. Philips Business Electronics B.V.
/s/ Michael Ramsay /s/ R.L. von Oostenbrugge
- --------------------------- ---------------------------------
Authorized Signature Authorized Signature
Michael Ramsay R.L. von Oostenbrugge
- --------------------------- ---------------------------------
Printed Name Printed Name
President, CEO Managing Director
- --------------------------- ---------------------------------
Title Title
April 2, 1999 31-03-1999
- --------------------------- ---------------------------------
Date Date
30.
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Exhibit A
DEFINITIONS
For purposes of the Agreement, the following terms shall have the
respective meanings indicated:
1. "Affiliate" shall mean shall mean any entity that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with another entity.
2. "Combination Box(es)" shall mean any [*] which incorporates (i) [*] and
[*]; and (ii) the TiVo Service.
3. "Commercial Release" shall mean [*].
4. "Competitive Device" shall mean [*].
5. "Confidential Information" shall be as defined in this Master Agreement
Section 17 ("Confidentiality").
6. "Co-Op Advertising Expenditures" shall mean amounts paid to retailers for
dealer advertising purposes, as such term is commonly used in the retail
trade.
7. "Coordinator" shall mean that person from each party who shall be
responsible for all matters pertaining to a specific element of the
Agreement, including but not limited to the following responsibilities:
(a) administering and coordinating the administrative or technical matters;
(b) arranging meetings, visits and consultations relating to the parties
performance; (c) coordinating the submission and acceptance of all
deliverables, if any; and (d) coordinating the exchange of Confidential
Information.
8. [*]
9. "Derivatives" shall mean any "Derivative Work" of all or part of a party's
Technology, as defined by the Copyright Law of the United States of
America, Title 17 U.S.C. (S) 101 et seq.
10. "DTV Combination Box(es)" shall mean any Combination Box which (i) [*],
(ii) enables the TiVo Service, and (iii) enables the DIRECTV service, and
(iv) [*].
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
i.
<PAGE>
11. [*] shall mean a Personal TV System Box, specifically designed
for use and distribution in [*] which enables the TiVo Service.
12. "First Level Support" shall mean direct telephone and/or on-line support of
customers.
13. [*]
14. "Hardware Specification" shall mean the hardware specification to the TiVo
Stand-alone Box set forth at Exhibit G. The parties will work together to
define the hardware specifications for the DTV Combination Box.
15. [*]
16. "Joint Technology" shall mean any Technology that (i) is developed jointly
by both parties during the term of this Master Agreement and (ii) is
developed as a result of the technical collaboration that is the subject of
this Master Agreement.
17. [*]
18. "Marketing Activities" shall mean: [*]
19. "Marketing Spend Period" shall mean that period from the Effective Date of
this Master Agreement until [*] after Commercial Release of the
Philip-branded TiVo Stand-alone Box.
20. "Manufacturing Subsidy" shall mean, [*]. The Manufacturing Subsidies paid
to Philips by TiVo are specified in Section 10 of this Master Agreement.
21. "Marketing Principles" shall mean those principles identified in Exhibit c
to the Marketing Addendum.
* Material has been omitted pursuant to a request for confidential treatment.
Such Material has been filed separately with the Securities and Exchange
Commission.
ii.
<PAGE>
22. "Network Operator" shall mean [*].
23. "Personal TV System(s)" shall mean [*] of hardware [*], software, and
technology which enables Personal TV Services.
24. "Personal TV System Box(es)" shall mean any [*] which (i) provides, or
allows for: (i) [*]; and (ii) [*]; and (iii), [*].
25. "Personal TV Service(s)" shall mean [*] which provides: (i) an [*]; and
(ii) [*].
26. "Philips Marks" shall mean the trademarks, service marks, trade names and
logos of Philips, specifically listed in Exhibit B ("Philips Marks") to the
Marketing Addendum, as such exhibit may be amended upon the agreement of
the parties from time to time.
27. "Pre-Existing Technology" shall mean any Technology that was developed by,
or for the benefit of, a party prior to the Effective Date of this Master
Agreement and not in the course of the technical collaboration which is the
subject of this Master Agreement.
28. "Proprietary Rights" shall mean any and all intellectual property rights
[*]arising under statutory law, common law or by contract and
whether or not perfected, including without limitation, all: (i) patents,
patent applications and patent rights; (ii) rights associated with works or
authorship including copyrights, copyright applications, copyright
registrations, mask works rights, mask work applications, mask work
registrations; (iii) trade and service marks; (iv) rights relating to the
production of trade secrets and confidential information; (v) rights
analogous to those set forth in this definition and any other proprietary
rights relating to intellectual property; and (vi) divisional applications,
continuations, renewals, reissues and extension of the foregoing (as and to
the extent applicable) now existing, hereafter filed, used or acquired,
whether registered or unregistered.
29. "Quality Plan" shall mean the quality assurance agreement mutually agreed
to by the parties for each of the Personal TV System Boxes to be
manufactured as contemplated by the Agreement.
30. "Retail Price" shall mean[*].
31. "Retail Rollout" shall mean a Commercial Release through national retail
and distribution channels including, without limitation, compliance with
the Roll Out milestones set forth in the Marketing Addendum.
[*]Material has been omitted pursuant to a request for confidential treatment.
such material has been filled seperately with the Securities and Exchange
Commission.
iii.
<PAGE>
32. "Second Level Support" shall mean support of First Level Support staff. No
calls from customers are to be fielded by Second Level Support staff.
33. "Service Subscriber" shall mean an end user who subscribes, activates and
pays for a subscription to Personal TV Services.
34. "Showcase Screen(s)" shall mean screens dedicated to network programming
promotions sold by TiVo.
35. "Software" shall mean computer programming software including both Object
Code and Source Code. "Object Code" shall mean computer programming code
substantially in binary form that is directly executable by a computer
after processing, but without compilation or assembly. "Source Code" shall
mean computer programming code that may be displayed in a form readable and
understandable by a programmer of ordinary skill; including related source
code level system documentation, comments and procedural code, such as job
control language. Source Code does not include Object Code, and vice-versa.
36. "Software Specification" shall mean the software specification for the TiVo
Stand-alone Box set forth at Exhibit H. The parties will work together to
define the software specifications for the DTV Combination Box.
37. "Specifications" shall mean the Hardware Specification and Software
Specification, including the engineering, operational and/or functional
descriptions, features, manufacturing specifications (including Bills of
Materials, "BOMs") and requirements as mutually designated and agreed by
the parties.
38. "Stand-alone Box(es)" shall mean a discrete Personal TV System Box which
provides external connectivity to a satellite, cable or television
broadcast receiver and contains a standard television tuner.
39. "Subsidy" shall mean hardware subsidies paid by TiVo to Philips to offset
the costs associated with the manufacturing and distribution of the Stand-
alone Box and/or DTV Combo Box.
40. "Technology" shall mean any discovery, improvement or invention whether or
not patentable, and all related know-how, designs, mask works, formulae,
processes, manufacturing techniques, trade secrets, ideas, artwork,
software or other copyrightable or patentable works.
41. "Territory" shall mean[*].
42. "Third Level Support" shall mean appropriate response, such as software bug
fixes, to recurrent issues brought to the attention TiVo's software
development organization by Second Level Support staff.
43. "Third Party Technology" shall mean any Technology that is owned or
controlled by a party other than Philips, TiVo or one of their Affiliates.
[*]Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
iv.
<PAGE>
"TiVo Enabling Technology" shall mean that Technology set forth in Exhibit
B.
45. "TiVo Marks" shall mean the trademarks, service marks, trade names and
logos of TiVo, specifically listed in Exhibit A ("TiVo Marks") to the
Marketing Addendum, as such exhibit may be amended upon the agreement of
the parties from time to time.
46. "TiVo Service(s)" shall mean services provided by TiVo over the Personal TV
System, including, without limitation, Personal TV Services.
47. "TiVo Stand-alone Box" shall mean a Stand-alone Box which enables the TiVo
Service and does not enable the Personal TV Services of any third party
[*].
48. "Value-added Services" shall mean services, other than Personal TV
Services, which are capable of being provided via Personal TV Systems.
* Material has been omitted pursuant to a request for confidential treatment.
Such maaterial has been filed seperately with the Securities and Exchange
Commission.
v.
<PAGE>
Confidential
Exhibit B
TIVO ENABLING TECHNOLOGY
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such maaterial has been filed seperately with the Securities and Exchange
Commission.
i.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
ii.
<PAGE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
iii.
<PAGE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
iv.
<PAGE>
Confidential
Exhibit C
COMMERCIAL RELEASE BRANDING REQUIREMENTS
. Pre-open sequence with a duration of approximately five (5) seconds
highlighting the transition between the Philips and TiVo Marks. The Philips
shield comes in to view, pauses to state "Philips Presents", and then fades
into the glint in TiVo's eye.
. Philips will be in the video background loop of both TiVo Central and Setup
page and the OSD layer of the Setup page.
. Philips will be offered an opportunity to create a "Philips Corner" line-
item on TiVo Central provided that Philips has content for viewers to
navigate through from that line-item. The Philips line-item will be
replaced by an "anchor tenant" position in the TiVo On-Air mall as soon as
technically feasible.
. Philips will be offered the opportunity to create additional Philips
branding via background video loops and the OSD layer.
. TiVo will notify Philips of changes that are made to the user interface
from the agreed specifications for commercial release to the extent such
changes affect Philips' brand presence as set forth in this Exhibit C.
<PAGE>
Confidential
Exhibit D
MINIMUM TERMS AND CONDITIONS OF END USER AGREEMENTS
This package may contain the following materials provided by Licensor to
Licensee: software and related explanatory written materials ("Documentation").
The term "Software" shall include any updates, modified versions, additions, and
copies of the Software that may be provided by Licensor from time to time.
Licensor grants to Licensee a nonexclusive license to use the Software and
Documentation, provided that Licensee agrees to the following:
1. License Grant. Licensee may use the Software solely in machine executable
object code form and solely in conjunction with the Product purchased by
Licensee.
2. Documentation. Licensor will deliver a copy of the End User documentation
for the Software (the "Documentation") to Licensee. Licensee shall have
the right to use the Documentation solely in connection with Licensee's use
of the Software with the Product.
3. Restrictions. Licensee may not copy, modify, or transfer the Software, or
any copy thereof, in whole or in part. Licensee may not reverse engineer,
disassemble, decompile, or translate the Software, or otherwise attempt to
derive the source code of the Software, except to the extent allowed under
any applicable law. Any attempt to transfer any of the rights, duties or
obligations hereunder is void. Licensee may not rent, lease, load, resell
for profit, or distribute the Software, or any part thereof.
4. Ownership. The Software is licensed, not sold, to Licensee for use only
under the terms of this Agreement, and Licensor and its suppliers reserve
all rights not expressly granted to Licensee. Licensee owns the media, if
any, on which the Software or Documentation is recorded, but Licensor and
its suppliers retain ownership of all copies of the Software and
Documentation itself.
5. Reservation of Rights. Except as stated above, this Agreement does not
grant Licensee any intellectual property rights in the Software or
Documentation.
6. Term. This Agreement will terminate immediately upon notice to Licensee if
Licensee materially breaches any term or condition of this Agreement.
Licensee agrees upon termination to promptly destroy the Software and all
copies.
7. Warranty Disclaimer. NEITHER LICENSOR NOR ANY OF ITS REPRESENTATIVES MAKES
OR PASSES ON TO LICENSEE OR OTHER THIRD PARTY ANY WARRANTY OR
REPRESENTATION ON BEHALF OF LICENSOR'S SUPPLIERS, INCLUDING BUT NOT LIMITED
TO ANY IMPLIED WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR
A PARTICULAR PURPOSE.
i.
<PAGE>
8. Limitation of Liability. IN NO EVENT WILL LICENSOR'S SUPPLIERS BE LIABLE TO
LICENSEE FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, INCLUDING
ANY LOST PROFITS OR LOST SAVINGS, EVEN IF LICENSOR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY THIRD PARTY. Some
states or jurisdictions do not allow the exclusion or limitation of
incidental, consequential or special damages, so the above limitations may
not apply to Licensee.
9. General. This Agreement will be governed by the laws of the State of
California without regard to or application of conflicts of law rules or
principles. This Agreement will not be governed by the United Nations
Convention on Contracts for the International Sale of Goods, the
application of which is expressly excluded. If any part of this Agreement
is found void and unenforceable, it will not affect the validity of the
balance of the Agreement, which shall remain valid and enforceable
according to its terms. Licensee agrees that the Software will not be
shipped, transferred or exported into any country or used in any manner
prohibited by the United States Export Administration Act or any other
export laws, restrictions or regulations. This Agreement shall
automatically terminate upon failure by Licensee to comply with its terms.
This Agreement may only be modified in writing signed by an authorized
officer of Licensor and its suppliers.
10. Third-Party Beneficiary. Licensee is hereby notified that TiVo Inc., a
California corporation, and having its principal place of business at 894
Ross Drive, Sunnyvale, California USA 94089, is a third-party beneficiary
to this Agreement to the extent that this Agreement contains provisions
which relate to Licensee's use of the Software and Documentation licensed
hereby. Such provisions are made expressly for the benefit of TiVo and are
enforceable by TiVo in addition to Licensor.
ii.
<PAGE>
Confidential
Exhibit E
MINIMUM SERVICE REQUIREMENTS
<PAGE>
Confidential
Exhibit F
PROCEDURES RELATING TO PROPRIETARY RIGHTS
1. Technology Notification. With respect to Philips Technology developed
exclusively pursuant to development of the Interface, Philips agrees to
disclose promptly each such Philips Technology to TiVo specifically
pointing out the features or concepts that Philips believes to be new or
different. With respect to TiVo Technology developed pursuant to
development of the Interface, TiVo agrees to disclose promptly such TiVo
Technology to Philips specifically pointing out the features or concepts
that TiVo believes to be new or different.
2. Proprietary Rights Protection.
(a) Assistance. Each party shall give the other party all reasonable
assistance in obtaining patent or other Proprietary Rights protection for
jointly-made inventions and in preparing and prosecuting any patent or other
Proprietary Rights application for such jointly-made inventions filed by the
other party (at such party's expense), and shall cause to be executed
assignments and other instruments and documents as the other party may consider
necessary or appropriate to perfect the rights granted pursuant to joint
development of the Interface.
(b) Election Not To Seek Protection. In the event that one party
elects not to seek and/or maintain patent or other Proprietary Rights protection
for the Interface in any particular country or not share equally in the expenses
thereof with the other party, the other party shall have the right to seek
and/or maintain such protection at its own expense in such country and shall
have full control over the prosecution and maintenance thereof even though title
to any patent or other Proprietary Rights protection issuing therefrom is
jointly owned. The other party shall keep the party electing not to seek or
maintain patent or other Proprietary Rights protection fully informed concerning
the prosecution or maintenance of such patent or other Proprietary Rights
protection for such jointly-made inventions by providing copies of all
communications with patent offices and by giving the party electing to seek or
maintain patent or other Proprietary Rights protection for such jointly-made
inventions the right to comment on such communications. Regardless of who has
responsibility, patent applications relating to the Interface may be filed only
after review of such applications by both parties. During the pendency of such
applications, and until a patent issues thereon or the application is officially
published by the governmental agency handling such applications, the contents of
such applications shall be considered Confidential Information.
(c) Third Party Obligations. In rendering performance pursuant to
development of the Interface, both parties shall comply at all times with all
restrictions and covenants applicable to third party Technology. Each party
shall have sole responsibility for payment of all royalties and other charges
with respect to the third party Technology it supplies to the other party and
the developed efforts hereunder, including royalties and charges that accrue as
a result of the subsequent exercise by a party, its Affiliates and their
successors and assigns, and sublicensees, end users and resellers of such party
of rights and licenses in and to end-products derived from development
hereunder.
i.
<PAGE>
(d) Proprietary Rights Claims. Each party shall make reasonable
efforts to notify, without unnecessary delay, the other party in writing of, and
to give such party any information provided by the third party claimant
concerning, any suits or claims of patent, copyright, trademark, mask work
infringement or trade secret misappropriation which have been made in writing
with respect to each party's respective Personal TV Systems and Services in
which such third party claims to have Proprietary Rights.
ii.
<PAGE>
Confidential
Exhibit G
HARDWARE SPECIFICATION
<PAGE>
- --------------------------------------------------------------------------------
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such maaterial has been filed seperately with the Securities and Exchange
Commission.
4.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such maaterial has been filed seperately with the Securities and Exchange
Commission.
5.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
7.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
9.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
10.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
11.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
12.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
13.
<PAGE>
[*]
* Material has been omitted pursuant to a request for Confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
14.
<PAGE>
Confidential
Exhibit H
SOFTWARE SPECIFICATION
<PAGE>
[*]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
[*]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
7.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
9.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
10.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
11.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
12.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
13.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
14.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
15.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
16.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
17.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
18.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
19.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
20.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
21.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
22.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed seperately with the Securities and Exchange
Commission.
23.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed seperately with the Securities and Exchange
Commission.
24.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed seperately with the Securities and Exchange
Commission.
25.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed seperately with the Securities and Exchange
Commission.
26.
<PAGE>
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed seperately with the Securities and Exchange
Commission.
27.
<PAGE>
CONFIDENTIAL
ADDENDUM A
PHILIPS BUSINESS ELECTRONICS B.V. - TIVO INC.
PURCHASE ADDENDUM
<PAGE>
CONFIDENTIAL
PURCHASE ADDENDUM
This Purchase Addendum ("Purchase Addendum") by and between TiVo
Inc. ("TiVo") and Philips Business Electronics B.V. ("Philips") shall be
effective as of March 31, 1999 (the "Effective Date"). Capitalized terms not
defined herein shall have the meanings assigned to such terms in that certain
Master Agreement (the "Master Agreement") between the parties dated March 31,
1999.
1. Scope. This Purchase Addendum sets forth the rights and obligations of the
parties with respect to Philips' initial purchase of [*] TiVo Stand-alone Boxes
from TiVo. The parties intend that this Purchase Addendum shall be replaced, in
its entirety, with a more comprehensive OEM Purchase Addendum to the Master
Agreement that will set forth the terms and conditions for subsequent purchases
of the TiVo Stand-alone Box by Philips.
2. Initial Purchase Obligation. Philips shall purchase [*] TiVo Stand-alone
Boxes that have been manufactured by TiVo in accordance with TiVo's current
Specifications.
3. Terms and Conditions for Purchase.
3.1 Philips' Standard Purchase Order. Philips and TiVo acknowledge and
agree that except as expressly set forth in this Purchase Addendum, the terms
and conditions set forth in Philips' standard purchase order shall govern and
control such purchase by Philips. To the extent that Philips' standard terms and
conditions of purchase conflict with those of this Purchase Addendum, the terms
and conditions of this Purchase Addendum shall prevail. A copy of Philips'
standard terms and conditions of purchase is attached hereto as Exhibit A
("Terms and Conditions of Purchase").
3.2 Payment Terms. Philips shall pay TiVo [*] for each TiVo Stand-alone
Box within [*] of the date of invoice. Philips shall pay TiVo interest at a rate
of [*] compounded [*] on all late payments.
3.3 Warranty. The parties acknowledge that Philips shall sell the
Philips-branded TiVo Stand-alone Boxes (which are subject to this Purchase
Addendum) to TiVo for resale to end users. TiVo shall provide all end users
with the TiVo standard end user warranty agreement attached hereto as Exhibit B
and shall be responsible for all warranty claims made by end users for defective
Philips-branded TiVo Stand-alone Boxes. TiVo shall defend, indemnify and hold
Philips harmless from and against all claims, suits and actions based on
warranty claims by end users.
3.4 Year 2000 Warranty. TiVo warrants that the Philips-branded TiVo
Stand-alone Boxes delivered pursuant to this Purchase Addendum will be Year 2000
Compliant. "Year 2000 Compliant" means that neither performance nor
functionality is affected by dates prior to, during, and after the year 2000.
3.5 Indemnification. Except as otherwise provided in Section 3.3 of
this Purchase Addendum, the indemnification provisions set forth in the Master
Agreement are incorporated herein by reference.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1
<PAGE>
CONFIDENTIAL
3.6 No Changes or Termination. Philips' acknowledges and agrees that its
purchase of [*] TiVo Stand-alone Boxes is firm and the "Changes" and
"Termination" provisions of the Philips' standard terms and conditions of
purchase shall not apply to this transaction.
4. OEM Purchase Agreement. Within [*] of execution of this Purchase Addendum,
the parties agree to negotiate in good faith the terms and conditions of and to
execute a more comprehensive OEM Purchase Addendum that shall supersede and
replace, in its entirety, this Purchase Addendum.
In Witness Whereof, the parties hereto have caused this Purchase Addendum
to be duly executed as of the date first set forth above.
TiVo Inc. Philips Business Electronics B.V.
/s/ Michael Ramsay /s/ R. L. von Oostenbrugge
- -------------------------------------- --------------------------------------
Authorized Signature Authorized Signature
Michael Ramsay R. L. von Oostenbrugge
- -------------------------------------- --------------------------------------
Printed Name Printed Name
President, CEO Managing Director
- -------------------------------------- --------------------------------------
Title Title
April 2, 1999 31-03-1999
- -------------------------------------- --------------------------------------
Date Date
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2
<PAGE>
CONFIDENTIAL
Exhibit A
TERMS AND CONDITIONS OF PURCHASE
ACCEPTANCE. This Order can be accepted only on the terms and conditions set
forth in this Purchase Order and any attachments hereto by a written
acknowledgment and/or commencement of performance. Additional or different terms
proposed by Seller or set forth on Seller's acknowledgment, invoice or other
communication to Buyer shall not become part of the Agreement unless such is
accepted in writing and signed by Buyer.
INVOICES. Invoices shall be submitted in triplicate and shall contain the
following information: purchase order number, item number, description of
items, sizes, quantities, unit prices and extended totals in addition to any
other information specified elsewhere herein. Payment of invoice shall not
constitute acceptance of goods and shall be subject to adjustment for errors,
shortage, defects in goods or other failure of Seller to meet the requirements
of the Order.
ASSIGNMENT AND SUBCONTRACTS. Seller shall not assign the accounts receivables
or subcontract this Order or any right or obligation hereunder without the
written consent of Buyer. Purchases of parts and materials to comply with this
Order shall not be construed as assignments or subcontracts.
CASH DISCOUNTS. Time in connection with any discount offered will be computed
from (i) scheduled delivery date, (ii) date of actual delivery, or (iii) date an
acceptable invoice is received by Buyer's Accounts Payable Department, whichever
is later. Payment is deemed to be made for purpose of earning a discount on the
date of mailing of Buyer's check.
TAXES. Unless otherwise specified, the prices set forth in this Order exclude
all applicable federal, state and local taxes. All such taxes shall be stated
separately on Seller's invoice.
GIFTS. Seller shall not make or offer gifts or gratuities of any kind to
Buyer's employees agents or members of their families to secure or influence any
business transaction. Violations shall be a material breach of this Agreement.
TRANSPORTATION. F.O.B. POINT. Unless otherwise specified, shipment will be
made F.O.B. destination to Buyer's designated plant or plants. Packing and
Shipment. Unless otherwise specified, when the price of this Order is based on
the weight of ordered goods, such price covers net weight of material ordered
only. Any charges for boxing, crating, handling, storage or other packing
requirements shall be stated separately on Seller's invoice. Seller shall mark
all containers with necessary lifting, handling a shipping information and also
purchase order numbers, release numbers, dates of shipment, and the names of the
consignee and consignor. An itemized packaging sheet must accompany each
shipment. No partial or complete delivery shall be made prior to the date or
dates shown unless Buyer has given prior written consent.
CHANGES. The Buyer may at any time, by a written and/or verbal order and
without notice to sureties or assignees, suspend performance hereunder, increase
or decrease the ordered quantities or
A-1.
<PAGE>
CONFIDENTIAL
make changes within the general scope of this Order in any one or more of the
following ways: a) Applicable drawings, designs or specifications; b) Method of
shipment or packing, and/or. c) Place of delivery and /or delivery schedule. If
any such change causes an increase or decrease in the cost of, or the time
required for performance of this Order, an equitable adjustment shall be made in
the Order price or delivery schedule, or both and the Order shall be modified in
writing accordingly. No claim by Seller for adjustment shall be valid unless
asserted within twenty (20) days from the date or receipt by the Seller of the
notification of change provided, however that such period may be extended upon
the written approval of the Buyer. Nothing in this clause shall excuse the
Seller from proceeding with the order as changed or amended.
DIRECT ALL COMMUNICATIONS TO BUYER
P.O. ORIGIN Sunnyvale, CA Telephone: (408) 991-2000 Fax: (408) 991-2487
P.O. ORIGIN Albuquerque, New Mexico Telephone: (505) 822-7000 Fax: (505) 822-
7002
RESALE NO. California SYGH 99-65467 5 NM Tax Idnet. 02-096896-005
RESPONSIBILITY FOR GOODS. Irrespective of any prior inspections or the F.O.B.
point named herein, Seller shall bear all risks of loss, damage, or destruction
for nonconforming goods. Seller shall also bear the same risks with respect to
goods rejected by Buyer. Buyer shall be responsible for any loss occasioned by
the gross negligence of its employees.
PATENTS. Seller will settle or defend at Seller's expense (and pay any costs,
fines or damages resulting from) all proceedings or claims against Buyer, its
subsidiaries or affiliates and their respective customers, for infringement or
alleged infringement by the goods furnished under this Order, or any part or use
thereof, of patents (including utility models and registered designs) now or
hereafter granted in the United States or any country where the Seller, its
subsidiaries or affiliates have furnished similar goods. Seller will at Buyer's
request identify the countries in which Seller, its subsidiaries or affiliates
have furnished similar goods.
TOOLING AND DOCUMENTS. All specifications, drawings or other documents and data
furnished by Buyer and all tools, dies, molds, jugs, fixtures, patterns,
machinery, special test equipment, special taps and gauges which have been
furnished, paid for, or charged against Buyer, or which have and their cost
amortized shall be deemed Buyer's property, treated as confidential information,
and delivered in good condition, normal wear and tear excepted, by Seller to
Buyer, F.O.B. Seller's plant, immediately upon request.
APPLICABLE LAW. The Agreement arising pursuant to the Order shall be governed
by and construed in accordance with the laws of the State of California. Any
rights, remedies and warranties available to Buyer by operation of law may only
be waived or modified in writing by Buyer in a supplement or an amendment to
this Order.
COMPLIANCE WITH LAWS AND REGULATIONS. Seller agrees to comply with all
applicable federal, state and local laws, rules and regulations. This Order
incorporates the provision of Executive Order No. 11246 (as amended) of the
President of the United States on Equal Employment Opportunity and the rules and
regulations issued pursuant thereto with which the Seller represents that it
will comply unless exempted. Seller further agrees to comply with all
provisions of Section 503 of the Rehabilitation of Act of 1973, as amended,
prohibiting
A-2.
<PAGE>
CONFIDENTIAL
discrimination against any employee or applicant for employment because of
physical or mental handicap in regard to any position for which the employee or
applicant for employment is qualified, and agrees to comply with the rules and
regulations promulgated with respect to this Act. Seller further agrees to
comply with the provisions of 38 USC Section 2012, and following, with respect
to the employment and training of disabled and Vietnam Era veterans. Seller
agrees not to discriminate against any employee or applicant for employment
because he or she is a disabled veteran or a veteran of the Vietnam Era in
regard to any position for which the employee or applicant for employment is
qualified. Seller agrees to comply with all rules and regulations issued
pursuant to these provisions of law. There are incorporated in this Order the
following provisions of Federal Acquisition Regulations they apply to performing
work or rendering services under Government procurement contract. all applicable
federal, state and local taxes. All such taxes shall be stated separately on
Seller's invoice.
GIFTS. Seller shall not make or offer gifts or gratuities of any kind to
Buyer's employees agents or members of their families to secure or influence any
business transaction. Violations shall be a material breach of this Agreement.
Utilization of Small Business Concerns and Small Disadvantaged Business Concerns
(if in excess of $10,000) [FAR 19.708]; Small Business and Small Disadvantaged
Business Subcontracting Plan (if in excess of $500,000) [FAR 19.708(b)];
Utilization of Labor Surplus Area Concerns (if in excess of $10,000) [FAR
20.301(b)]; Labor Surplus Area Subcontracting Program (if in excess of
$5000,000) [FAR 20.301(b)]; Employment of the Handicapped (if excess of $2,500)
[FAR 22.1402]; Listing of Employment Openings (if in excess of $10,000)
[FAR22.1302]. Seller warrants that in the performance of the Order he has
complied with all the provisions of the Fair Labor Standards Act of 1938 (as
amended) of the United States. If Seller does not have Workers Compensation of
Disability Benefits Insurance, Seller agrees to indemnify Buyer against all
damages sustained by Buyer resulting from Seller failure to have such insurance.
TERMINATION. Buyer may terminate this Order for convenience in whole or in
part, at any time, by verbal and/or written notice prior to Seller's written
order acknowledgment or commencement of performance under this Order. After
Seller has given written acknowledgment of this Order or has commenced
performance, Buyer may terminate this Order by giving ten (10) days written
notice of such termination.
A-3.
<PAGE>
Exhibit B
STATEMENT OF LIMITED WARRANTY
- --------------------------------------------------------------------------------
IMPORTANT
THIS STATEMENT OF LIMITED WARRANTY ("LIMITED WARRANTY") DESCRIBES THE WARRANTY
FOR THE ACCOMPANYING TIVO CENTER UNIT, ACCESSORIES AND DOCUMENTATION
(COLLECTIVELY, THE "DEVICE"). BY KEEPING THIS DEVICE BEYOND THIRTY (30) DAYS
AFTER THE DATE OF PURCHASE, YOU ACCEPT THIS LIMITED WARRANTY. PLEASE READ THIS
LIMITED WARRANTY CAREFULLY BEFORE OPERATING THE DEVICE. IF YOU DO NOT AGREE
WITH THESE TERMS AND CONDITIONS, YOU MUST NOT OPERATE THE DEVICE AND SHOULD
RETURN THE DEVICE FOR A FULL REFUND.
- --------------------------------------------------------------------------------
1. Warranty. TiVo Inc. ("TiVo") warrants that the Device will be free of
defects in materials and workmanship in normal use in an environment specified
by TiVo for up to one (1) year from the date of purchase (the "Warranty Period")
as follows. In the event of any such defects in materials or workmanship which
arise up to and including ninety (90) days from the date of purchase of the
Device (the "Purchase Date"), TiVo will repair or replace, at its option and
expense, any affected Device which is returned to TiVo within ten (10) days of
the end of the Warranty Period, and shall return a repaired or replacement
Device to you at TiVo's expense. In the event of any such defects in materials
or workmanship which arise beginning ninety-one (91) days from the Purchase Date
until one (1) year from the Purchase Date, TiVo will provide at its own expense
repair parts for any affected Device which is returned to TiVo within ten (10)
days of the end of the Warranty Period, subject to payment by you of TiVo's
then-applicable labor rates for associated Device repair, and shall return a
repaired Device to you at TiVo's expense. This Limited Warranty is extended
only to the original purchaser of the Device, and not to any subsequent owner or
purchaser of the Device. This Limited Warranty does not cover any defect in,
damage to, or inoperability or incorrect performance of, the Device due to acts
of God, negligence, misuse, abuse, accident, neglect, or unauthorized
alterations, modifications or repairs to any part of the Device. This Limited
Warranty does not cover improper installation of the Device, loss of use of the
Device, wasted service charges due to Device malfunction, damages due to
improper operation or maintenance, connection to an improper voltage supply,
customer installation, setup, instruction or television signal reception
problems. This Limited Warranty is valid only for Devices purchased and used in
the United States. As TiVo's sole obligation and your exclusive remedy for any
defective Device returned to TiVo within ten (10) days of the end of the
Warranty Period, TiVo will, at its option and expense, repair or replace the
Device as provided above, or give you a refund of the price you paid for the
Device. Any replacement Device will be warranted only for the remainder of the
original Warranty Period. This Limited Warranty is invalid if the TiVo serial
number has been altered or removed from the Device.
2. Warranty Procedure. To obtain warranty service for a Device which is
subject to the foregoing warranty, you should contact TiVo by calling toll-free
1-877-FOR-TIVO during TiVo's normal business hours. The responding TiVo
representative authorizing the return of your Device will give you a return
authorization number by telephone, and instructions on where and how to return
such Device to TiVo. You are responsible to select a shipment means for the
Device, and to insure such Device for its full replacement value. You must also
enclose your original receipt, invoice or bill of sale.
3. Disclaimer. TIVO MAKES NO WARRANTY THAT YOUR USE OF THE DEVICE WILL BE
ERROR-FREE OR UNINTERRUPTED. THE LIMITED WARRANTY ABOVE IS PROVIDED IN LIEU OF
ALL OTHER WARRANTIES CONCERNING THE DEVICE, WHETHER EXPRESS, IMPLIED, OR
PROVIDED BY STATUTE, INCLUDING ANY WARRANTIES OF
B-1
<PAGE>
CONFIDENTIAL
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, OR NON-INFRINGEMENT.
TIVO EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES. Because some jurisdictions do not
permit the exclusion of implied warranties, this disclaimer may not apply to
you. HOWEVER, EXCEPT TO THE EXTENT PROHIBITED BY APPLICABLE LAW, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, OR NON-
INFRINGEMENT THAT MAY BE AVAILABLE IS LIMITED IN DURATION TO THE WARRANTY
PERIOD. Because some jurisdictions also do not allow limitations on how long an
implied warranty lasts, this limitation may also not apply to you. TIVO'S
SUPPLIERS MAKE NO WARRANTIES OF ANY KIND CONCERNING THE DEVICE. This Limited
Warranty gives you specific rights, and you may also have other rights that vary
from state to state.
4. Limitation Of Liability. IN NO EVENT WILL TIVO OR ITS SUPPLIERS BE LIABLE
TO YOU OR ANY THIRD PARTY FOR ANY LOST PROFITS, LOSS OF DATA, OR OTHER
CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES ARISING FROM
OR RELATING TO THE USE OF OR INABILITY TO USE THE DEVICE, EVEN IF TIVO HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. TIVO'S SUPPLIERS WILL HAVE NO
LIABILITY OF ANY NATURE TO YOU OR ANY SUBSEQUENT OWNER OR PURCHASER OF THE
DEVICE, WHETHER OR NOT THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO CASE WILL TIVO'S TOTAL CUMULATIVE LIABILITY EXCEED THE PRICE YOU
PAID FOR THE DEVICE. YOU UNDERSTAND THAT THESE LIMITATIONS OF TIVO'S AND TIVO'S
SUPPLIERS' LIABILITY ARE A FUNDAMENTAL PART OF THIS LIMITED WARRANTY. Some
states do not allow the exclusion or limitation of incidental or consequential
damages, so the above limitation or exclusion may not apply to you.
5. Other Matters. The following two (2) sentences apply if you are a branch,
agency, or representative of the U.S. government. The Device is a "commercial
item" as that term is defined at 48 CFR 2.101 and is provided to the U.S.
Government only as a commercial end item. Consistent with FAR 12.211-12.212,
DFARS 227.7202-1 through 227.7202-4, and DFARS 252.227-7015, all U.S. Government
end users acquire the Device with only those rights, and subject to the
limitations, set forth herein. The laws of the United States and of the State
of California will govern this Limited Warranty. The State and Federal Courts
located in Santa Clara County, California shall have sole jurisdiction over any
disputes under this Limited Warranty, and you hereby submit to the personal
jurisdiction of such courts. The United Nations Convention on Contracts for the
International Sale of Goods will not apply to this Limited Warranty. If any
provision in this Limited Warranty is unenforceable under applicable law, it
will be deemed modified to the extent necessary to render it enforceable, and in
any event the other provisions will remain in full force and effect. Unless you
have entered into a signed, written agreement with TiVo governing your purchase
of the Device, this Limited Warranty is the complete and exclusive statement of
the warranty between you and TiVo with respect to the Device, and supersedes any
and all demonstrations, advertisements, proposals, and other oral or written
communications between you and TiVo (or your supplier) relating thereto. Should
you have any questions concerning this statement of Limited Warranty or, if you
desire to contact TiVo for any reason, please write to:
TiVo Inc.
894 Ross Drive, Suite 100
Sunnyvale, CA 94089
ATTN: TiVo Customer Service
or call toll-free:
1-877-FOR-TIVO (Toll-Free)
--------
B-2.
<PAGE>
Confidential
Marketing Addendum
Addendum B to
Philips Business Electronics B.V-TiVo Inc.
Master Agreement
<PAGE>
Confidential
Marketing Addendum
This Marketing Addendum ("Marketing Addendum") by and between TiVo Inc.
("TiVo") and Philips Business Electronics B.V. ("Philips") is incorporated by
reference into the Master Agreement, and is an integral part thereof. To the
extent that the terms and conditions of this Marketing Addendum conflict with
those of the Master Agreement, the terms and conditions of Master Agreement
prevail. Capitalized terms not defined herein shall have the same meaning as
those defined in the Master Agreement. This Marketing Addendum shall be
effective as of March 31, 1999 (the "Effective Date").
1. Scope. This Marketing Addendum sets forth the rights and obligations
of the parties with respect to the promotion and marketing of Philips Personal
TV Systems, the Philips- branded TiVo Stand-alone Box, and the DTV Combination
Box.
2. Marketing, Promotion And Advertising.
2.1 Philips' Marketing Spend.
(a) Initial Spend. Philips shall spend [*] (herein, the
"Marketing
Spend") on Marketing Activities prior to [*] and intends to spend
[*] cumulative during the Marketing Spend Period; provided, however, for each
day that Commercial Release is delayed past June 1, 1999, the Marketing Spend
Period shall be extended for an equal number of days. Such Marketing Spend shall
[*]. All Marketing Activities shall be conducted according to a marketing plan
or plans adopted by Philips. During such period, marketing plans shall be
developed in collaboration with TiVo and shall be consistent with the principles
set forth in Exhibit C ("Marketing Principles"). The Marketing Spend shall be
implemented, as follows:
(i) Not less than [*] by [*].
(ii) Not less than [*] by [*].
(iii) Not less than [*] by [*].
In the event Philips spends, on Marketing Activities, less
than [*] by [*], [*] by [*], or [*] by [*], the parties will renegotiate, in
good faith, the terms of the Master Agreement and all Addenda. If the parties
cannot agree, each party shall have the option, in its sole discretion, to
terminate the Master Agreement and all Addenda.
(b) Subsequent Spending. Thereafter, Philips shall spend, on
marketing and promotional activities and campaigns for Philips-branded Personal
TV Systems and Personal TV Systems Boxes, a minimum of [*] of that portion of
[*], received by Philips [*] So, for example, [*].
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-1-
<PAGE>
Confidential
For purposes of the Agreement, Philips' Co-Op Advertising Expenditures shall
be [*]
2.2 Retail Rollout. Philips, in good faith, shall use commercially
reasonable efforts to achieve the Retail Rollout of the Philips-branded TiVo
Stand-alone Box no later than [*].
2.3 Philips Advertising. Philips shall establish the character of all
advertising and promotional activities conducted by Philips for the Marketing
Activities. Notwithstanding the foregoing, and provided such advertising and
promotion is for products which enable the TiVo Service, TiVo Marks shall be
displayed consistent with the Marketing Principles. In no event shall the TiVo
Marks be more prominent than Philips' Marks. Final determination as to the
appearance and relative placement of the Philips Marks and TiVo Marks shall be
made by Philips. Notwithstanding the foregoing, use of each party's Marks shall
at all times comply with each such party's corporate identity policies. From and
after the Marketing Spend Period, Philips shall have no obligation to include
the TiVo Marks in Philips' advertising and promotion.
2.4 TiVo Advertising. TiVo shall establish the character of all
advertising and promotional activities conducted by TiVo. Notwithstanding the
foregoing, and provided such advertising and promotion is for the TiVo Service,
Philips Marks shall be displayed consistent with the Marketing Principles. In no
event shall the Philips Marks be more prominent than the TiVo Marks. Final
determination as to the appearance and relative placement of the Philips Marks
and TiVo Marks shall be made by TiVo. Notwithstanding the foregoing, use of each
party's Marks shall at all times comply with each such party's corporate
identity policies. From and after the Marketing Spend Period, TiVo shall have no
obligation to include the Philips Marks in TiVo's advertising and promotion.
2.5 Industry Promotion.
(a) Philips shall conduct [*] during the Marketing Spend Period.
During the Exclusivity Periods for the Philips-branded TiVo Stand-alone Box and
the DTV Combination Box, TiVo shall, [*] and upon the reasonable request of
Philips, support Philips' promotional campaigns by (i) [*], (ii) [*], and (iii)
[*]. [*], Philips may invite TiVo to [*]. Philips shall feature Philips-branded
TiVo Stand-alone Boxes and other Personal TV System Boxes enabling the TiVo
Service, as agreed by the parties at [*].
(b) Neither party shall issue any written press release
regarding cooperative developments and joint efforts with, or the intentions of,
the other party, without the prior written consent of such other party.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-2-
<PAGE>
Confidential
(c) For so long as the Agreement is in effect, the parties shall
reasonably cooperate in promoting Personal TV System Technology with all
appropriate standard-setting bodies and associations.
(d) The parties agree that TiVo will be the lead public
relations contact for the TiVo Personal TV Service and that Philips will be the
lead public relations contact for the Philips-branded Personal TV System boxes.
3. [*]
4. Promotional Materials. Philips shall include, and have final approval
of, all promotional material to be included in the packaging of Philips-branded
Personal TV System Boxes. Notwithstanding the foregoing, TiVo shall have the
right, during the Marketing Spend Period, to include certain promotional
materials in Philips' packaging of all such Boxes which enable the TiVo Service
subject to the approval of Philips, which approval shall not be unreasonably
withheld or delayed.
5. Registration Forms. The registration forms included in Philips-branded
TiVo Stand-alone Boxes and DTV Combination Boxes shall have a distinctive look
and feel. Each party shall be supplied with the information provided by the end
user on such forms and may be used by either party for any purpose, without
restriction; provided, that both parties shall comply with any privacy statement
of use restrictions contained within such forms. Either party may contact such
end users at any time without the consent of the other party.
6. End-User Data. TiVo shall provide to Philips copies of all names and
addresses of Service Subscribers who have purchased Philips-branded Personal TV
System Boxes; provided, however, that Philips and TiVo shall: (i) not use such
data for any purposes prohibited
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-3-
<PAGE>
Confidential
by any such Service Subscriber pursuant to the TiVo/Philips privacy statement
included with the end-user documentation; (ii) only use such data for their own
advertising, marketing, customer support, warranty, and product development
purposes; (iii) shall protect such information as they do their own confidential
information; and (iv) shall not distribute such data to any third party for any
purpose, except their employees, consultants and contractors with a need to
know.
7. Not For Resale Units.
7.1 TiVo Service. TiVo shall provide Philips with not less than fifty
(50) subscriptions to the TiVo Service, at no cost; provided, however, such
subscription may only be used for its own evaluation, testing, marketing and
public relations purposes.
7.2 Philips Boxes. Philips shall provide TiVo with not fewer than
fifty (50) Philips-branded Personal TV System Boxes (which enable the TiVo
Service), each quarter, at cost; provided, however, such Personal TV System
Boxes may only be used for its own evaluation, testing, marketing and public
relations purposes.
8. Trademark Licenses.
8.1 Philips Marks. Subject to the terms and conditions of the
Agreement, unless sooner terminated, in Philips' sole discretion, Philips hereby
authorizes TiVo to use Philips Marks, during the term of the Agreement solely:
(i) for purposes of branding Personal TV System Boxes manufactured by TiVo for
sale to Philips; and (ii) in the advertising and promotion of the Philips-
branded Personal TV Systems Boxes in connection with the TiVo Services as
provided in the Agreement. Before making use of any Philips Mark, TiVo will
provide Philips with a sample of the proposed use of the Philips Mark for
approval by Philips. If Philips does not accept, in writing, the proposed use of
the Philips Mark within [*] after receipt of the sample from TiVo, Philips will
be deemed to have rejected the proposed use. If Philips rejects the proposed use
of the Philips Mark, TiVo will modify or cancel the proposed use, as requested
by Philips. In addition, TiVo will comply with all trademark usage guidelines or
policies that Philips may furnish to TiVo in writing from time to time
concerning use of the Philips Marks. All use of the Philips Marks hereunder will
inure to the benefit of Philips. Philips has and will retain exclusive ownership
of the Philips Marks, and TiVo will not contest or challenge, or do anything
inconsistent with, Philips' exclusive ownership of the Philips Marks. Without
limiting the generality of the foregoing, TiVo may not affix, append, or place
any of its trademarks, trade names, or logos to, or in close proximity to, the
Philips Marks in a manner that results or could result in the creation of a
unitary composite mark. Except as otherwise provided for herein, nothing in the
Agreement shall be construed to create, by implication or otherwise, a right by
TiVo to manufacture or distribute Philips-branded Personal TV System Boxes
except for sale to Philips (as provided in the Purchase Agreement and the
contemplated OEM Purchase Addendum) or as otherwise specifically authorized by
Philips in writing.
8.2 TiVo Marks. Subject to the terms and conditions of the Agreement,
unless sooner terminated, in TiVo's sole discretion, TiVo hereby authorizes
Philips to use TiVo Marks, during the term of the Agreement solely for purposes
of branding and in the advertising and promotion of Philips-branded Personal TV
System Boxes which enable the TiVo Service as provided in this Agreement. Before
making use of any TiVo Mark, Philips will provide TiVo
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-4-
<PAGE>
Confidential
with a sample of the proposed use of the TiVo Mark for approval by TiVo. If TiVo
does not accept, in writing, the proposed use of the TiVo Mark within [*] after
receipt of the sample from Philips, TiVo will be deemed to have rejected the
proposed use. If TiVo rejects the proposed use of the TiVo Mark, Philips will
modify or cancel the proposed use, as requested by TiVo. In addition, Philips
will comply with all trademark usage guidelines or policies that TiVo may
furnish to Philips in writing from time to time concerning use of the TiVo
Marks. All use of the TiVo Marks hereunder will inure to the benefit of TiVo.
TiVo has and will retain exclusive ownership of the TiVo Marks, and Philips will
not contest or challenge, or do anything inconsistent with, TiVo's exclusive
ownership of the TiVo Marks. Without limiting the generality of the foregoing,
Philips may not affix, append, or place any of its trademarks, trade names, or
logos to, or in close proximity to, the TiVo Marks in a manner that results or
could result in the creation of a unitary composite mark .
9. Survival. The provisions of Sections 8 shall survive any termination or
expiration of this Marketing Addendum.
In Witness Whereof, the parties hereto have caused this Collaboration and
Marketing Addendum to be duly executed as of the date first set forth above.
TiVo Inc. Philips Business Electronics B.V.
/s/ Michael Ramsay /s/ R.L. von Oostenbrugge
- --------------------------- ---------------------------------
Authorized Signature Authorized Signature
Michael Ramsay R.L. von Oostenbrugge
- --------------------------- ---------------------------------
Printed Name Printed Name
President, CEO Managing Director
- --------------------------- ---------------------------------
Title Title
April 2, 1999 31-03-1999
- --------------------------- ---------------------------------
Date Date
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-5-
<PAGE>
Confidential
Philips Business Electronics B.V.- TiVo Inc.
Master Agreement
<PAGE>
Confidential
Exhibit A
TiVo Marks
[PICTURE APPEARS HERE]
-A-1-
<PAGE>
Confidential
Exhibit B
Philips Marks
[LOGO OF PHILIPS APPEARS HERE]
-B-1-
<PAGE>
Confidential
Exhibit C
Marketing Principles
Goals:
Define guidelines in their respective marketing plans that will be
beneficial to both parties and position them as the leaders in creating personal
television while developing clear brand association for both parties.
Promote the use of the Philips-branded Personal TV System Boxes with the
TiVo Service.
Implementation:
Marketing Activities shall be implemented such that:
(i) Philips shall leverage its strength with consumer
electronic retail sales and distribution channels to promote the Retail Rollout
of the Philips-branded Personal TV System Boxes and the on-going promotion,
marketing and sales of such products following the Retail Rollout.
(ii) Philips and TiVo shall encourage synergy and coordination
between all advertising, public relations and research agencies to establish
consistent marketing messages for the Philips-branded Personal TV System Boxes
and the TiVo Service.
(iii) Philips and TiVo shall develop and implement a direct
marketing and fulfillment campaign for the Philips-branded TiVo Stand-alone Box.
(iv) Philips and TiVo shall develop and implement a specific
marketing and sales campaign targeted to DIRECTV subscribers and potential
subscribers.
Relative Positioning:
In promoting personal television, the positioning of the two companies
shall strive to work cohesively so it is clear to the consumer how the two
together deliver the value experience.
Until [*] (i) TiVo shall include the designated Philips Marks and mention
of the Philips Personal TV Systems in its advertising in a manner which is
appropriate for the medium and the number of consumer electronics manufacturers
who have commercially released Personal TV System Boxes enabling the TiVo
Service; and (ii) Philips shall include the designated TiVo Marks and mention of
the TiVo Service in its Personal TV System advertising in a manner which is
appropriate for the medium.
From [*] Philips shall market the Personal TV category
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-C-1-
<PAGE>
Confidential
which will include a TiVo presence, and TiVo shall include Philips in its
advertising consistent with the way it includes other consumer electronics
manufacturers.
From date which is one year after Commercial Release of the first Philips-
branded Standalone Personal TV box and thereafter, Philips shall have no
obligation to include the TiVo Marks in Philips' advertising and promotion, and
TiVo shall have no obligation to include the Philips Marks in TiVo's advertising
and promotion.
Materials To Be Included:
Each party's advertising materials (such as TV spots, print ads,
infomercials, direct marketing materials, sales materials, product brochures,
data sheets, etc.) shall include representation of the other party in a manner
pre-approved by such other party during Marketing Spend Period. Such
advertising materials are not intended to include either party's corporate
collateral such as company backgrounders, strategy documents and press releases.
Retail Channel Marketing:
Marketing activities may include, but are not limited to the following:
. TV, radio, Internet and print advertising
. Promotional activities including trade show promotions, product
announcements, press releases, etc.
. Point-of-sale materials including marketing collateral, point-of-sale
advertisements, etc.
. Sales force training
. Marketing collateral for inclusion in device packaging
. Sales promotions and incentives
-C-2-
<PAGE>
EXHIBIT 10.8
MARKETING AGREEMENT
This Marketing Agreement (this "Marketing Agreement") is made and entered
into as of April 13, 1999 by and between DIRECTV, Inc., a California corporation
("DIRECTV"), and TIVO Inc., a Delaware corporation ("TIVO") (each a "Party" and,
collectively, the "Parties").
Whereas, DIRECTV is a leading digital satellite broadcaster and service
operator in the United States;
Whereas, TIVO has developed and plans to provide customized television
programming services;
Whereas, the Parties desire to establish a strategic business relationship
whereby DIRECTV will provide marketing access to its United States subscribers
and offer promotional support for TIVO's customized television programming
services and TIVO products; and
Whereas, to further their strategic business relationship, (i) concurrently
with entering into this Marketing Agreement, TIVO and DIRECTV are entering into
a Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to which
DIRECTV is making an equity investment in TIVO, and (ii) pursuant to this
Marketing Agreement, DIRECTV will receive additional equity in TIVO.
Now, Therefore, in consideration of the foregoing and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, agree as follows:
1. CERTAIN DEFINITIONS
Defined terms used but not defined in the Marketing Agreement will be as
defined in Appendix I attached hereto.
2. MARKETING OBLIGATIONS
2.1 DIRECTV Marketing Support. On the terms and subject to TIVO's
compliance with Section 2.8 below, for a period of [*] from and including [*]
(the "Marketing Period"), DIRECTV shall provide to TIVO the following marketing
and sales support:
2.1.1 Sales Force and Distribution Channel Support. At such time as
TIVO, or a third party authorized by TIVO, begins distributing the TIVO Products
in retail sales channels and the TIVO Products are available in sufficient
quantity to satisfy a successful product introduction in such channels to
DIRECTV's reasonable satisfaction, DIRECTV shall use its commercially reasonable
efforts to encourage retailers to distribute the TIVO Products (including the
TIVO Stand-Alone Receiver and the DIRECTV/TIVO Combo Receiver) and the TIVO
Service to the extent set forth below [*]:
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
(a) TIVO Stand-Alone Receiver. In connection with marketing and
sales of the TIVO Stand-Alone Receiver, (i) DIRECTV shall provide training
regarding the use of the TIVO Products and the TIVO Service to DIRECTV's sales
employees (other than telemarketing sales employees) located within the United
States (the "DIRECTV Sales Force") for the purpose of encouraging the DIRECTV
Sales Force to promote the TIVO Products and the TIVO Service in retail sales
channels; (ii) [*], DIRECTV shall include references to the TIVO Products and/or
the TIVO Service in DIRECTV [*] which are offered by DIRECTV and/or included in
the DIRECTV Service, including DIRECTV's [*], and (iii) DIRECTV shall include
TIVO promotional materials (provided to DIRECTV at TIVO's expense) in [*]
DIRECTV new subscriber welcome kits provided to new DIRECTV Subscribers [*].
DIRECTV and TIVO shall mutually agree on the placement, size and content of all
references to the TIVO Products and the TIVO Service in DIRECTV [*] and the size
and content of all TIVO promotional materials included in DIRECTV new subscriber
welcome kits.
(b) DIRECTV/TIVO Combo Receiver. In connection with marketing and
sales of the DIRECTV/TIVO Combo Receiver, (i) DIRECTV shall perform [*](a); and
(ii) DIRECTV and TIVO shall [*].
(c) Cooperation. TIVO shall cooperate with DIRECTV to provide
reasonable assistance to DIRECTV in its training of the DIRECTV Sales Force,
which shall include TIVO causing one or more of its employees or representatives
to attend and/or conduct all such training sessions and TIVO providing all
materials for such sessions and demo TIVO Products for DIRECTV sales offices.
The Parties agree to cooperate reasonably and in good faith to develop and offer
joint sales promotions of DIRECTV and TIVO products and services.
2.1.2 Commercial and Infomercial Avails. DIRECTV shall broadcast via
the DIRECTV Service comercials and infomercials promoting the TIVO Service
and/or the TIVO Products ("TIVO Television Advertising"). The TIVO Television
Advertising which DIRECTV shall be obligated to broadcast is described in more
detail on Schedule 2.1.2, but shall include the obligation of DIRECTV to provide
[*] on the DIRECTV Service [*] promoting the TIVO Service and/or the TIVO
Products [*] beginning as soon as practicable following the Launch Date (the
"TIVO infomercials"). DIRECTV shall insert TIVO Television Advertising only in
the positions and at the times which DIRECTV designates therefor and without
interruption of any program of the DIRECTV Service. The availability of any
period of time during which TIVO Television Advertising can be inserted shall be
subject to limitations imposed upon DIRECTV by program suppliers for
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
programming which DIRECTV, in its sole discretion, considers to be of
extraordinary merit or of special importance to the DIRECTV Service as a whole.
In the event that any period of time and/or particular network or group of
networks previously allocated to TIVO pursuant to the terms of this Marketing
Agreement is or becomes unavailable to TIVO, DIRECTV shall designate or cause to
be designated, as soon as practicable, a comparable period of time and/or
particular network or group of networks for broadcasting TIVO Television
Advertising. In addition, if and when DIRECTV becomes contractually able to
insert TIVO Television Advertising on networks which are not currently available
for such insertion, DIRECTV will work with TIVO to insert TIVO Television
Advertising on such networks; provide that DIRECTV's overall obligations under
this Section 2.1.2 shall not be increased by inserting TIVO Television
Advertising on any networks not currently available for commercial insertion.
TIVO shall be solely responsible for all costs related to developing and
producing the TIVO Television Advertising. DIRECTV shall broadcast the TIVO
Television Advertising via the DIRECTV Service at no additional cost to TIVO.
2.1.3 Mailings to DIRECTV Subscribers. Subject to subparagraph (d)
below DIRECTV will provide TIVO with access to DIRECTV Subscribers for the
purpose of mailing promotional materials relating solely to the TIVO Service
and/or the TIVO Products ("TIVO Promotional Materials") as follows:
(a) Direct Mail. TIVO shall have the right to distribute TIVO
Promotional Materials to DIRECTV Subscribers via direct mail in [*] mailings
during [*] of the Marketing Period; provided that, unless otherwise agreed to in
writing by DIRECTV and TIVO, no DIRECTV Subscriber shall receive more than [*]
per [*]. DIRECTV shall provide TIVO such access to DIRECTV Subscribers [*];
provided that TIVO shall pay [*]. DIRECTV shall provide TIVO access to the names
and addresses of DIRECTV Subscribers only through an independent third party
designated by DIRECTV (such that TIVO does not gain access to such list of names
and addresses). The Parties shall mutually agree (such agreement not to be
unreasonably withheld) on the specific timing of each such mailing.
(b) Subscriber Bill Mailings. TIVO shall have the right to
include a TIVO Promotional Materials insert in at least [*] outgoing bills
mailed by DIRECTV to DIRECTV Subscribers (the "Subscriber Bill Mailings") [*] of
the Marketing Period. TIVO and DIRECTV shall cooperate reasonably and in good
faith to mutually determine an implementation schedule for including TIVO's
inserts in the Subscriber Bill Mailings. The Parties shall coordinate reasonably
and in good faith with respect to the specifications of each such insert,
including, but not limited to, weight, size and paper thickness, in order to
enable DIRECTV's equipment (or its billing venders) to handle a particular
insert and to minimize incremental postage costs. The Parties shall cooperate
reasonably and in good faith to schedule, as promptly as practicable after the
date of this Marketing Agreement, the testing of a proposed TIVO Promotional
Material insert with DIRECTV's operations. DIRECTV shall be responsible for
placing the TIVO Promotional Material inserts into each Subscriber Bill Mailing,
but TIVO shall be responsible for [*] costs incurred by TIVO and DIRECTV related
to including
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
the TIVO Promotional Materials in the Subscriber Bill Mailings including,
without limitation, [*]. DIRECTV shall use commercially reasonable
efforts to work with TIVO to minimize all such costs. DIRECTV and TIVO also
agree to work together in good faith to discuss and identify additional means of
marketing the TIVO Products and the TIVO Service in the Subscriber Bill
Mailings; provided that each party shall decide in its sole discretion whether
to take any actions in addition to those expressly set forth in this Section
2.1.3(b).
(c) Delivery of TIVO Promotional Materials for Subscriber Bill
Mailings. TIVO shall deliver to DIRECTV (at a location designated by DIRECTV),
[*] a sufficient quantity of TIVO Promotional Materials inserts
in completed form as approved by DIRECTV no later than the Cut-Off Date (as
defined in Section 2.1.5(d)) for the relevant Subscriber Bill Mailing.
(d) Contractual Limitations on DIRECTV's Obligations.
Notwithstanding anything to the contrary in this Section 2.1.3, DIRECTV shall
have no obligation to allow TIVO to distribute TIVO Promotional Materials
through direct mail, or include TIVO Promotional Materials in any Subscriber
Bill Mailing, sent to DIRECTV Subscribers that are or become DIRECTV Subscribers
pursuant to DIRECTV's contractual relationships with NRTC or telephone operating
companies. [*].
(e) Access to Primestar and USSB Subscribers. At such time that
the subscribers currently using the direct-to-home satellite services offered by
Primestar and USSB become DIRECTV Subscribers, TIVO shall have the same rights
with respect to such subscribers under this Marketing Agreement as TIVO has with
respect to the DIRECTV Subscribers currently existing on the date hereof,
provided that nothing in this Section 2.1.3(e) shall be construed to extend
DIRECTV's obligations under this Section 2 beyond the end of the Marketing
Period.
(f) Access to Commercial Subscribers to the DIRECTV Service.
DIRECTV and TIVO shall work together in good faith to develop a strategy for
marketing the TIVO Products and/or the TIVO Service to commercial subscribers to
the DIRECTV Service and develop procedures to allow TIVO to mail such commercial
subscribers TIVO Promotional Materials; provided that each party shall decide in
its sole discretion whether and on what terms it will agree to take any specific
actions with respect to such commercial subscribers.
2.1.4 DIRECTV Website and Magazine Advertising. DIRECTV shall include
advertising relating to the TIVO Service and/or the TIVO Products (i) on the
homepage or other webpage in close proximity to the homepage on DIRECTV's
website at "www.directv.com" or such other internet address that is used by
DIRECTV as its primary website for promoting DIRECTV services to its existing
DIRECTV Subscribers and prospective subscribers, and (ii) in DIRECTV's On and
See magazines. The specific size, frequency and placement of such advertising
shall be consistent with the terms set forth in Schedule 2.1.4.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
TIVO shall be solely responsible for all costs related to designing and creating
such advertising and for delivering to DIRECTV camera ready artwork at such
times in advance of the dates such advertising will appear on DIRECTV's website
or be published as DIRECTV shall designate.
2.1.5 Content of TIVO Marketing Materials. TIVO generally shall have
the right to determine the creative content, look and feel of all TIVO-produced
point-of-sale materials promoting the TIVO Products and the TIVO Service, TIVO
Television Advertising, TIVO Promotional Materials and advertising relating to
the TIVO Service and/or the TIVO Products on DIRECTV's website or in On and See
Magazines (collectively, the "TIVO Marketing Materials"), subject to the
following limitations:
(a) References to DIRECTV or its Products or Services. DIRECTV
shall have the right to review and approve in its sole discretion the factual
accuracy and the creative content, look and feel of any portion of the TIVO
Marketing Materials which refers or relates to DIRECTV or the DIRECTV Service,
or any products, services or programming that could compete with the DIRECTV
Service or programming offered via the DIRECTV Service. DIRECTV also shall have
the right to review and approve in its sole discretion the creative content,
look and feel of any advertising relating to the TIVO Service and/or the TIVO
Products that is displayed on DIRECTV's website.
(b) Minimum Standards. All TIVO Marketing Materials shall comply
with applicable governmental codes, comport with reasonable standards of good
taste (consistent with the broadcast standards utilized by major broadcast
television networks), and comply with DIRECTV's reasonable policies and
practices of which TIVO has actual knowledge at the time such TIVO Marketing
Materials are proposed, including, without limitation, those relating to
advertisements of X-rated material, drug-related paraphernalia, cigarettes and
liquor.
(c) Telephone Numbers. If TIVO desires to include a telephone
number in any TIVO Marketing Materials which references DIRECTV in any respect,
the Parties shall consult, reasonably and in good faith, in order to determine
how to present the telephone number in such TIVO Marketing Materials so as not
to result in customer confusion.
(d) Compliance with Copyright and Trademark Laws. TIVO shall take
all actions necessary to ensure that the content of all TIVO Marketing Materials
does not violate any law or, to its best knowledge, infringe the copyright or
trademark rights of any person.
(e) Procedures for DIRECTV Review. TIVO shall deliver to DIRECTV
for its approval all proposed TIVO Marketing Materials not less than [*] prior
to the Cut-Off Date with respect to the type of TIVO Marketing Materials
proposed to be used. The "Cut-Off Date" shall mean (i) the date on which DIRECTV
must receive TIVO Marketing Materials in order to ensure that such materials are
aired (in the case of TIVO Television Advertising), included in a Subscriber
Bill Mailing (in the case of TIVO Promotional Materials) or displayed (in the
case of website or magazine advertising); (ii) in the case of TIVO-produced
point-of-sale materials, the date TIVO intends to print such materials; or (iii)
in the case of TIVO Promotional Materials to be disseminated by direct mail, [*]
prior to
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
the proposed mailing date. The Cut-Off Date for each type of TIVO Marketing
Material is set forth on Schedule 2.1.5(e). DIRECTV shall have [*] to approve or
disapprove such TIVO Marketing Materials from the date TIVO confirms via
telephone call that the appropriate person at DIRECTV has received such TIVO
Marketing Materials. If DIRECTV does not notify TIVO of any objections to the
proposed TIVO Marketing Materials within such [*] period, such TIVO Marketing
Materials shall be deemed accepted for all purposes of this Marketing Agreement.
2.2 Fulfillment of the TIVO Service and the TIVO Products. In
connection with the promotion of the TIVO Service and/or the TIVO Products by
DIRECTV, TIVO shall use commercially reasonable efforts to fulfill or cause to
be fulfilled any and all orders received for the TIVO Products and/or orders for
the TIVO Service and/or provide any required hardware or self-installation
materials related to the TIVO Service and/or the TIVO Products in accordance
with the terms set forth on Schedule 2.2. Notwithstanding the specific terms set
forth on Schedule 2.2, TIVO shall provide adequate staff to support all account
set-up and order transmission activities in a timely manner, and TIVO shall use
commercially reasonable efforts to ensure that the people receiving orders
maintain a high quality of professionalism.
2.3 Billing System. As between DIRECTV and TIVO, TIVO shall be
responsible for billing and remittance processing activities relating to the
sale of the TIVO Service to DIRECTV/TIVO Subscribers. DIRECTV shall be
responsible for billing and remittance processing activities relating to the
sale of the DIRECTV Service to DIRECTV/TIVO Subscribers. The Parties shall work
together in good faith to determine whether joint billing of DIRECTV/TIVO
Subscribers for the TIVO Service and the DIRECTV Service is desired and feasible
and, if so, to coordinate such billing activities.
2.4 Customer Service. TIVO shall provide all customer service related
to the TIVO Service and the TIVO Products in a manner that meets or exceeds the
customer service standards set forth in Schedule 2.4 hereto. TIVO 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 TIVO Service and/or the TIVO Products. The toll-free
line(s) shall be operational on the Launch Date and thereafter be available at
times sufficient to satisfy customer demand; provided that TIVO shall reimburse
DIRECTV for its out-of-pocket costs of answering and responding to any customer
service calls relating to the TIVO Service and/or the TIVO Products made to
DIRECTV's customer service center during hours in which TIVO customer service is
not answering customer calls; provided further that, from and after the date
DIRECTV begins airing the TIVO infomercials on the DIRECTV Service, TIVO shall
provide such customer service twenty-four (24) hours per day, seven (7) days per
week. TIVO shall forward all inquiries relating to the DIRECTV Service to the
DIRECTV customer service line designated by DIRECTV. DIRECTV shall forward all
inquiries relating to the TIVO Service and/or the TIVO Products to the TIVO
customer service line designated by TIVO.
2.5 Joint Logo and Trademark Guidelines. Both DIRECTV and TIVO
acknowledge the value of the brand of each respective Party and their associated
goodwill. In order to preserve such value, TIVO shall not use any DIRECTV
trademark, service name or logo (the "DIRECTV Trademarks") (including, without
limitation, "DIRECTV/(R)/" and "Total Choice/(TM)/"), without the prior written
approval of DIRECTV, and such usage by TIVO of the
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
DIRECTV Trademarks shall be in accordance with the DIRECTV Mark License
Agreement (together with the attached logo guidelines, which may be amended from
time to time) as set forth in Schedule 2.5(a). Any breach by TIVO of the DIRECTV
Mark License Agreement shall be deemed to be a material breach of this Marketing
Agreement. TIVO shall not use any logo, trademark, service mark or name of any
supplier of DIRECTV (including, without limitation, entities providing
programming to DIRECTV) in connection with the promotion of the TIVO Service
and/or the TIVO Products without the prior written approval of DIRECTV or a
separate agreement between TIVO and such supplier. Similarly, DIRECTV shall not
use any TIVO trademark, service name or logo (the "TIVO Trademarks") without the
prior written approval of TIVO, and such usage by DIRECTV of the TIVO Trademarks
shall be in accordance with the TIVO Mark License Agreement as set forth in
Schedule 2.5(b). Any breach by DIRECTV of the TIVO Mark License Agreement shall
be deemed to be a material breach of this Marketing Agreement. Neither Party
shall adopt, use, register, or seek to register any trade name, trademark or
service mark anywhere in the world which is identical to, or confusingly similar
to, any trademark or logo of the other Party, the use of which is governed by
this Marketing Agreement, the TIVO Mark License Agreement and the DIRECTV Mark
License Agreement. Upon termination or expiration of this Marketing Agreement,
neither party may use the trademarks of the other party and any rights to such
trademarks shall cease and otherwise terminate; provided, however, that each
party may continue to use such trademarks in connection with the reduction of
inventory existing as of the date of termination. Upon termination or expiration
of this Marketing Agreement, each Party shall cooperate in transitioning their
marketing efforts.
2.6 Quarterly Operational Review. DIRECTV and TIVO shall meet once
each quarter to review and agree on reasonable measures to attempt to reduce the
cost and/or increase the effectiveness of customer service, customer billing,
technical assistance and other services related to the support, activation or
fulfillment of orders for the TIVO Service and/or the TIVO Products by DIRECTV
Subscribers that also subscribe to the TIVO Service. As frequently as reasonably
practicable, TIVO shall provide to DIRECTV summaries of data which TIVO collects
or receives regarding the effectiveness of DIRECTV's marketing and sales support
provided pursuant to Section 2.1 (including without limitation data regarding
the volume of calls made in response to TIVO Marketing Materials and the rates
at which persons making such calls purchased TIVO Products and/or subscribed to
the TIVO Service).
2.7 Option to Extend the Marketing Period. [*] shall have the
option to extend the Marketing Period for [*] periods, during which periods [*]
would be obligated to [*]. [*] may exercise its option for the [*] period by
providing written notice to [*] at least [*] prior to the expiration of the
initial Marketing Period. [*] may exercise its option for the [*] period by
providing written notice to [*] at least [*] prior to the expiration of the [*]
extended period.
2.8 Minimum TIVO Service/Product Obligations. DIRECTV's obligation to
provide the marketing and sales support specified in this Section 2 is
conditioned upon TIVO continuing to provide the following minimum services to
TIVO Subscribers and DIRECTV/TIVO Subscribers (the "Minimum TIVO Services"):
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
7.
<PAGE>
2.8.1 TIVO Service. The TIVO Service shall [*] at a monthly
subscription charge not greater than [*]. TIVO shall notify DIRECTV of all
material problems or interruptions in the TIVO Service as soon as practicable
but in no event later than [*] from the time TIVO discovers such problem or
interruption, and TIVO shall use commercially reasonable efforts cure any such
material problem or interruption within [*] of providing such notice to DIRECTV.
2.8.2 TIVO Products. A TIVO Stand-Alone Receiver which [*] at a
retail price (for at least one model) not greater than [*]. TIVO shall ensure
that each category and model of the TIVO Stand-Alone receiver and the
DIRECTV/TIVO Combo Receiver is designed so as to not diminish or degrade the
performance of the DIRECTV receiver or the quality of the DIRECTV video, audio
or data broadcast viewed by DIRECTV Subscribers, as determined by DIRECTV in its
reasonable discretion, and TIVO shall make commercially reasonable efforts to
ensure that such TIVO Products are manufactured in accordance with such design.
No category or model of the TIVO Stand-Alone Receiver or the DIRECTV/TIVO Combo
Receiver shall have been recalled for any reason (other than a reason related to
the provision of the DIRECTV Service using the DIRECTV/TIVO Combo Receiver or
the specific hardware in the DIRECTV/TIVO Combo Receiver used to provide the
DIRECTV Service) by an order of a judicial or consumer regulatory body, or a
federal, state or municipal government agency. TIVO shall notify DIRECTV of all
Recurring Customer Complaints or material defects concerning any TIVO Products
as soon as practicable but in no event later than [*] from the time TIVO
discovers such Recurring Customer Complaint or material defect. TIVO shall use
commercially reasonable efforts to cure all defects or problems related to a
Recurring Customer Complaint within [*] of providing such notice to DIRECTV.
2.8.3 Back Office Support. TIVO shall continue to provide, or
cause third parties authorized by TIVO to provide, product fulfillment, billing
services and customer service to TIVO Subscribers in a manner that is consistent
with the standards set forth in Sections 2.2, 2.3 and 2.4, respectively.
2.8.4 Suspension of DIRECTV's Marketing Obligations. DIRECTV
shall have the right to suspend any portion or all of its marketing obligations
under Section 2 during any period in which DIRECTV reasonably determines in good
faith that TIVO has failed to provide the Minimum TIVO Services; provided that
no act or omission on the part of DIRECTV, including any act authorized under
this Marketing Agreement, is the cause or result of TIVO's non-compliance with
this Section 2.8. DIRECTV also shall have the right to suspend any portion or
all of its marketing obligations under Section 2 upon the occurrence of an
Intellectual Property Event (as defined in Section 11.6). DIRECTV shall resume
its marketing obligations under Section 2 at such time as DIRECTV determines in
good faith that TIVO has resumed the Minimum TIVO Services or, if applicable and
if DIRECTV has not already terminated this Marketing Agreement pursuant to
Section 11.6, that TIVO has cured the Intellectual Property
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
Event or otherwise indemnified DIRECTV in accordance with Section 11.6; provided
that, if DIRECTV resumes its marketing obligations, the Marketing Period may be
extended, at DIRECTV's sole option, by the length of time during which TIVO
failed to provide the Minimum TIVO Services or, if applicable, such Intellectual
Property Event was pending.
2.8.5 Minimum DIRECTV Service. DIRECTV shall [*]; provided that
DIRECTV shall have no obligation to maintain any particular programming or
networks offered on the DIRECTV Service currently or in the future. DIRECTV
shall use commercially reasonable efforts to notify TIVO of all material
problems or interruptions in the DIRECTV Service as soon as practicable in
accordance with DIRECTV's standard operating procedures, and DIRECTV shall use
commercially reasonable efforts to cure any such material problem or
interruption in the DIRECTV Service within [*] of providing such notice to TIVO.
2.9 TIVO Customer Data. DIRECTV shall have the right to purchase from
TIVO any available data that TIVO makes available or offers to sell to any third
party which is related to or derived from DIRECTV/TIVO Subscribers at a cost not
to exceed [*]; provided that DIRECTV shall not sell or distribute any such
customer data to any third party other than for use solely by or on behalf of
DIRECTV to promote DIRECTV programming. In addition, TIVO shall provide access
to all such customer data to all persons or entities that provide programming to
DIRECTV [*].
3. BANDWIDTH ALLOCATION
Subject to the terms of this Marketing Agreement, beginning on a date
to be mutually agreed to by the Parties and in any event no later than [*] after
[*] (the "Bandwidth Commencement Date"), and continuing for as long as [*],
DIRECTV shall make available to TIVO at least [*] of bandwidth capacity (the
"Bandwidth Capacity") via a DIRECTV satellite (or any other high power Ku-band
satellite that provides the DIRECTV Service (as determined by DIRECTV in its
sole and absolute discretion)) in order to deliver enhanced personalized
television services to TIVO Subscribers. The Parties shall mutually determine
the specific transmission times and rates associated with such delivery. TIVO
shall be responsible for transmitting, at TIVO's expense, a high quality signal
to one or more DIRECTV broadcast centers designated by DIRECTV containing the
data and/or video/audio used to provide such enhanced services in a format
specified by DIRECTV. DIRECTV shall use its commercially reasonable efforts to
maintain, in accordance with its technical standards and procedures, a high
quality signal transmission from DIRECTV's broadcast centers to the end user.
Notwithstanding the foregoing, (i) DIRECTV shall have the right to preempt or
interrupt any transmission of TIVO data and/or video/audio that DIRECTV
determines, in its sole discretion, is necessary in order to protect DIRECTV's
business, (ii) DIRECTV shall have the right to suspend its obligation to provide
the Bandwidth Capacity at any time after [*] if there are fewer than [*]
DIRECTV/TIVO Subscribers using such Bandwidth Capacity, and (iii) DIRECTV also
shall have the right to suspend its obligation to provide the
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
9.
<PAGE>
Bandwidth Capacity upon the occurrence and during the continuation of an
Intellectual Property Event (as defined in Section 11.6). Without limiting the
foregoing, DIRECTV agrees to work with TIVO to experiment, prior to the
Bandwidth Commencement Date, with utilizing the Bandwidth Capacity to deliver
video and audio to TIVO Stand-Alone Receivers as soon as practicable following
the Launch Date.
4. PAYMENT AND RELATED TERMS
4.1 Revenue Sharing. In exchange for the marketing and advertising
obligations provided above, for a period of [*] beginning on [*] DIRECTV shall
receive a percentage of TIVO's Gross Revenue as follows:
4.1.1 Initial Revenue Share. Prior to the date that is [*], TIVO shall
pay DIRECTV [*] of TIVO's Gross Revenue (determined as of the last day of each
month, the "Calculation Date"), with a [*] per DIRECTV/TIVO Subscriber per month
minimum (the "Initial Revenue Share"). TIVO shall pay to DIRECTV the Initial
Revenue Share within thirty (30) days of the Calculation Date.
4.1.2 Permanent Revenue Share. Following the date that is [*], TIVO
shall pay DIRECTV, in lieu of the Initial Revenue Share described in Section 4.1
above, [*] of TIVO's Gross Revenue (determined as of the Calculation Date), with
a [*] per DIRECTV/TIVO Subscriber per month minimum (the "Permanent Revenue
Share"). TIVO shall pay DIRECTV the Permanent Revenue Share within thirty (30)
days of the Calculation Date.
4.1.3 Additional Revenue Share. Following the date that is [*] TIVO
also shall pay DIRECTV [*], with a [*] per subscriber per month minimum (the
"Additional Revenue Share"). The amount of the Additional Revenue Share shall be
calculated for each month in the same manner as the Final Revenue Share is
calculated pursuant to Section 4.1.6 below.
4.1.4 Promotional Revenue Share. In the event the Parties mutually
agree (with each Party determining in its sole discretion) that a promotional
discount on the TIVO Service or other promotional package combining the products
and services of the Parties is required or advisable to gain market share or to
ensure the market acceptance of the TIVO Stand-Alone Receiver and DIRECTV/TIVO
Combo Receiver, the minimum Initial Revenue Share, minimum Final Revenue Share
and minimum Additional Revenue Share shall be reduced by the same percentage
that the TIVO Service is discounted in connection with such promotions. Such
reductions to the minimum Initial Revenue Share, minimum Final Revenue Share and
minimum Additional Revenue Share shall only apply to and during the existence of
any promotional activity undertaken pursuant to this Section 4.1.5.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
10.
<PAGE>
4.1.5 TIVO's Gross Revenue. For purposes of this Section 4.1,
TIVO's Gross Revenue for any particular month shall be an amount equal to
[*]. For the avoidance of doubt, TIVO's Gross Revenue shall not include [*]. To
the extent that TIVO sells and receives advance payment of subscription fees for
the TIVO Service for a subscription period covering more than [*], the aggregate
amount of TIVO's Gross Revenue for any particular subscriber for any particular
month shall be reduced by an amount equal to [*]. Tivo Gross Revenue for any
particular month also shall be [*] during such month to customers and third
parties in connection with the foregoing.
4.2 TIVO Promotional Activities. DIRECTV and TIVO agree to work
together in good faith to jointly explore and, if appropriate, implement
programs beyond those set forth in this Marketing Agreement to generate
additional revenue from DIRECTV Subscribers who also subscribe to TIVO, along
with the terms by which TIVO would be compensated under such programs; provided
that each Party shall decide in its sole discretion whether to take any actions
in addition to those expressly set forth in this Marketing Agreement.
4.3 Calculation of DIRECTV/TIVO Subscribers. TIVO and DIRECTV
shall cooperate and provide to a third party designated by DIRECTV all customer
activation and billing information and other information contained in their
respective customer and billing databases which is necessary for such third
party to calculate the number of DIRECTV/TIVO Subscribers on each Calculation
Date and on such other dates as requested by the Parties. The cost of third
party's services under this Section 4.3 shall be shared equally by the Parties.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
11.
<PAGE>
4.4 Audit Rights. For the sole purpose of ensuring compliance with this
Section 4, DIRECTV shall have the right to direct an independent certified
public accounting firm subject to strict confidentiality restrictions to conduct
a reasonable and necessary copying and inspection of portions of the records of
TIVO. Any such audit may be conducted after DIRECTV provides [*] prior written
notice to TIVO and shall be conducted during normal business hours in a manner
designed to prevent disruption to TIVO's business and operations. TIVO shall
have the right, at its sole and absolute discretion, to require the execution of
standard, reasonable confidentiality or similar agreements in connection with
such audits. Such audits shall not be made more frequently than once every [*].
Any such audit shall be at DIRECTV's expense unless an audit discloses that TIVO
underpaid DIRECTV by at least five percent (5%) for the period of the audit, in
which case TIVO shall reimburse DIRECTV for the cost of the audit. TIVO shall
have the right, at its election and expense, to copy and inspect the final
report delivered to DIRECTV at the conclusion of such audit, which report shall
specify with reasonable detail the methodologies, basis calculations, time
periods and assumptions used in preparing such report. TIVO shall be responsible
for paying in full to DIRECTV any and all amounts determined to be underpaid by
TIVO within [*] of such determination. Similarly, DIRECTV shall be responsible
for paying in full to TIVO amounts determined to be overpaid by TIVO within [*]
of such determination; provided that DIRECTV may instead offset any such amounts
against amounts which DIRECTV reasonably anticipates that TIVO will owe to
DIRECTV within the next [*]. All payments made under this Marketing Agreement
shall be subject to final adjustment as determined by the Parties' review of
supporting documentation or audit of TIVO's records in accordance with this
Section 4.3. In the event of any dispute or disagreement regarding such
payments, either Party may refer the matter to Dispute Resolution or Arbitration
as set forth in Section 12.3.
5. EQUITY CONSIDERATION
The form of documents to be executed in connection with this Section 5.1
shall be mutually agreed to by the parties, and shall include any and all
documentation necessary to comply with state and federal securities laws.
5.1 Common Stock Grants.
5.1.1 Initial Shares. In consideration of the obligations to be
performed by DIRECTV under this Marketing Agreement, and, in particular, the
obligations to be performed under Section 2 of this Marketing Agreement, TIVO
hereby grants to DIRECTV 1,852,329 shares (the "Initial Shares") of Common
Stock, par value $.001 per share, of TIVO ("Common Stock"), which number of
shares is equal to eight percent (9.1 %) of the total number of outstanding
shares of Common Stock on a fully diluted basis assuming the conversion of all
options, warrants, convertible securities and shares reserved for future
issuance under any and all of TIVO's stock option or equity incentive plans, as
of the time immediately prior to the execution of this Marketing Agreement (the
"TIVO Diluted Shares"), but after giving effect to the issuance of the Initial
Shares.
5.1.2 Additional Shares. In consideration of DIRECTV's delivery of a
promissory note for $2,822,168.00 in the form set forth on Schedule 5.1.2, TIVO
hereby grants to DIRECTV 1,128,867 shares of Common Stock (the "Additional
Shares," and together with
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
12.
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the Initial Shares, the "Shares"), which number of shares is equal to five
percent (5.0%) of the TIVO Diluted Shares before giving effect to the issuance
of the Additional Shares.
5.2 Right of Repurchase.
5.2.1 At the end of [*] following the [*] ([*]the "Repurchase Trigger
Date"), TIVO shall have the right to repurchase from DIRECTV, at a price of
$0.001 per share (the "Repurchase Price"), the number of Additional Shares equal
to [*] (the "Right of Repurchase"). TIVO's Right of Repurchase may be exercised
by delivery of a written notice to DIRECTV which is received by DIRECTV on or
before the [*] following the Repurchase Trigger Date. If TIVO fails to deliver
such notice to DIRECTV, then TIVO shall have no further right to exercise such
Right of Repurchase. Notwithstanding the foregoing, TIVO shall not be entitled
to exercise its Right of Repurchase at any time that TIVO is in default in the
performance or observance of any material covenant, agreement or condition set
forth in this Marketing Agreement or if, prior to the date TIVO delivers to
DIRECTV written notice of TIVO's exercise of the Right of Repurchase, DIRECTV
terminates the Marketing Agreement pursuant to Section 11.
5.2.2 If, prior to TIVO's exercise of its Right of Repurchase, there
is any change affecting TIVO's outstanding Common Stock as a class that is
effected without the receipt of consideration by TIVO (through merger,
consolidation, reorganization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating, dividend, combination of
shares, change in corporation structure or other transaction not involving the
receipt of consideration by TIVO), then any and all new, substituted or
additional securities or other property to which DIRECTV is entitled by reason
of DIRECTV's ownership of Additional Shares shall be immediately subject to the
Right of Repurchase and be included in the definition of "Additional Shares" for
all purposes of the Right of Repurchase with the same force and effect as the
shares of Additional Shares presently subject to the Right of Repurchase, but
only to the extent such Additional Shares are, at the time, covered by such
Right of Repurchase. While the total Repurchase Price shall remain the same
after each such event, the Repurchase Price per Additional Share upon exercise
of the Right of Repurchase shall be appropriately adjusted.
5.3 Legend. All certificates representing the Shares shall have endorsed
thereon legends in substantially the following forms (in addition to any other
legend which may be required by other agreements between the parties hereto):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
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OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS
ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE COMPANY."
All certificates representing the Additional Shares also shall have
endorsed thereon a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF REPURCHASE SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN
INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES
SUBJECT TO SUCH RIGHT OF REPURCHASE IS VOID WITHOUT THE PRIOR
EXPRESS WRITTEN CONSENT OF THE COMPANY."
5.4 DIRECTV Investment Representations. In connection with the grant of
the Shares under this Section 5, DIRECTV makes the investment representations
set forth on Schedule 5.4.
5.5 Anti-Dilution Protection. TIVO shall afford to all holders of the
Shares the "anti-dilution" protections set forth on Schedule 5.5.
6. COMBO RECEIVER
The Parties agree to cooperate and work with Philips Business Electronics
B.V. ("Philips") (or such other manufacturer(s) that the Parties mutually agree
upon) to develop a combination DIRECTV/TIVO receiver (the "DIRECTV/TIVO Combo
Receiver") capable of receiving both the DIRECTV Service and the TIVO Service in
a single set-top box. The Parties shall work together in good faith to mutually
(i) negotiate any agreements necessary to define the rights of DIRECTV, TIVO and
third party manufacturers with respect to the DIRECTV/TIVO Combo Receiver and
(ii) define the features and functionality of the DIRECTV/TIVO Combo Receiver;
provided, however, the DIRECTV/TIVO Combo Receiver shall satisfy the minimum
criteria set forth on Schedule 6 (which will be superseded by final technical
specifications agreed to by the parties). TIVO acknowledges that it shall not be
permitted to make any changes to the DIRECTV/TIVO Combo Receiver (through
software upgrades or otherwise) after the DIRECTV/TIVO Combo Receiver is
commercially introduced without the prior written consent of DIRECTV. The
Parties shall mutually agree upon the date on which to launch the DIRECTV/TIVO
Combo Receiver, which the Parties tentatively expect will be commercially
available [*]. Any DIRECTV promotional activity or advertising relating
specifically and solely to the DIRECTV/TIVO Combo Receiver shall also promote
the TIVO Service. Likewise, any TIVO promotional activity or advertising
relating specifically and solely to the DIRECTV/TIVO Combo Receiver shall also
promote the DIRECTV Service. The
* Material has been omitted pursuant to a request for confidential treatment.
Such matirla has been filed separately with the Securities and Exchange
Commission.
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relative prominence of each Party's brand, products or services shall be
mutually determined in good faith between the Parties prior to any such
promotional activity or advertising.
7. CONTENT PROTECTION MEASURES
Both TIVO and DIRECTV acknowledge that content protection within the
broadcast television and motion picture entertainment community is a high
priority. Accordingly, TIVO shall include in all TIVO Products any content
protection measures, including copyright protection technology (e.g.,
Macrovision), which major television and motion picture studios request to be
included in new digital television devices as determined by DIRECTV in its
reasonable discretion.
8. CONFIDENTIALITY
8.1 Confidentiality. Each of the Parties agrees that, except as otherwise
provided for in this Marketing Agreement, such Party and its employees will
maintain in confidence the terms and provisions of this Marketing Agreement, as
well as all of the information provided to it by the other Party which the
receiving Party knows or reasonably should know is confidential information of
the other Party (including all of the written data, summaries, reports, other
proprietary information, trade secrets and information of all kinds, acquired,
devised or developed in any manner from the other Party's personnel or files or
pursuant to this Marketing Agreement) (the "Confidential Information"), and such
Party will not use the Confidential Information of the other Party, except as
required for performance of this Marketing Agreement and will not reveal the
same to any persons not employed by the other Party except: (i) (a) at the
written direction of the other Party; (b) to the extent necessary to comply with
the law or the valid order of a court of competent jurisdiction or in connection
with any arbitration proceeding, in which event the disclosing Party shall so
notify the other Party as promptly as practicable (and, if possible, prior to
making any disclosure) and shall seek confidential treatment of such
information; (c) as part of its normal reporting or review procedure to any of
its Affiliated Companies, its auditors and its attorneys, if such Affiliated
Companies, auditors and attorneys agree to be bound by the provisions of this
Section 7.1; (d) in order to enforce any of its rights pursuant to this
Marketing Agreement; and (e) to potential investors, insurers and financing
entities, if any such person agrees to be bound by the provisions of this
Section 7.1; or (ii) (a) if, prior to the time of disclosure to the recipient,
the Confidential Information is in the public domain, or is otherwise validly
known to the recipient, as evidenced by written record or (b) if, after
disclosure to the recipient the Confidential Information becomes part of the
public domain by written publication through no fault of the recipient. The
Parties further agree to maintain any oral information which would be
Confidential Information if reduced to writing as confidential in accordance
with standard industry practice (subject to the foregoing exceptions for
Confidential Information). Each Party agrees to use the same degree of care to
protect the other Party's Confidential Information as it uses with its own
proprietary Information, but in no event with less than reasonable care.
Immediately upon the written request of the Party providing the other Party with
Confidential Information (which request the providing Party may make, as a
specific or general request, in its sole discretion at any time up to one year
after the termination or expiration of this Marketing Agreement), the receiving
Party shall provide to the providing Party (or destroy if the providing Party so
requests) all requested Confidential Information provided by the providing
Party. Notwithstanding the foregoing, (i) DIRECTV shall not be
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required to provide to TIVO or destroy any records or information pertaining to
DIRECTV Subscribers or which is needed to provide customer service and technical
assistance to DIRECTV Subscribers that receive the DIRECTV Service via a
DIRECTV/TIVO Combo Receiver and (ii) TIVO shall not be required to return or
destroy any records or information needed to bill then-current DIRECTV/TIVO
Subscribers.
8.2 Press Release. During the term of this Marketing Agreement, neither
Party shall issue an independent press release with respect to this Marketing
Agreement or the transactions contemplated hereby without the prior consent of
the other Party.
9. ADDITIONAL REPRESENTATION AND WARRANTIES
9.1 Power and Authority; No Breach. Each of the Parties represents and
warrants that all corporate action on the part of its officers, directors and
shareholders necessary for the authorization of this Marketing Agreement has
been completed and that each Party has full power and authority to enter into
this Marketing Agreement and perform its obligations hereunder and that its
execution of this Marketing Agreement and performance of its obligations
hereunder does not and will not violate any law or result in a breach of or
default under the terms of any contract or agreement by which such Party is
bound. The enforcement and enjoyment by either Party of its rights and benefits
hereunder do not and will not violate, and are not and will not be subject to
restraint or curtailment under, the terms of any contract or agreement by which
the other Party is bound.
9.2 Compliance with Law. Each Party is in compliance with all applicable
governmental statutes, laws, rules, regulations, ordinances, codes, directives,
and orders (whether federal, state municipal or otherwise) and is solely
responsible for the compliance with all such laws (including, without
limitation, consumer disclosure and privacy laws) arising out of or relating to
its obligations under this Marketing Agreement.
9.3 TIVO Intellectual Property Rights. TIVO represents and warrants that,
to the best of its knowledge, the TIVO Service and the TIVO Stand-Alone Receiver
(and any underlying technology related thereto) do not infringe any [*] patent,
copyright, trade secret or other proprietary right of any third party or
otherwise conflict with the rights of any third party. TIVO represents and
warrants that, to the best of its knowledge, it has or will have obtained all
necessary licenses for the TIVO Service and for patents covering the
manufacture, sale and use of the TIVO Stand-Alone Receiver related to the TIVO
Service (including without limitation for any electronic program guide and
related display, navigation, filtering, selection and recording applications
utilized in connection with providing the TIVO Service).
9.4 Additional TIVO Representations and Warranties. Except as set forth
in schedules to the Stock Purchase Agreement, TIVO represents and warrants to
DIRECTV that all of the representations and warranties made by TIVO in Section 3
of the Stock Purchase Agreement are true and correct as of the date of this
Marketing Agreement as if made on such date and, as to representations and
warranties regarding the transactions contemplated under the Stock Purchase
Agreement or the shares of Series F Preferred Stock issuable thereunder, as if
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Secutities and Exchange
Commission.
16.
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made with respect to the transactions contemplated under this Marketing
Agreement and the Shares issuable pursuant to Section 5 hereof, respectively.
10. INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 Indemnification. Each Party (the "Indemnifying Party") shall
indemnify and hold the other Party and its Affiliated Companies and their
respective employees, officers, agents, attorneys, stockholders and directors,
and their respective successors, licensees and assigns (the "Indemnified
Party(ies)") harmless from and against (and shall pay as incurred) any and all
third party claims, proceedings, actions, damages, costs, settlements, expenses
and other liabilities and losses (whether under a theory of strict liability, or
otherwise) of any kind or nature incurred by or threatened, imposed or filed
against, any Indemnified Party (including, without limitation, (a) reasonable
costs of defense, which shall include, without limitation, court costs and
reasonable attorney and other reasonable expert and reasonable third party fees
and (b) to the extent permitted by law, any fines, penalties and forfeitures in
connection with any proceedings against an Indemnified Party) caused by any
breach (or, with respect to third party claims only, alleged breach) by the
Indemnifying Party of any representation, warranty or agreement hereunder.
Without limiting the generality of the foregoing, TIVO shall indemnify, defend
and hold harmless DIRECTV and its Affiliated Companies from and against any and
all damages, costs, expenses, liabilities and losses which arise out of or are a
result of any claim, demand, action, suit or proceeding in which it is alleged
that the TIVO Service and/or the TIVO Products (excluding the components of the
DIRECTV/TIVO Combo Receiver which relate specifically and solely to the DIRECTV
Service and any DIRECTV technology incorporated into the DIRECTV/TIVO Combo
Receiver), or the TIVO Promotional Materials or other marketing materials
provided by TIVO to DIRECTV (excluding changes to such TIVO Promotional
Materials required by DIRECTV), or any part thereof, violates or infringes any
patent, copyright, trademark or other proprietary right of any third party or
constitutes a misappropriation of any third party's trade secrets.
10.2 Notification and Control. If any claim for indemnification arises
under Section 10.1, the Indemnified Party shall notify the Indemnifying Party
(the "Indemnity Notification"); provided that the failure to so notify the
Indemnifying Party will not release the Indemnifying Party from its obligation
to indemnify the Indemnified Party unless the Indemnifying Party is materially
prejudiced by the failure to receive such notice. The Indemnifying Party shall
assume the defense of any such claim, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses of such counsel, and shall consult with and keep the Indemnified Party
reasonably informed with respect to the defense, compromise, settlement,
resolution or other disposition of any such claim. The Indemnified Party shall
have the right to employ separate counsel in the defense of any such claim 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) representation of the Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between such Indemnified Party and any other
Party represented by such counsel to such proceeding (in which case the
Indemnifying Party shall not have the right to assume the defense of such action
17.
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on behalf of the Indemnified Party). The Indemnifying Party shall promptly
inform the Indemnified Party of all material aspects of such defense,
compromise, any proposed settlement, resolution or other disposition of any such
claim. Neither Party shall admit any liability with respect to, or settle,
compromise, resolve or discharge any such claim without the other Party's prior
written consent, which consent shall not be unreasonably withheld in the case of
any settlement, resolution, compromise or discharge involving only the payment
of money.
10.3 Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS MARKETING AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY OR ANY THIRD
PARTY, WHETHER FORESEEABLE OR NOT AND REGARDLESS OF THE FORM, LEGAL, THEORY OR
BASIS OF RECOVERY OF ANY SUCH CLAIM. IN NO EVENT SHALL ANY PROJECTIONS OR
FORECASTS BY EITHER PARTY BE BINDING AS COMMITMENTS OR, IN ANY WAY, PROMISES BY
SUCH PARTY, AND ANY FAILURE BY EITHER PARTY TO ACHIEVE ANY MINIMUM NUMBER OF
SUBSCRIBERS SHALL NOT CONSTITUTE A BREACH OR OTHER CAUSE OF ACTION OR ENTITLE
THE OTHER PARTY TO REMEDIES EXCEPT AS EXPRESSLY PROVIDED IN THIS MARKETING
AGREEMENT.
11. TERMINATION
11.1 Initial Term. The initial term of this Marketing Agreement (the
"Initial Term") shall be seven (7) years from the Launch Date.
11.2 Termination for Material Default. Either Party may terminate this
Marketing Agreement immediately in the event that the other Party materially
defaults in the performance or observance of any material covenant, agreement or
condition set forth in this Marketing Agreement, which default remains uncured
for a period of [*] from the date that the notifying Party provides notice to
the defaulting Party.
11.3 Termination for Insolvency. Either Party may terminate this Marketing
Agreement effective immediately upon giving notice to the other Party, (i) upon
the institution by or against the other Party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of its debts
and such proceeding is not dismissed within [*] of its being filed; (ii) upon
the other Party making an assignment for the benefit of creditors; or (iii) upon
the other Party's dissolution or liquidation.
11.4 Termination for Launch Date Delay. DIRECTV shall have the right to
terminate this Marketing Agreement if the Launch Date does not occur before
[*]. DIRECTV's right to terminate this Marketing Agreement pursuant to this
Section 11.4 shall be exercisable by delivery of written notice to TIVO which is
received by TIVO on or before [*]. If DIRECTV fails to timely deliver such
notice to TIVO, then DIRECTV shall have no further right to terminate this
Marketing Agreement pursuant to this Section 11.4.
11.5 Termination for Insufficient DIRECTV/TIVO Subscribers. DIRECTV shall
have the right to terminate this Marketing Agreement on or after [*], if, on
such date, there are fewer than [*] DIRECTV/TIVO Subscribers.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
18.
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DIRECTV's right to terminate this Marketing Agreement pursuant to this Section
11.5 shall be exercisable by delivery of written notice to TIVO which is
received by TIVO on or before [*] following the third anniversary of the Launch
Date. If DIRECTV fails to timely deliver such notice to TIVO, then DIRECTV shall
have no further right to terminate this Marketing Agreement pursuant to this
Section 11.5.
11.6 Termination for an Intellectual Property Event. If (i) any legal
action alleging patent, copyright or other proprietary rights infringement is
commenced against TIVO or DIRECTV or any of their respective Affiliated
Companies with respect to any intellectual property rights utilized by TIVO in
connection with providing the TIVO Service, the TIVO Products or any hardware or
software related thereto, including, without limitation, intellectual property
rights related to the content of TIVO Marketing Materials provided to DIRECTV
pursuant to Section 2 of this Marketing Agreement (an "Intellectual Property
Event"), and (ii) TIVO does not indemnify DIRECTV for all damages which may
arise from such legal action in amounts and upon terms and conditions acceptable
to DIRECTV in its sole discretion within [*] of DIRECTV's written request
therefor, then DIRECTV shall have the right to terminate this Marketing
Agreement upon written notice to TIVO effective as of the date set forth in such
notice.
11.7 Effect of Termination. Termination of this Marketing Agreement shall
not affect (i) any orders for the TIVO Products, the TIVO Service and/or the
DIRECTV Service placed by any DIRECTV/TIVO Subscribers, (ii) any third party, or
(iii) any license granted to TIVO or DIRECTV, except that the Bandwidth Capacity
shall no longer be provided by DIRECTV. Termination shall not prejudice the
rights or liabilities of the Parties with respect to the TIVO Products, the
DIRECTV/TIVO Combo Receiver, the TIVO Service and the DIRECTV Service previously
sold, or any indebtedness then owing by any Party to the other Party. Any
termination of this Marketing Agreement by TIVO or DIRECTV as specifically
provided for under the terms of this Marketing Agreement shall be without any
charge, obligation, or liability whatsoever to TIVO or DIRECTV, as the case may
be, except as otherwise expressly provided in this Marketing Agreement.
Notwithstanding the foregoing, unless TIVO terminates this Marketing Agreement
pursuant to Section 11.2, no termination of this Marketing Agreement shall
eliminate or reduce the obligation of TIVO to pay the full amount of the Revenue
Share Payments for DIRECTV/TIVO Subscribers acquired before the date of
termination which are otherwise payable to DIRECTV when due under Section 4.
12. MISCELLANEOUS PROVISIONS
12.1 Rights of Transfer. Neither Party shall transfer any of its rights
or obligations under this Marketing Agreement (including by means of an
assignment or transfer of substantially all of its assets to, or consolidation
or merger with, another entity, whether or not the transferring Party is the
surviving entity), except that DIRECTV shall have the right to transfer its
rights or obligations under this Marketing Agreement to any Affiliated Company,
(i) in connection with or to facilitate an initial public offering of its common
stock or (ii) in connection with any consolidation, merger or sale of assets
involving the transfer of substantially all the assets or stock of DIRECTV;
provided that the entity surviving such transaction assumes all of these
obligations hereunder. Subject to the foregoing, this Marketing Agreement shall
be binding on and shall inure to the benefit of the permitted successors and
assigns of the Parties.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
19.
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12.2 Taxes. Any taxes (including, without limitation, any property,
employee, service, franchise, customs, import/export duties, excise and any
other related taxes) asserted against TIVO or DIRECTV by any local, state,
national or international entity, as a result of or arising under the
performance of its obligations under this Marketing Agreement shall be the
responsibility of the Party against which such taxes are asserted. Each Party
shall be responsible for any taxes related to its income hereunder.
12.3 Dispute Resolution/Arbitration.
12.3.1 Disputes. Any dispute or disagreement arising between DIRECTV
and TIVO 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 [*], 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 [*], 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
[*] from the date of his or her appointment, and shall appoint a time and place
for a final hearing not more than [*] from the date of the status conference.
The final hearing shall, if at all possible as determined by such arbitrator,
conclude no later than [*] after its commencement. The Parties shall also
specifically have the right to seek injunctive relief as part of any
arbitration.
12.3.2 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.
12.3.3 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.
12.3.4 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 TIVO.
12.3.5 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.
12.4 Independent Contractor, No Agents, Relationship, No-Third Party
Beneficiaries. Each Party is an independent contractor in performing the
services described in this Marketing Agreement Except as otherwise expressly
provided in this Marketing Agreement, no Party (nor any of its officers,
directors, agents or employees) shall act or hold itself out as an
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
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agent of the other Party hereto. The Parties do not intend this Marketing
Agreement or the relationship hereunder to constitute a joint venture or
partnership. The provisions of this Marketing Agreement are for the benefit only
of the Parties hereto, and no third party may seek to enforce, or benefit from,
these provisions.
12.5 Applicable Law, Entire Agreement, Modification. This Marketing
Agreement shall be construed in accordance with and be governed by the laws of
the State of California, without regard to otherwise applicable conflict of law
principles, except that issues relating to the arbitrability of claims under
Section 12.3 shall be governed by the Federal Arbitration Act, not California
law. This Marketing Agreement (together with all Schedules hereto) constitutes
the entire agreement between the parties and supersedes all previous
understandings, commitments or representations concerning the subject matter.
Each Party acknowledges that the other Party has not made any representations on
which it intends to rely upon in entering into this Marketing Agreement other
than those representations that are contained herein. This Marketing Agreement
may not be amended or modified, and none of its provisions may be waived, except
by a writing signed by an authorized officer of the Party against whom the
amendment, modification or waiver is sought to be enforced.
12.6 Notices. All notices and other communications from either Party to
the other hereunder shall be in writing and shall be deemed received upon actual
receipt when personally delivered, upon acknowledgment of receipt if sent by
facsimile, or upon the expiration of the third business day after being
deposited in the United States mails, postage prepaid, certified or registered
mail, addressed to the other Party at a location specified in writing by such
Party. Until notice in accordance with this Section 12.6 is given to the
contrary, the addresses, phone numbers and facsimile number for purposes of
giving notice are as follows:
TIVO
TIVO Inc.
894 Ross Drive
Suite 100 Sunnyvale, CA 94089
Attn: Michael Ramsay
Fax: (408) 747-5096
cc: General Counsel
DIRECTV
DIRECTV, Inc.
2230 East Imperial Highway
El Segundo, CA 90245
Attn: Vice President, Advanced Products
Fax: (310) 964-4106
cc: Senior Vice President, Business Affairs and General Counsel
12.7 Severability. Nothing contained in this Marketing Agreement shall be
construed to require commission of any act contrary to law, and wherever there
is any conflict between any provision of this Marketing Agreement and any law,
such law shall prevail, provided, however,
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that in such event, the affected provisions of this Marketing Agreement shall be
modified to the minimum extent necessary to permit compliance with such law and
all other provisions shall continue in full force and effect.
12.8 Survival of Provisions. The rights and obligations pursuant to
Sections 8.1, 10, 11.7 and 12 of this Marketing Agreement shall survive any
expiration or termination of this Marketing Agreement. In addition, any
obligations which expressly or by their nature are to continue after
termination, cancellation or expiration of this Marketing Agreement shall
survive and remain in effect. All other rights and obligations of DIRECTV and
TIVO under this Marketing Agreement shall cease upon termination.
12.9 Force Majeure. The duties and obligations of the TIVO and DIRECTV
hereunder may be suspended upon the occurrence and continuation of any Event of
Force Majeure and for a reasonable start-up period thereafter. If an Event of
Force Majeure is in effect for [*], then, at any time after such 180th
consecutive day at which the Event of Force Majeure continues in effect, either
Party may terminate this Marketing Agreement effective upon written notice to
the other Party. An "Event of Force Majeure" shall mean any act, cause,
contingency or circumstance beyond the reasonable control of such Party (whether
or not reasonably foreseeable), including, without limitation, to the extent
beyond the reasonable control of such Party, any governmental action,
nationalization, expropriation, confiscation, seizure, allocation, embargo,
prohibition of import or export of goods or products, regulation, order or
restriction (whether foreign, federal or state), war (whether or not declared),
civil commotion, disobedience or unrest, insurrection, public strike, riot or
revolution, lack or shortage of, or inability to obtain, any labor, machinery,
materials, fuel, supplies or equipment from normal sources of supply, strike,
work stoppage or slowdown, lockout or other labor dispute, fire, flood, drought
or other natural calamity, weather, sun spots, or other electronic, electro-
magnetic, atmospheric or other condition affecting transmission, damage or
destruction to plant and/or equipment, satellite transmission failures, loss or
degradation of any satellite capacity (whether related to a satellite which
provides the DIRECTV Service or any other satellite in the DBS Distribution
System), commandeering of vessels or other carriers resulting from acts of God,
or any other accident, condition, cause, contingency or circumstances including
(without limitation, acts of God) within or without the United States. Neither
TIVO nor DIRECTV shall, in any manner whatsoever, be liable or otherwise
responsible for any delay or default in, or failure of, performance resulting
from or arising out of or in connection with any Event of Force Majeure and no
such delay, default in, or failure of, performance shall constitute a breach by
either Party hereunder; provided, however, to the extent that the Event of Force
Majeure materially affects DIRECTV's or TIVO's ability to meet any time bounded
commitments set forth in this Marketing Agreement, the dates in this Marketing
Agreement shall be extended by the number of days that such Party is precluded
from performing all of its material obligations set forth in this Marketing
Agreement due to the Event of Force Majeure.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
22.
<PAGE>
In Witness Whereof, the Parties have caused this Marketing Agreement to be
executed as of the date first above written.
TIVO Inc.
By: /s/ Michael Ramsay
---------------------------
Name: Michael Ramsay
-------------------------
Title: President, CEO
------------------------
DIRECTV, Inc.
By: /s/ Eddy W. Hartensten
-----------------------------
Name: Eddy W. Hartensten
---------------------------
Title: President
--------------------------
23.
<PAGE>
APPENDIX I
1. "AAA" shall have the meaning set forth in Section 12.3.1.
2. "Additional Revenue Share" shall have the meaning set forth in Section
4.1.3.
3. "Additional Shares" shall have the meaning set forth in Section 5.1.2.
4. "Affiliated Company(ies)" means 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.
5. "Applicable Percentage" shall have the meaning set forth in Section
5.1.2(a).
6. "Arbitration Rules" shall have the meaning set forth in Section 12.3.1.
7. "Bandwidth Capacity" shall have the meaning set forth in Section 3.
8. "Bandwidth Commencement Date" shall have the meaning set forth in Section
3.
9. "Calculation Date" shall have the meaning set forth in Section 4.1.1.
10. "Common Stock" shall have the meaning set forth in Section 5.1.1.
11. "Confidential Information" shall have the meaning set forth in Section 7.1.
12. "Cut-Off Date" shall have the meaning set forth in Section 2.1.5(e).
13. "DBS Distribution System" means the distribution system for video, audio,
data and other programming services whereby the programming satellite signal or
feed is received from the transmission source by a DIRECTV turnaround earth-
station facility which compresses the signal and then uplinks it at one of the
DIRECTV Frequencies on a DIRECTV Satellite for transmission to DIRECTV
Subscribers.
14. "DIRECTV" shall have the meaning, set forth in the initial paragraph.
15. "DIRECTV Frequencies" means the DBS operating frequencies associated with
the 101. West Longitude orbital location, for which an Affiliated Company of
DIRECTV is the FCC-authorized permittee.
16. "DIRECTV Sales Force" shall have the meaning set forth in Section 2.1.1(a).
17. "DIRECTV Satellite" means a DBS communications satellite located at or
about the 101. West Longitude orbital location.
18. "DIRECTV Service" means the video, audio, data or other programming
services distributed from time to time by DIRECTV via the DBS Distribution
System, as edited, selected,
1.
<PAGE>
packaged, scheduled and priced in DIRECTV's sole discretion. The DIRECTV Service
does not include the TIVO Service.
19. "DIRECTV Subscribers" means those residential customers authorized by
DIRECTV to receive the DIRECTV Service via the DBS Distribution System.
20. "DIRECTV Trademarks" shall have the meaning set forth in Section 2.5.
21. "DIRECTV/TIVO Combo Receiver" shall have the meaning set forth in Section
6.
22. "DIRECTV/TIVO Subscriber" means any person that (i) subscribes to both the
DIRECTV Service and the TIVO Service using a DIRECTV/TIVO Combo Receiver; or
(ii) (A) subscribes to both the DIRECTV Service and the TIVO Service using a
separate DIRECTV receiver and a TIVO Stand-Alone Receiver, and (B) such person
purchased a DIRECTV receiver prior to a TIVO Stand-Alone Receiver.
23. "Event of Force Majeure" shall have the meaning set forth in Section 12.9.
24. "Final Revenue Share" shall have the meaning set forth in Section 4.1.2.
25. "Indemnified Party(ies)" shall have the meaning set forth in Section 10.1.
26. "Indemnifying Party" shall have the meaning set forth in Section 10.1.
27. "Indemnity Notification" shall have the meaning set forth in Section 10.2.
28. "Initial Revenue Share" shall have the meaning set forth in Section 4.1.1.
29. "Initial Shares" shall have the meaning set forth in Section 5.1.1.
30. "Initial Term" shall have the meaning set forth in Section 11.1.
31. "Intellectual Property Event" shall have the meaning set forth in Section
11.6.
32. "Launch Date" means the first date on which: (i) the TIVO Service is
operational and commercially available within the United States at a monthly
subscription charge not greater than [*] to consumers purchasing the TIVO
Stand-Alone Receiver and/or the DIRECTV/TIVO Combo Receiver; (ii) the TIVO
Stand-Alone Receiver is (A) compatible (either directly or through an infrared
blaster) with at least [*] of DIRECTV's receivers currently in
use by DIRECTV Subscribers such that use of the TIVO Stand-Alone Receiver does
not diminish or degrade the performance of the DIRECTV Receiver or the quality
of the DIRECTV video, audio or data broadcast viewed by DIRECTV Subscribers or
otherwise to DIRECTV's reasonable satisfaction and (B) available for commercial
distribution to consumers via direct sales, wholesale and/or retail channels
within the United States to DIRECTV's reasonable satisfaction determined in good
faith, at a retail price (for at least one model) not greater than [*]; and
(iii) TIVO is capable of providing customer service, product fulfillment and
billing services to TIVO Subscribers to DIRECTV's reasonable satisfaction.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities Exchange Commission.
2.
<PAGE>
33. "Marketing Agreement" shall have the meaning set forth in the initial
paragraph.
34. "Marketing Period" shall have the meaning set forth in Section 2.1.
35. "Minimum TIVO Services" shall have the meaning set forth in Section 2.8.
36. "NRTC" means the National Rural Telecommunications Cooperative.
37. "Party(ies)" shall have the meaning in the initial paragraph.
38. "Philips" shall have the meaning set forth in Section 6.
39. "Recurring Customer Complaint" shall mean a problem or defect concerning a
TIVO Product reported to TIVO's customer service staff or any other employee of
TIVO by more than fifty (50) customers who own or frequently use a TIVO Product.
40. "Repurchase Price" shall have the meaning set forth in Section 5.2.1.
41. "Repurchase Trigger Date" shall have the meaning set forth in Section
5.2.1.
42. "Revenue Share Payments" shall mean payments of the Initial Revenue Share,
the Final Revenue Share and/or the Additional Revenue Share made in accordance
with Section 4.1.
43. "Right of Repurchase" shall have the meaning set forth in Section 5.1.2(a).
44. "Shares" shall have the meaning set forth in Section 5.1.2.
45. "Stock Purchase Agreement" shall have the meaning set forth in the
Recitals.
46. "Subscriber Bill Mailings" shall have the meaning set forth in Section
2.1.3(b).
47. "TIVO" shall have the meaning set forth in the initial paragraph.
48. "TIVO Diluted Shares" shall have the meaning set forth in Section 5.1.1.
49. "TIVO Infomercial" shall have the meaning set forth in Section 2.1.2.
50. "TIVO Marketing Materials" shall have the meaning set forth in Section
2.1.5.
51. "TIVO Products" shall mean any and all hardware or equipment used by
consumers to activate or receive the TIVO Services, including without limitation
the TIVO Stand-Alone Receiver and any TIVO technology incorporated in the
DIRECTV/TIVO Combo Receiver. TIVO Products may include hardware or equipment
manufactured, distributed and sold by third parties including Philips
Electronics B.V. and its Affiliated Companies.
52. "TIVO Promotional Materials" shall have the meaning set forth in Section
2.1.3.
53. "TIVO Service" means any and all of the personalized television services
offered by TIVO to consumers.
3.
<PAGE>
54. "TIVO Stand-Alone Receiver" shall mean a set-top box which allows consumers
to receive the TIVO Service, other than the DIRECTV/TIVO Combo Receiver.
55. "TIVO Subscribers" means those residential or commercial customers
authorized by TIVO to receive the TIVO Service.
56. "TIVO Television Advertising" shall have the meaning set forth in Section
2.1.2.
57. "TIVO Trademarks" shall have the meaning set forth in Section 2.5.
4.
<PAGE>
Schedule 2.1.2.
TIVO Television Advertising Specifications
DIRECTV agrees to provide TIVO with advertising spots (avails) and
infomercials on the programming networks and sports services broadcast via the
DIRECTV Service for the purpose of promoting and marketing the TIVO Service
capable of generating a minimum of [*] impressions during the Marketing Period.
As an example, [*] during the Marketing Period translates to approximately [*].
Such number of gross impressions also would include infomercials broadcast via
the DIRECTV Service.
TIVO Television Advertising Specifications - Avails
Based on the current scheduling capabilities of DIRECTV's tape-based
insertion system, all TIVO avails will be scheduled on a run-of-schedule (ROS)
basis, with no scheduling of specific marquee events on any of the networks. If
DIRECTV upgrades its insertion system to a video server-based architecture,
DIRECTV will make good faith efforts to insert avails with a level of accuracy
and specificity consistent with commercial broadcast practices.
At a minimum and subject to contractual obligations which may change from
time to time, DIRECTV agrees to insert TIVO avails on the networks listed below:
[*]
DIRECTV reserves the right to remove and/or substitute the advertising
time on certain cable networks to the extent DIRECTV's rights change with
respect to such ability to sell such advertising time, and DIRECTV cannot
guarantee time on any specific network(s) and/or event.
DIRECTV will make good faith efforts to provide TIVO with affidavits
certifying telecast and number of plays of TIVO avails. Reconciliation of the
schedule will occur on a monthly basis. DIRECTV will also make best efforts to
notify TIVO of a change in schedule of sports events. DIRECTV and TIVO shall
meet quarterly to provide feedback to one another
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
regarding TIVO avail placement and to coordinate, to the extent feasible,
upcoming TIVO avail scheduling with TIVO promotional activities; provide,
however, that all such placement and scheduling shall be determined by DIRECTV
in accordance with this Marketing Agreement.
TIVO Television Advertising Specifications - Infomercials
DIRECTV agrees to provide TIVO with infomercials spots (including the TIVO
infomercials) on the DIRECTV Service for the purpose of promoting and marketing
the TIVO Products and the TIVO Service during the Marketing Period. The
duration, timing and placement of such infomercials will be determined by
DIRECTV in its sole discretion. TIVO agrees to provide TIVO infomercials to
DIRECTV at any length necessary to make use of infomercials broadcast
opportunities offered by DIRECTV, which may change from time to time.
2.
<PAGE>
Schedule 2.1.4.
DIRECTV Website and Magazine Advertising Specifications
Website Advertising Specifications
At a minimum, DIRECTV will provide TIVO with a presence on DIRECTV's website as
described below. Any TIVO banner on DIRECTV's website shall be equal in size to
468 X 60 pixels. The size of such banner may change over the course of the
Marketing Period. Currently, directv.com receives [*] visits per
month, resulting in an average of [*] page views per month./1/
<TABLE>
<CAPTION>
Location in Content Frequency Avg. Visits per
directv.com month/1/
- -------------------- ---------------------- -------------------------- ------------------
<S> <C> <C> <C>
Home Page [*] [*] [*]
On-Line Programming [*] [*] [*]
Q&A Page [*] [*] [*]
DIRECTV System [*] [*] [*]
Products Page
</TABLE>
- --------------------------------
[*]
[*]
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed with the Securities and Exchange Commission.
1.
<PAGE>
On Magazine Advertising Specifications
Starting with the first published edition of On Magazine following the
Launch Date, DIRECTV will provide prominent placement of a full-page
(approximately 8" x 10.5"), four-color TIVO advertisement [*] of On Magazine.
Prominent locations in On include cover locations (back cover, inside back
cover, inside front cover) or within the first [*] of the magazine's inside
pages. DIRECTV will place the TIVO advertisement in a cover location in at least
[*] editions.
See Guide Advertising Specifications
Starting with the first published edition of the See Guide following the
Launch Date, DIRECTV will provide prominent placement of a full-page
(approximately 9" x 10.75"), four-color TIVO advertisement in [*] the See Guide.
Prominent locations in See include cover locations (back cover, inside back
cover, inside front cover) or within the first [*]of the guide's inside pages.
DIRECTV will place the TIVO advertisement in a cover location in at least [*]
editions.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
Schedule 2.1.5(e)
Cut-Off Dates for TIVO Marketing Materials
Materials Approved and Finalized Materials Needed
- --------------------------- -----------------------------------------
Avails [*]days prior to first air date
Infomercials [*]days prior to first air date
Bill Stuffer Content [*]days prior to insertion
On Magazine Advertisements [*]days prior to publication
See Guide Advertisements [*]days prior to publication
Website Content [*]days prior to insertion
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed with the Securities and Exchange Commission.
1.
<PAGE>
Schedule 2.2
Fulfillment Specifications
for the TIVO Service and the TIVO Products
TIVO shall take orders for TIVO Service and/or the TIVO Products:
(i) over the telephone via a toll-free number (with such telephone
number staffed from at least [*] in all applicable
time zones);
(ii) via fax (from either a customer directly or a third party); and
(iii) via electronic data interface.
TIVO shall accept payments for the TIVO Service and/or the TIVO via check,
money order and credit cards (Visa, Mastercard and American Express).
TIVO, or a third party authorized by TIVO, shall drop ship the applicable
TIVO Product within [*] of receipt of the order. The shipping carrier utilized
shall provide shipment of the TIVO Products in [*] days. TIVO may charge a
shipping and handling fee that is no greater than [*] % of TIVO's actual
shipping costs charged by the shipping carrier.
TIVO shall utilize an order management system in which customer orders and
records (for the TIVO Service and/or the TIVO Products) shall be established and
maintained. Such order management system shall support all customers
transactions and inquiries regarding the TIVO Service and/or the TIVO Products.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
Schedule 2.4
Customer Service Standards
<TABLE>
<CAPTION>
Metrics: Standards
- --------------------------------------------- -----------------------
<S> <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 meets or exceeds [*]
% of calls where EC is polite and respectful [*]
% of calls that have one call resolution [*]
Legal compliance [*]
Call monitoring per EC per month [*]
Systems:
Telemarketing - available [*]
Telecom - available [*]
Networks - available [*]
</TABLE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
Schedule 2.5(a)
DIRECTV Mark License Agreement
This DIRECTV MARKS LICENSE AGREEMENT (the "License") is made effective as
of the ______ day of April 1999 (the "Execution Date"), by and between DIRECTV,
Inc., a California corporation ("DIRECT "), and TIVO Inc., a Delaware
corporation ("Licensee").
WHEREAS, Licensee and DIRECTV are entering into concurrently herewith a
Marketing Agreement (the "Marketing Agreement");
WHEREAS, DIRECTV desires to grant Licensee certain limited rights to
utilize certain trademarks (the "Marks" as hereinafter defined);
WHEREAS, DIRECTV and Licensee have agreed to establish a strategic business
relationship whereby DIRECTV will provide marketing access to its United States
subscribers and offer promotional support for Licensee's personalized television
programming services (collectively, the "TIVO Service") and the products related
thereto pursuant to the Marketing Agreement. In addition, DIRECTV and Licensee
shall work to develop a set top box that is capable of receiving the TIVO
Service and the DIRECTV Service (as defined below) without the need of a cable,
wire or other interconnect (the "DIRECTV/TIVO Combo Receiver");
WHEREAS, TIVO desires to use the Marks in accordance with the terms set
forth in this License (the "Licensed Use") as hereinafter defined; and
WHEREAS, the parties desire to establish a relationship and set forth in
writing the terms and conditions for Licensee's use of the Marks.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
In consideration of the mutual covenants contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
As used in this License with initial capital letters, the following words
and phrases shall have the definitions set forth below.
1.1 Affiliate. "Affiliate" shall mean, when referring to two (2)
companies, that there is a direct or indirect commonality of ownership between
the two (2) companies of at least fifty percent (50%).
1.2 DIRECTV/TIVO Materials. "DIRECTV/TIVO Materials" shall mean any and
all materials (including, but not limited to, advertising and point-of-sale
marketing materials), whether printed, audio or visual (including video), or any
combination thereof, used to (i)
1.
<PAGE>
promote the DIRECTV/TIVO Combo Receiver and the features related thereto and/or
(ii) accurately state, describe or explain that the TIVO Service, through the
use of the TIVO Stand-Alone Receiver, is compatible with the DIRECTV Service
and/or the DIRECTV System Product.
1.3 DIRECTV Service. "DIRECTV Service" shall mean the video, audio, data
or other programming services distributed from time to time by DIRECTV via the
DBS Distribution System (as defined in the Marketing Agreement), as edited,
selected, packaged, scheduled and priced in DIRECTV's sole discretion.
1.4 DIRECTV System Product. "DIRECTV System Product" shall mean the set-
top subscriber equipment necessary to receive the DIRECTV Services for viewing
on a television monitor.
1.5 Licensed Use. "Licensed Use" shall mean use of the Marks to produce
and distribute the DIRECTV/TIVO Materials.
1.6 Marks. "Marks" shall mean the trademarks and/or logos described and
depicted in Exhibit A hereto, as amended by DIRECTV from time to time, of which
Licensee is entitled to make a Licensed Use pursuant to the terms of this
License.
1.7 Term. "Term" shall mean the period of this License as set forth in
Section 2.6.
1.8 Territory. "Territory" shall mean the [*]
1.9 TIVO Stand-Alone Receiver. "TIVO Stand-Alone Receiver" shall mean a
set top box which allows consumers to receive the TIVO Service, other than the
DlRECTV/TIVO Combo Receiver.
2. LICENSE
2.1 Grant. Subject to the full performance by Licensee of all of its
obligations under this License and the Marketing Agreement, DIRECTV hereby
grants to Licensee, and Licensee hereby accepts, a [*] license to make Licensed
Use of the Marks during the Term in the Territory.
2.2 Right to Authorize Others. Licensee shall have the full and complete
right and authority to authorize one or more Affiliates by agreement to make
Licensed Use of the Marks; provided, however, that such agreement is in a form
reasonably acceptable to DIRECTV. In the event that Licensee authorizes an
Affiliate to make Licensed Use of the Marks, Licensee shall be fully responsible
under this License for such person's activities or inactivities to the same
extent as though done or omitted by Licensee. Notwithstanding any such
authorization, DIRECTV shall look solely to Licensee to perform all obligations
undertaken by Licensee.
2.3 Restrictions. In each instance where the Marks are used, Licensee
shall conform its use as set forth in the DIRECTV Logo Guidelines attached
hereto as Exhibit B. Nothing contained in the DIRECTV Logo Guidelines shall be
interpreted to expand Licensee's rights to use any trademarks or logos other
than those set forth in Exhibit A. Licensee shall conduct all
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
activities hereunder so as to not knowingly violate any applicable laws in the
Territory or other relevant geographic area, and shall cause each person
authorized by Licensee, or acting by authority given another by or through
Licensee, to make Licensed Use of the Marks strictly and solely in accordance
with the terms of this License.
2.4 Reserved Right. All rights in and to the Marks not expressly granted
in this License to Licensee are reserved to DIRECTV. Licensee acknowledges and
agrees that DIRECTV reserves the right to use or authorize or license another to
use the Marks. DIRECTV shall have and retains the sole and exclusive right to
utilize itself or license parties to utilize the Marks in any manner not
inconsistent with the terms of this License.
2.5 Conditions. The license granted hereunder is expressly conditioned
upon Licensee's full and complete compliance with the applicable provisions of
the trademark laws of the United States and all other applicable laws which
affect the Licensed Use.
2.6 Duration of License. The Term of this License shall begin as of the
Execution Date and shall continue concurrently with the term of the Marketing
Agreement, unless earlier terminated. This License will automatically terminate
upon the termination of, for any reason, the Marketing Agreement.
2.7 Seconds. Licensee shall not offer for sale, sell, ship, advertise,
promote, market, distribute or use for any purpose whatsoever any DIRECTV/TIVO
Materials bearing the Marks which fails to meet any requirement of this License
or the Marketing Agreement. Further, Licensee shall not permit any third party
authorized by Licensee to make Licensed Use of the Marks to offer for sale,
sell, ship, advertise, promote, market, distribute or use for any purpose
whatsoever any DIRECTV/TIVO Materials bearing the Marks which fails to meet any
requirement of this License or the Marketing Agreement.
3. REVIEW OF DIRECTV/TIVO MATERIALS
Licensee shall provide to DIRECTV a representative sample of its
DIRECTV/TIVO Materials for DIRECTV's review and written approval prior to the
initial printing or publishing of such DIRECTV/TIVO Materials. DIRECTV shall
provide its approval or rejection of such DIRECTV/TIVO Materials within 10
business days. After Licensee has provided DIRECTV with such a representative
sample and obtained DIRECTV's written approval of such DIRECTV/TIVO Materials,
Licensee shall only be obligated to provide additional samples of such
DIRECTV/TIVO Materials in the event such DIRECTV/TIVO Materials substantially
differs from DIRECTV/TIVO Materials previously provided to DIRECTV or upon the
request of DIRECTV.
4. OWNERSHIP OF PROPRIETARY RIGHTS AND GOODWILL
4.1 Ownership. Licensee acknowledges that each Mark is a valuable asset
of DIRECTV. Licensee will at no time acquire or assert any claim of ownership
of, or any claim to, any goodwill or reputation associated with the Marks, or in
any derivation, adaptation or variation of any Mark. All use of each Mark by
Licensee shall inure to the benefit of DIRECTV. Licensee agrees that during the
Term and thereafter it will not attack the title or any rights of DIRECTV in and
to any Mark or the validity of this License.
3.
<PAGE>
4.2 Use by Licensee. Licensee agrees that in using any Mark, it will not
in any way represent that it has any right, title or interest in the Marks other
than those expressly granted under this License. Licensee further agrees that it
will not use or authorize the use, either during or after the Term, of any
configuration, trademark, trade name or other designation confusingly similar to
the name of DIRECTV or any Mark. Licensee will not directly or indirectly
register or attempt to register, in any country or territory, any Mark or any
derivation or adaptation of any Mark, or any word, symbol or design which is so
similar to any Mark as to be likely to cause confusion as to any association
with, sponsorship by or approval of DIRECTV.
4.3 Modifications of Marks. Licensee shall not depart from the form of
the Marks set forth in Exhibit A. Licensee acknowledges that, from time to time,
it may be necessary or desirable for DIRECTV to modify or discontinue use of
certain elements of a Mark and correspondingly amend Exhibit A. Accordingly,
DIRECTV does not represent or warrant that any Mark or any element thereof will
be maintained or used by DIRECTV in any particular fashion.
5. INFRINGEMENT
DIRECTV, at its expense and at its sole and absolute discretion, may
commence or prosecute any claims or suits in its own name to protect any of its
rights in and to any Mark against infringement or appropriation by others not a
party to this License. Licensee shall promptly notify DIRECTV of any known or
suspected infringements or imitations by other persons of any Mark and shall
provide, to the extent reasonably obtainable by Licensee, information regarding
the identity of such persons and their activities and a sample or facsimile of
the product and/or any material which is suspected to infringe upon or imitate
the Mark. Licensee agrees to cooperate fully with and to assist DIRECTV in the
commencement and prosecution of such claims or suits with respect to Licensee's
use of the Marks, to the extent reasonably deemed necessary or desirable by
DIRECTV, provided, however, that DIRECTV shall reimburse Licensee for all
reasonable costs incurred in connection therewith. If such costs may include
Licensee's costs for its employees or other agents, Licensee shall notify
DIRECTV in advance and the parties shall negotiate in good faith a reasonable
apportionment of the costs for Licensee's employees and other agents. With
respect to all claims and suits initiated by DIRECTV to protect its proprietary
rights in any Mark, including suits in which Licensee is joined as a party,
DIRECTV shall have the sole right to employ counsel of its own choosing and to
direct the conduct and any settlement of the litigation. DIRECTV shall be
entitled to receive and retain all amounts awarded as damages, settlements,
profits or otherwise in connection with such claims or suits. Licensee agrees
not to contact any third party alleged infringer or imitator in order to make
any demands or claims, institute any suit, or take any other action in response
to such alleged infringement or imitation without first obtaining the prior
written permission of DIRECTV.
6. INDEMNIFICATION
6.1 Indemnification by License. Licensee hereby indemnifies and agrees
to defend and hold DIRECTV, and each and all of its respective parent,
Affiliates, and each and all of its officers, directors, employees, agents,
successors and assigns harmless from any claim or suit, liability, judgment,
damage, penalty, fee or litigation costs arising out of Licensee's breach under
4.
<PAGE>
this License. DIRECTV agrees to reasonably cooperate with Licensee in the
defense of such action, provided that Licensee shall reimburse DIRECTV for its
reasonable out-of-pocket costs incurred in connection therewith. DIRECTV shall
have the right at its option to defend against any such claim with attorneys of
its selection at the expense of Licensee.
6.2 Indemnification by DIRECTV. DIRECTV hereby indemnifies and agrees to
defend and hold Licensee, and each and all of its respective parent, Affiliates,
and each and all of its officers, directors, employees, agents, successors and
assigns harmless from any claim or suit, liability, judgment, damage, penalty,
fee or litigation costs arising out of any claims of trademark infringement by
any third party based on Licensed Use of the Marks by Licensee. Licensee agrees
to promptly notify DIRECTV of any claim of trademark infringement by any third
party and DIRECTV shall defend Licensee, through attorneys of DIRECTV's
choosing, at no cost to Licensee. Licensee agrees to reasonably cooperate with
DIRECTV in the defense of such action, provided that DIRECTV shall reimburse
Licensee for its reasonable out-of-pocket costs incurred in connection
therewith. Licensee agrees to take no actions of any kind regarding such claim
without the express prior written approval of DIRECTV. DIRECTV shall have the
sole and absolute right to settle any such action and to negotiate and determine
settlement terms. Licensee shall take all steps reasonably necessary to mitigate
its damages incurred, including the removal of any Mark from any DIRECTV/TIVO
Materials involved. The remedy provided in this Section 6.2 shall be the sole
and entire remedy of Licensee, and DIRECTV shall not be responsible for any
other damages of any kind, including special or consequential damages or
projected lost sales or profit of Licensee or other expenditures of Licensee. If
less than all of the DIRECTV/TIVO Materials are affected by the action of the
third party, or activities in a specific geographic location are curtailed, then
this License shall be modified to the extent necessary to reflect the reduction
of products or the restriction as to geographic location.
7. DEFAULT AND TERMINATION
7.1 Default. Licensee's failure to observe the material provisions of
this License, including but not limited to Sections 2 and 3, shall constitute a
material breach. Upon any material breach, DIRECTV may give Licensee notice of
such breach and, in addition to any other legal or equitable remedies which it
may have, shall have the right to terminate this Agreement. Licensee shall have
[*] after the receipt of notice in which to cure any breach and shall notify
DIRECTV within [*] that Licensee intends to attempt a cure.
7.2 Termination. In the event this License is terminated, Licensee shall
immediately discontinue all use of the Marks and within [*] (a) deliver to
DIRECTV an inventory report indicating the number, location and description of
any remaining DIRECTV/TIVO Materials authorized hereunder, and (b) destroy all
DIRECTV/TIVO Materials at its sole cost; provided, however, that if such
termination is a result of DIRECTV's breaching its obligations hereunder, then
such destruction shall be at DIRECTV's sole cost. Licensee shall certify in
writing to DIRECTV that it has discontinued all use of the Marks and has so
destroyed all DIRECTV/TIVO Materials.
7.3 Expiration. Upon expiration of this Agreement, Licensee shall
immediately discontinue all use of the Marks and within [*] (a) deliver to
DIRECTV an inventory
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
report indicating the number, location and description of any remaining
DIRECTV/TIVO Materials authorized hereunder, and (b) destroy all DER.ECTV/TIVO
Materials. Licensee shall certify in writing to DIRECTV that it has discontinued
all use of the Marks and has destroyed all DIRECTV/TIVO Materials.
8. INJUNCTIVE RELIEF
Licensee recognizes and acknowledges the great amount of goodwill and
secondary meaning associated with each Mark licensed under this License and
further acknowledges and admits that in the event Licensee violates any of the
terms of this License concerning or related to the use of any Mark; (a) D]RECTV
could not be adequately compensated for injury resulting therefrom by payment of
money damages; (b) DIRECTV would be irreparably injured by such violation; (c)
it would be difficult if not impossible to determine the resulting monetary
damages suffered by DIRECTV; and (d) injunctive relief would be appropriate to
prevent Licensee from performing any act constituting such a violation or
performing any other act tending to injure in any way the goodwill or secondary
meaning associated with any Mark.
9. INTERPRETATION
9.1 Applicable Law; Entire Agreement; Modification. The existence,
validity, construction, operation and effect of this License and the Exhibits
hereto shall be determined in accordance with, and be governed by, the laws of
the State of California (without reference to the choice of law provisions of
California). This License and the Exhibits hereto constitute the entire
agreement, whether written or oral, between the parties, and supersede all
previous understandings, commitments or representations concerning the subject
matter. Reference to "License," unless specifically set forth otherwise, shall
include this License and all Exhibits hereto. Each party acknowledges that the
other party has not made any representations other than those which are
specifically set forth herein. This License may not be amended or modified in
any way, and none of its provisions may be waived, except by a writing signed by
an authorized officer of the party against whom the amendment, modification or
waiver is sought to be enforced.
9.2 Benefit. This Agreement shall be binding on and shall inure to the
benefit of any and all Successors and permitted assigns of the parties.. Any
purported assignment by either party not in compliance with the provisions of
this Agreement shall be null and void and of no force and effect.
9.3 Illegality. If any provision of this License or any application
thereof, should be held by a court of competent jurisdiction to be illegal,
invalid, void or unenforceable, all provisions of this License and all
applications thereof not held illegal, invalid, void or unenforceable, shall
continue in full force and effect and shall in no way be affected, impaired or
invalidated by such holding. The parties intend that if any provision of this
License is capable of two constructions one of which would render the provision
void and the other of which would render the provision valid, then the provision
shall have the meaning which renders it valid.
9.4 Relationship of Parties. This License does not constitute and shall
not be construed as constituting a partnership or agency relationship between
DIRECTV and Licensee.
6.
<PAGE>
Licensee shall have no right to obligate or bind DIRECTV in any manner
whatsoever and shall not hold itself out as having any such right. Nothing
contained in this License shall or is intended to give any rights of any kind to
any third person.
9.5 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT,
OCCASIONED BY ANY BREACH OF ANY OBLIGATION UNDER THIS AGREEMENT FOR ANY CAUSE
WHATSOEVER, WHETHER ARISING IN NEGLIGENCE OR OTHERWISE.
9.6 Counterparts. This License may be executed in several counterparts,
each of which shall be deemed an original, and all such counterparts together
shall constitute but one and the same instrument. The parties also agree that
this License shall be binding upon the faxing by each party of a signed
signature page thereof to the other party. If such a faxing occurs, the parties
agree that they will each also immediately post, by express or overnight
courier, a fully executed original counterpart of the Agreement to the other
party.
10. MISCELLANEOUS
10.1 Assignability and Sublicensing. This License is personal to Licensee
and none of the rights of Licensee hereunder shall be sold, transferred,
assigned or sublicensed by Licensee except as provided by this License and no
rights hereunder shall devolve by operation of law or otherwise upon any
assignee, receiver, liquidator, trustee, or other party. DIRECTV shall have the
right to assign any or all of its rights and obligations under this License
without the approval of Licensee, so long as the obligations of DIRECTV are
discharged by any such assignee and the assignment causes no additional
obligations to Licensee.
10.2 Waiver. The failure or delay of either party in enforcing any of its
rights under this License shall not be deemed a continuing waiver or
modification of this License, nor shall a waiver by either party of a breach or
default hereunder be deemed a waiver by such party of a subsequent breach or
default of like or similar nature. No waiver shall be effective against either
party unless it is in writing and signed by a duly authorized officer of such
party. Resort by either party to any remedies referred to in this License or
arising by reason of a breach of this License by either party shall not be
construed as a waiver by the acting party of its rights to any other legal or
equitable remedies available to it.
10.3 Survival of Rights. Notwithstanding anything to the contrary in this
License, the rights and obligations of DIRECTV and Licensee pursuant to Sections
4.1, 4.2, 6, 9 and 10 of this License shall survive any termination of this
License.
10.4 Dispute Resolution and Arbitration.
10.4.1 Initial Dispute Resolution. Any dispute or disagreement
between DIRECTV and Licensee arising out of this Agreement shall be resolved
according to the following dispute resolution procedure:
7.
<PAGE>
(a) such dispute shall first be addressed to each party's
project manager (or other appropriate person as identified by the particular
party) for discussion and attempted resolution;
(b) if any such dispute is not resolved by such project
managers within five (5) business days from the date that either party gives
written notice that such dispute or disagreement exists, then such dispute shall
be immediately referred to the Vice President of Advanced Products, in the case
of DIRECTV, and to the Chief Executive Officer, in the case of Licensee, for
discussion and attempted resolution; and
(c) if the dispute is not resolved within five (5) business
days after such second-tier referral, it shall be referred to the Executive Vice
President, in the case of DIRECTV, and to the Chief Executive Officer, in the
case of Licensee.
10.4.2 Arbitration Procedures.
(a) Selection of Arbitrator. If a dispute is not resolved
to the mutual satisfaction of DIRECTV and Licensee, each in their respective
sole discretion, within five (5) business days (or such longer period as may be
mutually agreed upon) after the third-tier referral described in Section 10.4.1
(c), such dispute may be referred by either party to arbitration in Los Angeles,
California before one arbitrator in accordance with the Commercial Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association in
effect on the date that notice of such dispute was originally given. Unless
otherwise mutually agreed to in advance, the arbitrator shall be selected from a
panel of qualified arbitrators in accordance with the procedures of the
Arbitration Rules.
Hearing Procedures. Once appointed, the arbitrator shall designate a time
and place for a pre-hearing status conference not more than fourteen (14) days
from the date of their appointment, and shall appoint a time and place for a
final hearing not more than thirty (30) days from the date of the status
conference. The final hearing shall conclude no later than thirty (30) days
after its commencement. The party that demands arbitration of the unresolved
dispute or disagreement shall specify in writing the matter to be submitted to
arbitration. The arbitrator shall render a written decision setting forth an
award and stating with reasonable detail the reasons for the decision reached.
Any cash component of the award shall be payable in United States dollars
through a bank in the United States. 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
Licensee.
(b) 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 without limitation, California
courts. Notwithstanding the above, DIRECTV shall have the right to seek
injunctive relief, as provided in Section 8, in California or any other state or
federal court of competent jurisdiction to enforce its rights under this
License.
10.5 Notices. All notices and other communications from either party to
the other hereunder shall be in writing and shall be deemed received upon actual
receipt when personally delivered, upon acknowledgment of receipt if sent by
facsimile, or upon the expiration of the
8.
<PAGE>
fifth business day after being deposited in the United States mails, postage
prepaid, certified or registered mail, addressed to the other party as follows:
To TIVO:
TIVO Inc.
894 Ross Drive
Suite 100
Sunnyvale, CA 94089
Attn: Michael Ramsay
Fax: (408) 747-5096
cc: General Counsel
To DIRECTV:
DIRECTV, Inc.
2230 East Imperial Highway
El Segundo, CA 90245
Attn: Vice President, Advanced Products
Fax: (310) 964-4106
cc: Senior Vice President, Business Affairs
and General Counsel
Fax: (310) 726-4991
Witness Whereof, each of the parties hereto has duly executed and delivered
this Agreement as of the day and year first written above.
DIRECTV, INC. TIVO INC.
By:__________________________________ By:________________________________
Name:________________________________ Name:______________________________
Title:_______________________________ Title:_____________________________
9.
<PAGE>
EXHIBIT A
MARKS APPROVED FOR USE IN DIRECTV/TIVO MATERIALS
A. Licensed Marks: The following trademarks are licensed for use by the above
Licensee pursuant to the Agreement with the Execution Date shown above:
1. DIRECTV
2. [LOGO HERE]
B. Prescribed Style: The Marks, when used in the approved medium, shall
conform to the following guidelines:
1. In text, the term "DIRECTV" shall be shown as typed capital letters.
2. In addition to the foregoing provisions, the DIRECTV Trademark Style and
Use Guidelines including those contained in Exhibit B (as may be amended by
DIRECTV), shall also govern the use of the Marks in DIRECTV/TIVO Materials.
1.
<PAGE>
EXHIBIT B
DIRECTV LOGO GUIDELINES
1.
<PAGE>
Schedule 2.5(b)
TIVO Mark License Agreement
1.
<PAGE>
Schedule 5.1.2
Form of Promissory Note
PROMISSORY NOTE
$2,822,168.00 Los Angeles, California
April -, 1999
For valued received, DIRECTV, Inc., a California corporation ("DIRECT"),
whose address is 2230 East Imperial Highway, El Segundo, California 90245,
promises to pay to TIVO, INC., a Delaware corporation ("TIVO"), the principal
amount of Two Million Eight Hundred Twenty-Two Thousand One-Hundred Sixty-Eight
Dollars ($2,822,168.00), without interest on the date (the "Maturity Date") that
is 36 months after the Bandwidth Commencement Date (as defined in that certain
Marketing Agreement dated April _, 1999 by and between DIRECTV and TIVO (the
"Marketing Agreement")). The Maturity Date shall be extended from time to time,
automatically and without any action by DIRECTV or TIVO, by any amount of time
(i) during which DIRECTV preempts or interrupts the Bandwidth Capacity or
DIRECTV's obligation to provide the Bandwidth Capacity is suspended, in each
case pursuant to the last sentence of Section 3 of the Marketing Agreement, and
(ii) during the occurrence of any Event of Force Majeure (as defined in the
Marketing Agreement).
All payments under this Note shall be made to the TIVO or its order, in
lawful money of the United States of America at the offices of TIVO at its then
principal place of business or at such other place as TIVO shall designate in
writing for such purpose from time to time. Notwithstanding the foregoing, (i)
the principal amount of this Note shall be reduced, automatically and without
any action by DIRECTV and TIVO, by 1/36th of the original principal amount for
each full month of Bandwidth Capacity that is made available by DIRECTV to TIVO
as contemplated by Section 3 of the Marketing Agreement (whether or not such
Bandwidth Capacity is actually used by TIVO) between the date of this Note and
the Maturity Date; and (ii) in the event the Marketing Agreement is terminated
by DIRECTV pursuant to Section II of the Marketing Agreement, DIRECTV shall be
permitted, at its option, to repay the principal amount of this Note (A) in
cash; (B) using shares of Common Stock, par value $.01 per share, of TIVO
("Common Stock"), provided that the value of any such shares, determined as of
the date the Note is repaid, shall be (1) equal to the trading price per share
of Common Stock on the primary national securities exchange or automated
quotation system on which such Common Stock then is listed or trades, if any,
(2) if the Common Stock is not then so listed or traded, based on a valuation of
the Common Stock performed by an investment banking firm of nationally
recognized standing selected jointly by TIVO and DIRECTV, or (3) determined by
mutual agreement of DIRECTV and TIVO; (C) by making available for use by TIVO
commercial slots broadcast via the DIRECTV Service, which may be used by TIVO to
promote the TIVO Products and/or the TIVO Service (but without making reference
to DIRECTV or the DIRECTV Service) and shall be valued at the then-current
advertising rate card utilized by DIRECTV for its third party advertisers; or
(D) any combination of the above.
1.
<PAGE>
This Note may be prepaid by DIRECTV in whole or in part at any time, after
two days' written notice of DIRECTV's intention to make any such prepayment,
which notice shall specify the date and amount of such prepayment. Any
prepayment shall be without penalty.
No waiver or modification of any of the terms of this Note shall be valid
or binding unless set forth in a writing specifically referring to this Note and
signed by duly authorized officers of DIRECTV and TIVO, and then only to the
extent specifically set forth therein.
The rights of DIRECTV and TIVO to assign their respective obligations under
this Note shall be the same as their respective rights under Section 12.1 of the
Marketing Agreement.
In the event that any one or more provisions of this Note shall be held to
be illegal, invalid or otherwise unenforceable, the same shall not affect any
other provision of this Note and the remaining provisions of this Note shall
remain in full force and effect.
This Note shall be governed by and construed in accordance with the laws of
the State of California, without giving effect to the principles thereof
relating to conflicts of law.
In Witness Whereof, DIRECTV has caused this Note to be duly executed the
day and year first above written.
DIRECTV, INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
2.
<PAGE>
Schedule 5.4
DIRECTV Investment Representations
1.1 Investment Representations. DIRECTV understands that the Shares have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"). DIRECTV also understands that the Shares are being offered
and sold pursuant to an exemption from registration contained in the Securities
Act, based in part upon DIRECTV's representations contained in this Marketing
Agreement. DIRECTV hereby represents and warrants as follows:
(a) DIRECTV Bears Economic Risk. DIRECTV has substantial experience
in evaluating and investing in private placement transactions of securities
in companies similar to TIVO so that it is capable of evaluating the merits
and risks of its investment in TIVO and has the capacity to protect its own
interests. DIRECTV must bear the economic risk of this investment
indefinitely unless the Shares are registered pursuant to the Securities
Act, or an exemption from registration is available. DIRECTV understands
that TIVO has no present intention of registering the Shares. DIRECTV also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available,
such exemption may not allow DIRECTV to transfer all or any portion of the
Shares under the circumstances, in the amounts or at the times DIRECTV
might propose.
(b) Acquisition for Own Account. DIRECTV is acquiring the Shares for
DIRECTV's own account for investment only, and not with a view towards
their distribution.
(c) DIRECTV Can Protect Its Interest. DIRECTV represents that by
reason of its, or of its management's, business or financial experience,
DIRECTV has the capacity to protect its own interests in connection with
the transactions contemplated in this Marketing Agreement. Further,
DIRECTV is aware of no publication of any advertisement in connection with
the transactions contemplated in this Marketing Agreement.
(d) Accredited Investor. DIRECTV represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(e) TIVO Information. DIRECTV has had an opportunity to discuss
TIVO's business, management and financial affairs with directors, officers
and management of TIVO. DIRECTV has also had the opportunity to ask
questions of and receive answers from, TIVO and its management regarding
the terms and conditions of this investment.
(f) Rule 144. DIRECTV acknowledges and agrees that the Shares must be
held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. DIRECTV
has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act, as in effect from time to time, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about TIVO, the resale
occurring following the
1.
<PAGE>
required holding period under Rule 144 and the number of shares being sold
during any three-month period not exceeding specified limitations.
(g) Residence. The office or offices of DIRECTV in which its
investment decision was made is located at the address or addresses of
DIRECTV set forth in Section 12.6 of this Marketing Agreement.
2.
<PAGE>
Schedule 5.5
Anti-Dilution Protection
1. Adjustment for Preferred Stock Splits and Combinations.
If TIVO shall at any time or from time to time prior to a Qualified Public
Offering (as defined below) effect a subdivision of any outstanding series of
preferred stock of TIVO which is convertible into shares of Common Stock
("Preferred Stock") without a corresponding subdivision of the Common Stock, or
if TIVO shall at any time or from time to time prior to a Qualified Public
Offering combine the outstanding shares of Preferred Stock into a smaller number
of shares without a corresponding combination of the Common Stock, TIVO shall
take action to cause each Share then outstanding to be proportionately
subdivided or combined. Any adjustment under this Paragraph I shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
2. Adjustment for Dividends and Distributions Payable in Common Stock.
If TIVO at any time or from time to time prior to a Qualified Public
Offering makes, or fixes a record date for the determination of holders of
Preferred Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, TIVO shall take action to cause the holders
of the Shares to receive on account of each Share then outstanding as of the
time of such issuance or, in the event such record date is fixed, as of the
close of business on such record date, an additional number of shares of Common
Stock that is equal to the number of shares of Common Stock payable on account
of each share of Common Stock into which such Preferred Stock is convertible;
provide , however, that if such record date is fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
such additional shares of Common Stock shall not be issued and instead the
number of shares of Common Stock payable shall be adjusted pursuant to this
Paragraph 2 to reflect the actual payment of such dividend or distribution.
3. Adjustments for Other Dividends and Distributions Payable in Other
Securities of TIVO.
If TIVO at any time or from time to time prior to a Qualified Public
Offering makes, or fixes a record date for the determination of holders of
Preferred Stock entitled to receive, a dividend or other distribution payable in
securities of TIVO other than shares of Common Stock, TIVO shall take action to
cause the holders of the Shares to receive on account of each Share the amount
of other securities of TIVO that is equal to the amount of other securities of
TIVO payable to holders of Preferred Stock on account of each share of Common
Stock into which such Preferred Stock is convertible; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, such other securities
of TIVO shall not be issued and instead the number of other securities of TIVO
payable shall be adjusted pursuant to this Paragraph 3 to reflect the actual
payment of such dividend or distribution.
4. Additional Issuances of Common Stock.
1.
<PAGE>
If TIVO shall at any time or from time to time prior to a Qualified Public
Offering issue Additional Shares of Common Stock (as defined below) at an
Effective Price (as defined below) less than the then Current Market Value (as
defined below) of the Common Stock, TIVO shall cause the holders of the Shares
to receive a number of additional shares of Common Stock determined in
accordance with the formula:
A
N=( C x ( --------------- ))- C
P
O +=( ---)
M
where:
N = Number of additional shares of Common Stock to be issued under
this Paragraph 4.
C = Number of shares of Common Stock issued to DIRECTV on the date of
this Agreement.
A = the number of Fully Diluted Shares (as defined below) outstanding
immediately after the issuance of such Additional Shares of
Common Stock.
O = the number of Fully Diluted Shares outstanding immediately prior
to the issuance of such Additional Shares of Common Stock.
P = the aggregate consideration received for the issuance of such
Additional Shares of Common Stock.
M = the Current Market Value (as defined below) per share of Common
Stock.
5. Definitions.
(a) "Additional Shares of Common Stock" shall mean shares of Common Stock
or Preferred Stock, or securities convertible into or with rights to purchase
Common Stock or Preferred Stock, issued by TIVO, whether or not subsequently
reacquired or retired by TIVO other than (A) shares of Common Stock issued upon
conversion of outstanding shares of TIVO's Preferred Stock; (B) up to 6,500,000
shares of Common Stock and/or options, warrants or other Common Stock purchase
rights, and the Common Stock issued pursuant to such options, warrants or other
rights (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like) to employees, officers or directors of, or
consultants or advisors to TIVO pursuant to stock purchase or stock option plans
or other arrangements that are approved by TIVO's Board of Directors; (C) shares
of Common Stock or Preferred Stock, or securities convertible into or with
rights to purchase Common Stock or Preferred Stock, issued in connection with
acquisition transactions, where such transactions have been approved by the
Board of Directors of TIVO (D) shares of Common Stock or Preferred Stock, or
other securities
2.
<PAGE>
convertible into or with rights to purchase shares of Common Stock or Preferred
Stock, issued to financial and other institutions, lessors or vendors of TIVO in
connection with the provision of credit to TIVO; and (E) any shares of, or
securities convertible into, TIVO's Common Stock or Preferred Stock issued in
connection with strategic transactions involving TIVO and other entities,
including (i) joint ventures, manufacturing, marketing or distribution
arrangements or (ii) technology transfer or development arrangements (provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Board of Directors of TIVO).
(b) "Current Market Value" per share of Common Stock at any date shall be
the value of the Common Stock determined in good faith by the Board of Directors
of TIVO and certified in a board resolution, after giving due consideration to
the valuation and pricing in TIVO's most recently completed arm's length equity
financing transactions, TIVO's financial position and progress in developing its
products and services, the exercise price as approved by the Board of Directors
of TIVO for the most recent option grants pursuant to TIVO's stock purchase or
stock option plans or other arrangements, the existence and strength of
competitors to TIVO's products and services, TIVO's progress in achieving
milestones in developing its products and services, TIVO's progress in
establishing strategic partnerships for the manufacturing, development and
marketing of its products and services, and the lack of a public market for
TIVO's securities; provide that, if DIRECTV disputes the valuation determined by
the Board of Directors of TIVO, such valuation shall be conclusively determined
by an investment banking firm of nationally recognized standing selected jointly
by DIRECTV and TIVO and compensated by TIVO.
(c) The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing (i) the aggregate consideration received, or
deemed to have been received by TIVO for such issuance under this Section, for
such Additional Shares of Common Stock by (ii) total number of Additional Shares
of Common Stock issued or sold, or deemed to have been issued or sold by TIVO
under this Section.
(d) "Fully Diluted Shares" shall mean (i) shares of TIVO Common Stock
outstanding as of a specified date, and (ii) shares of TIVO Common Stock into or
for which rights, options, warrants or other securities outstanding as of such
date are exercisable or convertible.
(e) "Qualified Public Offering" shall mean a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of TIVO in which (i) the per share price is at least Five Dollars
($5.00) per share (as adjusted for stock splits, combinations and similar
events) and (ii) the gross cash proceeds to TIVO (before underwriting discounts,
commissions and fees) are not less than $15,000,000.
3.
<PAGE>
Schedule 6
DIRECTV/TIVO Combo Receiver Minimum Criteria
1. Joint Development of User Interface
. The parties agree to work together in good faith to define a common
user interface design for the DIRECTV/TIVO Combo Receiver.
. The parties agree to work together in good faith to ensure software
and service compatibility between the TIVO Service and DIRECTV
Service.
. TIVO agrees that DIRECTV/TIVO Combo Receiver will be enabled such that
the DIRECTV Service (and related user interface) appears first to the
consumer.
. The TIVO Service (and related user interface) will be enabled as an
option to the DIRECTV Service.
. The parties agree to work together in good faith to develop
appropriate branding and attribution in each of the DIRECTV Service
and TIVO Service; provide that TIVO agrees that (1) DIRECTV may, at
its option, use "Personal TV" or "Personal TV Service" when referring
to the optional TIVO Service, and (2) the initial user interface for
the TIVO Service will incorporate a DIRECTV on-screen appearance in a
manner that is acceptable to DIRECTV.
. DIRECTV will retain complete control of the content, services,
features, look and feel of the DIRECTV Service, including the
functionality necessary to operate all facets of the DIRECTV Service.
. Subject to Section 2 below, TIVO will retain complete control of the
content, services, features, look and feel of the TIVO Service,
including the functionality necessary to operate all facets of the
TIVO Service.
. Any changes in the overall user interface will involve the
participation of both parties.
2. Promotional Showcases
. As part of the TIVO Service, TIVO currently intends to promote and
deliver 64 promotional showcases" on the TIVO Service. "Promotional
showcases" consist of short-duration, promotional spots or
advertisements offered on the TIVO Service highlighting selected
programming offered on premium and other networks.
. TIVO shall have exclusive control over the timing, duration, placement
and content of promotional showcases which are not delivered using the
Bandwidth Capacity provided pursuant to Section 3 of the Marketing
Agreement, subject to the standards set forth in Sections 2.1.5(a),
(b), (c) and (d) of the Marketing Agreement.
1.
<PAGE>
. If TIVO uses the bandwidth provided pursuant to Section 3 of the
Marketing Agreement to deliver such promotional showcases:
- TIVO shall have the right to control the timing, duration,
placement and content of all such promotional showcases
subject to (i) DIRECTV's right to require TIVO to make any
change in the timing, duration, placement or content which
DIRECTV determines to be necessary in its sole discretion
and (ii) the standards set forth in Sections 2.1.5(a), (b),
(c) and (d) of the Marketing Agreement.
- DIRECTV shall have the right to prohibit or restrict any
such promotional showcases which DIRECTV determines in its
sole discretion may be detrimental to DIRECTV's business.
. TIVO will provide to DIRECTV [*] promotional showcase on the showcase
portion of the joint user interface (with links to multiple
promotional showcases promoting DIRECTV programming), which may be
used by DIRECTV to promote DIRECTV programming. DIRECTV will use
additional bandwidth capacity on a DIRECTV Satellite (and not the
Bandwidth Capacity made available to TIVO pursuant to Section 3 of the
Marketing Agreement) to provide the programming content for such
promotional showcases. DIRECTV shall not pay for [*] but shall pay for
[*].
. TIVO shall keep DIRECTV reasonably informed of upcoming promotional
showcases in order to allow DIRECTV to manage its promotional
programming and avoid conflicting or competitive promotional product
. DIRECTV shall have the right to have any networks designated by
DIRECTV promoted via TIVO showcases at rates paid to TIVO that are
equal or better than rates actually charged to any of TIVO's third
party customers.
3. Functionality
. The DIRECTV/TIVO Combo Receiver shall be developed in a manner that
will allow a customer who owns a DIRECTV/TIVO Combo Receiver to (i)
receive high quality uninterrupted DIRECTV Service and (ii) use the
"live pause," "fast-forward" and "rewind" features of the DIRECTV/TIVO
Combo Receiver, in each case whether or not such customer subscribes
to the TIVO Service.
4. Technical Specifications
. The DIRECTV/TIVO Combo Receiver shall conform to DIRECTV technical
specifications, as such specifications may be amended by DIRECTV from
time to time.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
EXHIBIT 10.9
Agreement, dated as of April 16, 1999 (the "Effective Date"), by and
--------------
between TiVo Inc., a Delaware corporation having an address at 894 Ross Drive,
Sunnyvale, California 94089 ("TiVo") and NBC Multimedia, Inc., a Delaware
corporation having an address at 30 Rockefeller Plaza, New York, New York 10112
("NBC").
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WHEREAS, TiVo is in the business of developing and marketing personal video
recorders and services associated therewith (the "TiVo Service");
------------
WHEREAS, pursuant to that certain Series G Preferred Stock Purchase
Agreement, dated as of the Effective Date, NBC is purchasing certain securities
of TiVo; and
WHEREAS, as a charter partner of TiVo, TiVo has agreed to grant to NBC and
each network wholly or partially owned by the National Broadcasting Company,
Inc. or its affiliates (each an "NBC Network") certain preferential rights.
NOW, THEREFORE, for good and valuable consideration, the parties hereby
enter into this Agreement on the terms and conditions set forth below:
1. Showcase Screen. NBC shall receive preferential "anchor" placement in the
---------------
Showcase Screen (as defined below) for a period of [*] from the
Effective Date. TiVo staff, working in conjunction with NBC creative services,
will produce weekly showcases and special programming packages highlighting
current programming and upcoming events through the Showcase Screen. NBC will
provide TiVo with appropriate content and branding to support the production
effort to include graphics, video, audio and voiceovers. NBC, at its
discretion, can feature promotions for programming appearing on any NBC Network
through the Showcase Screen up to [*] in advance of the time a particular show
is scheduled to air. For purposes hereof, "Showcase Screen"
---------------
means a screen available to TiVo users through a link on the main TiVo Central
screen which features TiVo's network partners and which will allow viewers to
receive information, trailers, previews or special video content for programming
promoted by TiVo's network partners, and a simple "record" capability.
2. Active Promos. TiVo shall work with NBC in order to embed data tags within
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promotions for upcoming NBC Networks shows in order to allow TiVo viewers
watching such promos to instruct the TiVo Service to record that show when it
airs simply by pressing a button on their TiVo remote controls ("Active
------
Promos"); provided, however, that this provision shall become effective only
- ------
when and if such functionality becomes technically feasible and generally
available on the TiVo Service; and provided, further, that TiVo shall have the
right to require payment of a fee for this service (which fee shall be [*] at
the earlier of i) when TiVo reaches [*] or ii) after [*] following the
implementation of Active Promos as a generally available feature of the TiVo
Service NBC shall pay the actual, documented incremental out-of-pocket costs of
developing Active Promos used to promote NBC Networks programming.
3. Promo Plus. TiVo shall work with NBC in order to cause the TiVo Service to
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trigger promotions immediately prior to NBC Networks programs that have been
recorded by viewers in
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities Exchange and
Commission.
1.
<PAGE>
order to "up-sell" specials, new shows, and lesser performing programs;
provided, however, that this provision shall become effective only when and if
such functionality becomes technically feasible and generally available on the
TiVo Service; and provided, further, that TiVo shall have the right to require
payment of a fee for this service (which fee shall be [*]) at the earlier of i)
when TiVo reaches [*] or ii) after [*] following the implementation of Active
Promos as a generally available feature of the TiVo Service. NBC shall pay the
actual, documented incremental out-of-pocket costs of developing Active Promos
used to promote NBC Networks programming. At the discretion of NBC, these promos
will be encoded as Active Promos. TiVo shall not use Promo Plus functionality to
promote non-NBC Networks programming immediately prior to or following any NBC
Networks programs.
4. TiVolution Magazine. As a TiVo charter partner, NBC Network programming
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packages and specials shall be featured inside the TiVolution Magazine on the
TiVo Service; provided that inclusion and positioning of such features within
the TiVolution Magazine shall be at the discretion of TiVo's editorial staff.
All programming packages and specials would offer viewers an opportunity to
record those shows from inside the TiVolution Magazine.
5. Now Showing on TiVo. For a period of [*] from the Effective Date,
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NBC may at its option specify up to [*] of NBC Network promos and/or
featured programs for inclusion on the TiVo disc that is shipped standard from
the factory. These programs would expire at an appropriate time to remain
timely.
6. E-Commerce Mall. For a period of [*] after TiVo's e-commerce area
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(the "On-Air Mall") is launched, NBC shall receive placement [*] inside such On-
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Air Mall to sell NBC Networks merchandise. Other terms of such placement will be
agreed to by the Parties prior to the commercial launch of the On-Air Mall.
7. Preference Engine Software. TiVo has no plans or intent to, now or in the
--------------------------
future, provide favorable treatment to any programmer or programmers via its
preference engine software or any other technology incorporated within the TiVo
Service. However, if at any time TiVo implements a commercial program to favor
certain programmers or content producers via the TiVo Service, then TiVo shall
promptly offer any advantages provided to any other programmer or content
producer to NBC without additional compensation.
8. NBC Audience Response Data. For a period of [*] from the Effective Date,
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NBC shall have the right to receive from TiVo any data that TiVo makes available
or offers to sell to any third party which is related to or derived from any NBC
Network ("NBC Specific Data"), TiVo shall not market, sell, share or otherwise
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distribute the NBC Specific Data to, or function as a service bureau with
respect to the NBC Specific Data on behalf of, any NBC Competitor, without the
prior written consent of NBC. For purposes hereof, "NBC Competitor" means any
entity which owns or controls a broadcast, cable or satellite television channel
or service, or any affiliate of such an entity. To the extent that TiVo at any
time in the future offers for sale or otherwise distributes any reports or other
materials which incorporate or rely upon
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
NBC Specific Data, then TiVo shall offer such reports or materials to NBC on
terms no less favorable than TiVo's standard rate for such reports or materials
at such time.
9. Restrictions on Commercial Alteration. TiVo will not swap out, replace or
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otherwise alter any commercial messages included within NBC Network programs
without the prior written consent of NBC. At such time when TiVo has the
technical capability to insert advertising within programming via the TiVo
Service, if the parties believe it to be in their best interests at such time,
the Parties will negotiate in good faith regarding opportunities presented by
such technology, including the method, mechanics and economics of inserting
advertising into programs broadcast by NBC Networks.
10. Restrictions on Adjacent Promotions. TiVo shall not insert promotions or
-----------------------------------
advertising directly prior to or after any NBC Network programs unless such
promotions or advertising were provided by NBC or an NBC Network.
11. Signal Pass Through. TiVo shall ensure that the TiVo Service shall not
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delete any programming or data within the signals that are transmitted by any
NBC Network.
12. Internet Capability. If at any time during the Term the TiVo Service is
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enabled for Internet connectivity, then (a) TiVo shall ensure that any links
and/or web content incorporated within or otherwise accompanying the signal of
each NBC Network will be passed through to users of the TiVo Service, and (b)
prior to entering into any agreement with any other party regarding placement of
its Internet assets within the TiVo Service, TiVo shall negotiate in good faith
with NBC with respect to placement for the Internet assets of NBC and its
affiliates.
13. Trade Shows. NBC may offer TiVo demonstration space at relevant industry
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tradeshows in which NBC Interactive participates as an exhibitor. TiVo may
highlight programming of the NBC Networks (as specified by NBC) in its trade
show demonstrations.
14. Promotion; Links. For a period of [*] after the Effective Date,
----------------
each of TiVo and NBC will feature each other as partners on their websites
(NBC.com & TiVo.com) with a link to the other's site; provided, however, that
NBC's obligation under this Section shall be subject to certain internal
approvals; and provided, further, that each party shall comply with the other
party's policies regarding the use of its trademarks and logos.
15. Minimum Standards. All NBC Network promotional material contemplated under
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this agreement shall comply with applicable governmental codes, comport with
reasonable standards of good taste (consistent with the broadcast standards
utilized by major broadcast television networks), and comply with TiVo's
reasonable policies and practices, including, without limitation, those relating
to advertisements of X-rated material, drug related paraphernalia, cigarettes
and liquor.
16. Confidentiality.
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(a) General. During the Term, each party hereto (the "Disclosing Party")
------- ----------------
may disclose to the other party (the "Receiving Party") information in
---------------
connection with the performance of this Agreement, including without limitation
technical data, trade secrets, plans for products or services, customer or
supplier lists, marketing plans, software, source code for
*Material has been omitted pursuant to a request for confidential treatment.
Such materiual has been filed separately witht the Securities and Exchange
Commission.
3.
<PAGE>
software, financial documents or data, and designs which it maintains, and which
when provided hereunder, shall be designated in writing or otherwise reasonably
identified as confidential ("Confidential Information"). The parties shall use
------------------------
the Confidential Information of the other party solely to perform this
Agreement, and all Confidential Information shall remain the sole property of
the Disclosing Party. The Receiving Party shall hold the Confidential
Information in strict confidence and shall not make any disclosure of the
Confidential Information (including methods or concepts utilized in the
Confidential Information) to anyone during the Term [*] thereafter without the
express written consent of the Disclosing Party, except to employees,
consultants or agents to whom disclosure is necessary to the performance of this
Agreement and who have executed a confidentiality agreement with the Receiving
Party, or who have been advised of their obligation to maintain the
confidentiality of the Confidential Information. Each of the parties shall use
the same care as it uses to maintain the confidentiality of its most
confidential information, which shall in no event be less than reasonable care.
(b) Exclusions. Notwithstanding the foregoing, the Receiving Party shall
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have no obligation under this Agreement with respect to any Confidential
Information disclosed to it which: (a) the Receiving Party can demonstrate was
already known to it at the time of its receipt hereunder; (b) is or becomes
generally available to the public other than by means of the Receiving Party's
breach of its obligations under this Agreement; (c) is independently obtained
from a third party whose disclosure violates no duty of confidentiality; (d) is
independently developed by or on behalf of the Receiving Party without use of or
reliance on any Confidential Information furnished to it under this Agreement,
and such independent development can be reasonably evidenced by the Receiving
Party; or (e) is disclosed pursuant to applicable law or regulation or by
operation of law, provided that the Receiving Party may disclose only such
information as is legally required, and provided further that the Receiving
Party shall provide reasonable notice to the Disclosing Party of such
requirement and a reasonable opportunity to object to such disclosure.
17. Term and Termination.
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(a) Term. The term of this Agreement (the "Term") shall commence on the
----
Effective Date and expire three (3) years thereafter.
(b) Termination for Breach. If either party is in material breach of this
----------------------
Agreement, the other party shall so notify the breaching party in writing,
specifying the nature of the breach. The breaching party shall have [*] from
receipt of such notice to correct the breach. If the breach is not cured within
that time period, the other party may terminate this Agreement by providing the
breaching party with written notice of termination. Each party acknowledges that
the remedy at law for any breach or threatened breach of the provisions of
Sections 6-13 and 16 shall be inadequate, and that the non-breaching party, in
addition to any other remedy available to it, shall be entitled to obtain
injunctive relief without proof of irreparable injury and without posting bond.
(c) Other Termination. Either party may terminate this Agreement
-----------------
immediately upon the occurrence of any of the following events with respect to
the other party: (a) a receiver is appointed for such party or its material
assets; (b) such party becomes insolvent, generally unable to pay its debts as
they become due, makes an assignment for the benefit of its creditors
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
or seeks relief under any bankruptcy, insolvency or debtor's relief law; (c) if
proceedings are commenced against the other party under any bankruptcy,
insolvency or debtor's relief law, and such proceedings have not been vacated or
set aside within [*] from the date of commencement thereof, or (d) if such
party is liquidated or dissolved or otherwise ceases to do business.
(d) Return of Confidential Information. Upon any termination of this
----------------------------------
Agreement, each party shall immediately return, or if so requested destroy, all
Confidential Information and other property belonging to the requesting party.
18. Right of First Negotiation. For a period of [*] after the expiration
--------------------------
or termination of this Agreement, prior to entering into any agreement with a
third party which would grant such third party preferential treatment with
respect to the matters discussed in Sections, 7 or 12 hereof, TiVo shall
negotiate in good faith with NBC with respect to obtaining such preferences on
behalf of the NBC Networks.
19. Miscellaneous. This Agreement shall be governed by and construed in
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accordance with the laws of the State of California, without regard to
principles of conflicts of law. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all previous or contemporaneous agreements, proposals, understandings and
representations, written or oral, with respect to the terms and conditions
hereof. This Agreement may not be modified or amended except in writing signed
by a duly authorized representative of each party. All notices, including
notices of address changes, required or permitted to be given by either party
under this Agreement shall be sent by registered or certified mail or by
reputable overnight commercial delivery to the address specified herein by each
party. In the event that any one or more of the provisions of this Agreement
shall be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not be affected, or if any one or more of the provisions contained herein shall
be held to be excessively broad as to duration, activity or subject, such
provision shall be construed by limiting and reducing such provisions so as to
be enforceable to the maximum extent compatible with applicable law. The waiver
by either party of any default or breach of this Agreement shall not constitute
a waiver of any other or subsequent default or breach. Neither party may assign
this Agreement or the rights and obligations accruing hereunder without the
prior written consent of the other party, except that either party may so assign
(i) in connection with the sale of all or substantially all of its assets, (ii)
to the surviving entity in any merger or consolidation, or (iii) to an
affiliated company; provided, that the applicable assignee must assume all of
the obligations of the assignor hereunder. The parties' rights and obligations
under Section 16 shall survive expiration or termination of this Agreement.
*Material has been omitted pursuant to a request for confidential treatment.
Such treatment has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
by their respective duly authorized officers or representatives as of the day
and year first above written.
NBC MULTIMEDIA, INC. TIVO INC.
/s/ [illegible] /s/ David H. Courtney
- ----------------------------------- ----------------------------------------
Signature Signature
[illegible] David H. Courtney
- ----------------------------------- ----------------------------------------
Print Name Print Name
Vice President Vice President, Chief Financial Officer
- ----------------------------------- ----------------------------------------
Title Title
6.
<PAGE>
EXHIBIT 10.10
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made effective as of the 23rd
day of February, 1998 (the "Effective Date") between Verity, Inc., a Delaware
corporation ("Verity"), as Sublessor, and Teleworld, Inc., a Delaware
corporation ("Teleworld"), as Sublessee.
RECITALS:
A. Verity and Ross Drive Investors, a California general partnership
("RDI"), are parties to that certain Lease dated January 22, 1996, as amended
June 20, 1996, November 5, 1996, and January 17, 1997 (collectively, the
"Lease"), pursuant to which Verity leases from RDI that certain building
containing approximately 43,925 gross leasable square feet of space located at
894 Ross Drive, Suite 100, Sunnyvale, California (the "Master Premises").
B. Verity desires to sublet approximately 24,598 square feet of space
constituting Suite 100 of the Master Premises (the "Premises"), to Teleworld and
Teleworld desires to sublet the same from Verity. The Premises include the right
to use the office cubicles, furniture and network and data wiring (excluding the
T 1 line) currently located in or serving the Premises and set forth on Exhibit
A attached hereto.
NOW, THEREFORE, in consideration of the mutual covenants herein provided
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. Unless otherwise defined, all capitalized terms used
-----------
herein shall have the same meanings as given them in the Lease. A copy of the
Lease is attached hereto as Exhibit B.
2. Sublease.
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2.1 Incorporation of Lease Terms. Verity hereby subleases to
----------------------------
Teleworld and Teleworld hereby subleases from Verity, the Premises. Except as
otherwise expressly herein provided, such sublease of the Premises shall be on
all of the terms, covenants, conditions and provisions in the Lease, which
terms, covenants, conditions and provisions are incorporated in and made a part
hereof as if fully set forth herein, and are imposed upon the respective parties
of this Sublease, with Verity hereunder being substituted for Landlord under the
Lease, and Teleworld hereunder being substituted for Tenant under the Lease;
provided that the following provisions of the Lease are not incorporated into
this Sublease: Section 2.1 (first sentence only), Section 2.2, Section 2.3,
Section 3.1, Section 5.4, Section 7.3, Article 8, First Addendum to Lease dated
January 22, 1996, Second Addendum to Lease dated January 22, 1996, First
Amendment to Lease dated June 20, 1996, Second Amendment to Lease dated November
5, 1996, and Third Amendment to Lease dated January 17, 1997. Teleworld shall
comply with all of the terms and conditions applicable to Tenant under the Lease
in connection with, but only with respect to, its occupancy and use of the
Premises and the Common Area. Teleworld shall have the right to use eighty-seven
(87) parking stalls in the parking areas of the Project. To the
1.
<PAGE>
extent the provisions of this Sublease are inconsistent with or different from
the provisions of the Lease, the provisions of this Sublease shall control the
rights and obligations of Verity and Teleworld with respect to the use and
occupancy of the Premises and the Common Area.
2.2 Limitations to Responsibility. Notwithstanding the incorporation
-----------------------------
of the provisions of the Lease into this Sublease, Verity shall not be held
accountable for any representations and warranties made by RDI as Landlord under
the Lease, nor shall be Verity be responsible for the performance of any
obligations to be performed by Landlord under the Lease, and Teleworld agrees to
look solely to RDI for the performance of such obligations. At Teleworld's
request (and at Teleworld's cost, which shall be paid in advance), Verity shall
use commercially reasonable efforts to cause RDI to perform its obligations
under the Lease, but in no event shall Verity be obligated to initiate or
participate in any legal proceedings or actions intended to compel RDI to
perform or undertake any other action with respect to RDI that may impair
Verity's relations with RDI. The failure by RDI to perform its obligations under
the Lease shall not excuse performance by Verity or Teleworld of their
obligations hereunder.
3. Term. Subject to Paragraph 3.1 below, the term of this Sublease shall
----
be eighteen (18) months, commencing March 15, 1998. Sublessee shall be permitted
early occupancy to install its phone systems and wiring, subject to all the
provisions of this Sublease except the obligation to pay Rent (as defined in
Paragraph 5.1 below), which shall begin on the Commencement Date (as defined in
Paragraph 3.1 below).
3.1 Initial Term. The initial term of the Sublease contemplated
------------
hereby (the "Term") shall commence on the later of: (a) the date which is two
(2) days following receipt by Verity of RDI's written consent to this Sublease,
or (b) March 15, 1998 (the "Commencement Date"). The Term shall expire on
September 30, 1999 (the "Scheduled Expiration Date"), subject to extension in
accordance with and subject to Paragraph 3.2 below.
3.2 Extension Period. Should Teleworld desire to extend the term of
----------------
this Sublease by up to six (6) additional months, Teleworld shall notify Verity
of such desire not less than one hundred eighty (180) days prior to the
Scheduled Expiration Date. Following Verity's receipt of such notice, Verity
shall decide in its sole and absolute discretion whether and on what terms
Verity would make the Premises available to Teleworld following the Scheduled
Expiration Date, provided, however, that the monthly Rent payable during the
first six (6) months following the Scheduled Expiration Date shall not exceed
Seventy Two Thousand Five Hundred Sixty Four Dollars and Ten Cents ($72,564.10).
If Verity decides to make the Premises available to Teleworld following the
Scheduled Expiration Date, Verity shall, not less than ninety (90) days prior to
the Scheduled Expiration Date, give notice thereof to Teleworld, including the
terms on which Verity would be willing to make the Premises available. If Verity
does not give such notice to Teleworld (or does not otherwise respond to
Teleworld regarding the availability of the Premises after the Scheduled
Expiration Date) at least ninety (90) days prior to the Scheduled Expiration
Date, Verity shall be deemed to have decided not to make the Premises available
to Teleworld after the Scheduled Expiration Date and this Sublease shall expire
on the Scheduled Expiration Date. Nothing herein shall be construed so as to
obligate Verity to make the Premises available to Teleworld following the
Scheduled Expiration Date on any terms. If Verity decides to make the Premises
available to Teleworld after the Scheduled Expiration Date and Verity and
Teleworld thereafter are able to agree upon the terms and
2.
<PAGE>
conditions of this Sublease with respect to the time period following the
Scheduled Expiration Date (such period is referred to herein as the "Extension
Period"), then such agreed upon terms and conditions shall be in effect during
the Extension Period. If Verity and Teleworld are unable to agree upon such
terms and conditions of this Sublease prior to the commencement of the Extension
Period, this Sublease shall terminate on the Scheduled Expiration Date.
4. Use. Teleworld shall use the Premises in accordance with the terms set
---
forth in Article 4 of the Lease. The Premises shall not be used for
manufacturing processes of any kind.
5. Rent; Security Deposit.
----------------------
5.1 Monthly Rent. Teleworld agrees to pay to Verity, as rent
------------
("Rent") for the Premises for each month of the term of this Sublease, the sum
of: (a) Seventy Thousand One Hundred Four Dollars and Thirty Cents ($70,104.30)
for the first twelve (12) months of the Term, and (b) Seventy One Thousand Three
Hundred Thirty Four Dollars and Twenty Cents ($71,343.20) for the balance of the
Term up to the Scheduled Expiration Date. The foregoing amount represents the
monthly base rent plus an additional sum to cover Teleworld's share of the
monthly building expenses for the Premises totaling Two and 85/100 Dollars
($2.85) per square foot per month for the first twelve (12) months of the Term,
and Two and 90/100 Dollars ($2.90) per square foot per month for the balance of
the Term up to the Scheduled Expiration Date. Teleworld and Verity acknowledge
and agree that such Rent includes payment for use of the items set forth on
Exhibit A attached hereto at the rate of fifty cents ($.50) per square foot per
month. The first month's Rent shall be due on the Commencement Date, provided
that such amount shall be prorated to reflect the partial month, based on the
number of days from and including the Commencement Date to and including March
31, 1998. Teleworld shall have no additional obligation to pay for utilities,
heating, ventilation, or air conditioning repairs and maintenance, insurance,
property taxes, or repairs that are the responsibility of Verity under Paragraph
7.3(e) below, or common area maintenance, including janitorial expenses and
Common Operating Expenses, except as expressly provided herein.
5.2 Place of Payment of Rent. The Rent and all other amounts payable
------------------------
to Verity hereunder shall be paid to Verity when due, without prior notice or
demand and without deduction or offset, in lawful money of the United States by
check payable to Verity, Inc. and mailed to: Verity, Inc., 892 Ross Drive,
Sunnyvale, California 94089, Attention: Accounts Receivable.
5.3 Security Deposits. Teleworld shall pay Seventy Two Thousand Five
-----------------
Hundred Sixty Four Dollars and Ten Cents ($72,564.10) on the Effective Date as
security for the performance of Teleworld's obligations under this Sublease.
Teleworld shall also pay One Hundred Forty Five Thousand Dollars ($145,000.00)
on the Effective Date as a security deposit with respect to Teleworld's
obligations to maintain and return in good condition the office cubicles,
furniture and network and data wiring which Teleworld is permitted to use under
this Sublease. Teleworld acknowledges and agrees that Verity shall be entitled
to withhold from such security deposit amounts to perform necessary repair or
replacement of any of the items listed on Exhibit A at the expiration of the
Term of this Sublease.
3.
<PAGE>
5.4 Discounted Payment. Notwithstanding the amount of monthly Rent
------------------
set forth in Paragraph 5.1 above, Teleworld shall have the option to pay all
Rent due under this Sublease in a single payment upon the Commencement Date,
which single payment shall be equal to all amounts of Rent to be paid by
Teleworld under this Sublease, discounted to its present value as of the
Commencement Date utilizing a discount rate of ten percent (10%) per annum.
6. Acceptance and Condition of Premises. Verity shall deliver the
------------------------------------
Premises to Teleworld on the Commencement Date in broom-clean condition.
Teleworld acknowledges that it had the right to inspect the Premises and the
items listed on Exhibit A prior to commencing occupancy. By executing this
Sublease, Teleworld shall be deemed to have accepted the same in their "AS-IS"
condition, subject to any circumstances, defects, or conditions therein, and
without any representations or warranties from Verity.
7. Related Provisions.
------------------
7.1 Insurance. With respect to the tenant's insurance to be provided
---------
by Teleworld as described in Paragraph 9.1 of the Lease, such policies of
insurance shall include as named insureds RDI, Verity and Teleworld.
7.2 Waiver of Subrogation. With respect to the waiver of subrogation
---------------------
contained in Paragraph 9.4 of the Lease, such waiver shall be deemed to be
modified to constitute an agreement by and among RDI, Verity, and Teleworld (and
RDI's consent to this Sublease, if given, shall be deemed to constitute its
approval of this modification).
7.3 Building Services and Repairs and Maintenance.
---------------------------------------------
(a) Teleworld shall be entitled to use of common areas in or
relating to the Master Premises.
(b) Teleworld shall be responsible for keying its locks and
otherwise providing its own security for the Premises. Teleworld shall deliver
two copies of each new key to Verity.
(c) Verity shall make available to Teleworld the janitorial
service serving the balance of the Master Premises, at no additional charge to
Teleworld. Such service shall include removal of Teleworld's waste,
notwithstanding the provisions of the second to last sentence of Section 7.1 of
the Lease to the contrary, provided that such waste is of the type and quantity
generated by typical office use. Verity reserves the right to charge Teleworld
reasonable amounts for removal of wastes if extraordinary types or quantities of
waste are generated by Teleworld.
(d) Teleworld shall be responsible for installation and service
for telephone and data transmission lines; provided Teleworld may use the
network and data wiring set forth on Exhibit A which is already installed in or
serving the Premises, which Teleworld acknowledges does not include the T 1
line.
4.
<PAGE>
(e) Teleworld shall be responsible, at its own expense, for
repair and maintenance as set forth in Paragraph 6.1 of the Lease with respect
only to the Premises, but shall not be responsible for repair and maintenance of
HVAC equipment, utility facilities or other such building systems and equipment
that serve the Master Premises as a whole. Teleworld, at its cost, shall
maintain in good condition all items of office cubicles, furniture and network
and data wiring set forth on Exhibit A attached hereto. Such items shall be
returned by Teleworld to Verity upon the expiration of the Term in the condition
in which they were delivered to Teleworld.
(f) If Verity determines in the reasonable exercise of its
discretion that Teleworld is utilizing a disproportionate share of utilities,
heating, ventilation and/or air conditioning or that Teleworld is regularly
using such utilities and services beyond the base business hours of 8:00 a.m. to
8:00 p.m. Monday through Friday, Verity reserves the right to charge Teleworld
for any such disproportionate or excess usage (and Teleworld shall pay to Verity
within thirty (30) days of Verity's request) at the rate of Ten Cents ($.10) per
rentable foot of the Premises per month; provided that this excess charge shall
apply only for so long as the electrical service capacity of the Premises
remains at the level that exists as of the date of this Sublease, and if
Teleworld increases or otherwise changes such capacity, then Landlord reserves
the right to charge Teleworld the actual charges incurred by Verity for
Teleworld's disproportionate or excess usage, as evidenced by Verity's
calculation thereof.
8. Signage. Teleworld shall have the right, at its sole cost and expense,
-------
to place a sign on the suite door and the monument sign outside the Building,
and to place standard identification on the lobby directory, provided any such
signs shall be consistent in size and character with existing signage of other
subtenants of Verity and Teleworld obtains the prior written consent of RDI and
Verity (which consent Verity shall not unreasonably withhold) prior to
installing such sign. Upon termination of this Sublease, Teleworld shall remove
the sign and repair any damage caused by the installation or removal of the
sign.
9. Assignment and Subletting. Teleworld shall have no right to assign
-------------------------
this Sublease or any of its rights hereunder or sublet all or any portion of the
Premises, without the prior written consent of Verity (which Verity may grant or
withhold in its sole discretion), and without the consent of RDI to the extent
required under the Lease.
10. Right of Offer. In the event Verity determines to further sublease
--------------
suites 202, 203 or 204 of the Master Premises during the Term of this Sublease,
Verity shall advise Teleworld of the terms and conditions on which Verity is
willing to sublease such space. Within five (5) days of receipt of such
information, Teleworld shall advise Verity in writing whether Teleworld desires
to sublease such space on the terms and conditions delivered to Teleworld by
Verity. In the event Teleworld elects to sublease, such space shall be added to
this Sublease by execution of an appropriate addendum as soon as practical. In
the event Teleworld fails to notify Verity in writing of its acceptance of the
proposed terms and conditions within such five (5) days, then Verity shall be
free to sublease such space to third parties on terms and conditions acceptable
to Verity, in its sole discretion, which terms and conditions may be different
from those previously communicated to Teleworld. The right of offer granted to
Teleworld in this Paragraph 10 shall be subject to any prior rights of first
offer, rights of first refusal or similar rights granted by Verity to any other
subtenant of the Master Premises as of the Effective Date.
5.
<PAGE>
11. Notices. All notices, demands, requests, advices, or designations
-------
which may be or are required to be given by either party to the other hereunder
shall be in writing. All notices, demands, requests, advices or designations
shall be sufficiently given by personal delivery, by certified or registered
mail, return receipt requested, postage prepaid, or by Federal Express or
similar overnight courier and addressed to Verity at the address specified in
Paragraph 5.2 of this Sublease, or to Teleworld at the Premises. Either party
may by notice to the other specify a different address for notice purposes. Each
notice, request, demand, advice or designation referred to in this paragraph
shall be deemed delivered only upon delivery.
12. Brokers. A commission shall be paid to Cornish & Carey Commercial
-------
("C&C") under a separate agreement between C&C and Verity. Except for the
foregoing, each party warrants and represents to the other that it has retained
no broker or other party that is entitled to any fee or commission in connection
with this Sublease, and each agrees to indemnify, defend and hold harmless the
other party from any and all liabilities, claims or damages arising out of such
party's breach of the foregoing warranty and representation.
13. Termination of Lease. This Sublease is and shall at all times be
--------------------
subordinate to the Lease. In the event the Lease is terminated for any reason,
then this Sublease shall automatically terminate on the date of such
termination, and shall be of no further force and effect. If Verity has actual
advance knowledge of any termination, Verity shall promptly advise Teleworld
thereof. If the termination of the Lease (and resulting termination of this
Sublease) occurs through no fault of Verity, Verity shall have no liability
therefor to Teleworld.
14. Surrender of the Premises. Upon expiration or termination of this
-------------------------
Sublease, Teleworld shall comply with Paragraph 15.2 of the Lease except that
Teleworld shall have no obligation to (i) have the HVAC system serviced, (ii)
wax the floors, (iii) shampoo the carpets, and/or (iv) paint the walls of the
Premises (or clean the walls so that they appear freshly painted); except that
Teleworld shall be obligated to paint the walls of the Premises (or clean the
walls so that they appear freshly painted) if as a result of holes, other
damage, and/or marring of the walls such painting or cleaning is appropriate to
put the Premises in reasonable condition for use and occupancy for the purposes
permitted by Article 4 of the Lease. Upon expiration or termination of the Term
of this Sublease, Verity and Teleworld shall inspect the Premises and the items
listed on Exhibit A to determine whether any repairs or replacements are
necessary. Verity shall have no obligation to return the security deposits made
by Teleworld under this Sublease until completion of such inspection and
determination of necessary repair or replacement costs, if any.
15. Consent of RDI. Whenever the consent of Landlord is required under the
--------------
Lease, Teleworld acknowledges the consent of Verity and RDI shall be required.
Furthermore, this Sublease shall not be operative or deemed effective for any
purpose whatsoever unless and until the consent of RDI to this Sublease has been
obtained. Teleworld and Verity shall use their commercially reasonable efforts
to obtain such consent on or before March 6, 1998. If such consent is not
obtained by March 31, 1998, Verity shall return to Teleworld all sums paid to
Verity by Teleworld pursuant hereto, and this Sublease shall be of no further
force or effect.
6.
<PAGE>
16. Counterparts. This Sublease may be executed in counterparts and
------------
delivered by and to the respective parties by facsimile transmission, and each
such counterpart copy hereof so executed and delivered shall constitute an
original, and all such counterparts together shall constitute a single
agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their duly authorized representatives as of the day and year first above
written.
VERITY:
Verity, Inc., a Delaware corporation
By: /s/ James E. Ticehurst
--------------------------------------
Its: V.P. Administration and Controller
-------------------------------------
Teleworld:
Teleworld, Inc., a Delaware corporation
By: /s/ Michael Ramsay
--------------------------------------
Its: CEO
-------------------------------------
7.
<PAGE>
Lease
Dated: January 22, 1996
By And Between
ROSS DRIVE INVESTORS,
a California General Partnership
as Landlord
And
VERITY, INC.,
a Delaware Corporation
as Tenant
Affecting Premises Commonly Known as
894 Ross Drive, Sunnyvale, California
<PAGE>
Table Of Contents
<TABLE>
<CAPTION> Page
<S> <C>
ARTICLE 1 DEFINITIONS....................................... 1
1.1 General........................................... 1
1.2 Additional Rent................................... 1
1.3 Address for Notices............................... 1
1.4 Agents............................................ 1
1.5 Agreed Interest Rate.............................. 1
1.6 Base Monthly Rent................................. 1
1.7 Building.......................................... 1
1.8 Commencement Date................................. 1
1.9 Common Area....................................... 1
1.10 Common Operating Expenses......................... 2
1.11 Effective Date.................................... 2
1.12 Event of Tenant's Default......................... 2
1.13 Hazardous Materials............................... 2
1.14 Insured and Uninsured Peril....................... 2
1.15 Law............................................... 2
1.16 Lease............................................. 2
1.17 Lease Term........................................ 2
1.18 Lender............................................ 2
1.19 Permitted Use..................................... 2
1.20 Premises.......................................... 2
1.21 Project........................................... 2
1.22 Private Restrictions.............................. 2
1.23 Real Property Taxes............................... 3
1.24 Scheduled Commencement Date....................... 3
1.25 Security Instrument............................... 3
1.26 Summary........................................... 3
1.27 Tenant's Alterations.............................. 3
1.28 Tenant's Share.................................... 3
1.29 Trade Fixtures.................................... 3
</TABLE>
i.
<PAGE>
Table Of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 2 DEMISE, CONSTRUCTION AND ACCEPTANCE............... 3
2.1 Demise of Premises................................ 3
2.2 Commencement Date................................. 3
2.3 Construction of Improvements...................... 4
2.4 Delivery and Acceptance of Possession............. 4
2.5 Early Occupancy................................... 4
ARTICLE 3 RENT.............................................. 4
3.1 Base Month Rent................................... 4
3.2 Additional Rent................................... 4
3.3 Payment of Rent................................... 5
3.4 Late Charge and Interest on Rent in Default....... 5
3.5 Security Deposit.................................. 5
ARTICLE 4 USE OF PREMISES................................... 6
4.1 Limitation on Use................................. 6
4.2 Compliance with Regulations....................... 6
4.3 Outside Areas..................................... 6
4.4 Signs............................................. 7
4.5 Parking........................................... 7
4.6 Rules and Regulations............................. 7
ARTICLE 5 TRADE FIXTURES AND ALTERATIONS.................... 7
5.1 Trade Fixtures.................................... 7
5.2 Tenant's Alterations.............................. 8
5.3 Alterations Required by Law....................... 8
5.4 Amortization of Certain Capital Improvements...... 9
5.5 Mechanic's Liens.................................. 9
5.6 Taxes on Tenant's Property........................ 9
ARTICLE 6 REPAIR AND MAINTENANCE............................ 10
6.1 Tenant's Obligation to Maintain................... 10
6.2 Landlord's Obligation to Maintain................. 11
6.3 Control of Common Area............................ 11
</TABLE>
ii.
<PAGE>
Table Of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 7 WASTE DISPOSAL AND UTILITIES........................... 12
7.1 Waste Disposal......................................... 12
7.2 Hazardous Materials.................................... 12
7.3 Utilities.............................................. 13
7.4 Compliance with Governmental Regulations............... 14
ARTICLE 8 COMMON OPERATING EXPENSE............................... 14
8.1 Tenant's Obligation to Reimburse....................... 14
8.2 Common Operating Expenses Defined...................... 14
8.3 Real Property Taxes Defined............................ 15
ARTICLE 9 INSURANCE.............................................. 16
9.1 Tenant's Insurance..................................... 16
9.2 Landlord's Insurance................................... 17
9.3 Tenant's Obligation to Reimburse....................... 18
9.4 Release and Waiver of Subrogation...................... 18
ARTICLE 10 LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY....... 19
10.1 Limitation on Landlord's Liability..................... 19
10.2 Limitation on Tenant's Recourse........................ 19
10.3 Indemnification of Landlord............................ 19
ARTICLE 11 DAMAGE TO PREMISES..................................... 20
11.1 Landlord's Duty to Restore............................. 20
11.2 Landlord's Right to Terminate.......................... 20
11.3 Tenant's Right to Terminate............................ 21
11.4 Abatement of Rent...................................... 21
ARTICLE 12 CONDEMNATION........................................... 21
12.1 Landlord's Termination Right........................... 21
12.2 Tenant's Termination Right............................. 22
12.3 Restoration and Abatement of Rent...................... 22
12.4 Temporary Taking....................................... 22
12.5 Division of Condemnation Award......................... 22
</TABLE>
iii.
<PAGE>
Table Of Contents
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 13 DEFAULT AND REMEDIES.............................. 23
13.1 Events of Tenant's Default........................ 23
13.2 Landlord's Remedies............................... 24
13.3 Waiver............................................ 25
13.4 Limitation on Exercise of Rights.................. 26
13.5 Waiver by Tenant of Certain Remedies.............. 26
ARTICLE 14 ASSIGNMENT AND SUBLETTING......................... 26
14.1 Transfer By Tenant................................ 26
14.2 Transfer By Landlord.............................. 29
ARTICLE 15 GENERAL PROVISIONS................................ 29
15.1 Landlord's Right to Enter......................... 29
15.2 Surrender of the Premises......................... 30
15.3 Holding Over...................................... 30
15.4 Subordination..................................... 31
15.5 Mortgagee Protection and Attornment............... 31
15.6 Estoppel Certificates and Financial Statements.... 31
15.7 Reasonable Consent................................ 32
15.8 Notices........................................... 32
15.9 Attorneys' Fees................................... 32
15.10 Corporate Authority............................... 32
15.11 Miscellaneous..................................... 33
15.12 Termination by Exercise of Right.................. 33
15.13 Brokerage Commissions............................. 33
15.14 Force Majeure..................................... 34
15.15 Entire Agreement.................................. 34
</TABLE>
iv.
<PAGE>
Summary Of Basic Lease Terms
<TABLE>
<CAPTION>
Section
(Lease Reference) Terms
- ----------------- -------------------------------------------------------------------------
<S> <C>
A. Lease Reference Date: January 22, 1996
--------------------
(Introduction)
B. Landlord: Ross Drive Investors,
--------
(Introduction) a California general partnership
C. Tenant: Verity, Inc.
------
(Introduction) a Delaware corporation
D. Premises: That area consisting of 33,834 square feet of
--------
(S1.21) gross leasable area the address of which is 894
Ross Drive, Suite 100, 101, 200, 201 and 202,
Sunnyvale, CA, within the Building as Shown on
Exhibit A.
E. Project: The land and improvements shown on Exhibit A
-------
(S1.22) consisting of one (1) buildings the aggregate
gross leasable area of which is 43,925 square
feet.
F. Building: The building in which the Premises are located
--------
(S1.7) known as 894 Ross Drive, Sunnyvale,
California containing 43,925 square feet of
gross leasable area.
G. Tenant's Share: 77.03$ See First Addendum,
--------------
(S1.29) See First Addendum, Paragraph 5
H. Tenant's Allocated Parking Stalls: 132 stalls.
(S4.5) ---------------------------------
I. Scheduled Commencement Date: June 1, 1996.
(S1.26) ---------------------------
J Lease Term: 105 calendar months (plus the partial month following the
----------
(S1.18) Commencement Date if such date is not the first day of a month)
K Base Monthly Rent: Months 1 - 24:
-----------------
(S3.1) Months 25 - 60:
Months 61 - 84:
Months 85 - 105:
L. Prepaid Rent: See First Addendum, Paragraph 5 which shall constitute the
------------
(S3.3) first month's rent
M Security Deposit: See First Addendum, Paragraph 4
(S3.5) ----------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Section
(Lease Reference) Terms
- ----------------- ------------------------------------------------------------------------------
<S> <C>
N Permitted Use: General office, research and development, marketing and all
-------------
(S4.1) other related legal uses.
O Permitted Tenant's Alterations Limit: $5,000.00
------------------------------------
(S5.2) (exclusive of Interior Improvements constructed pursuant to Exhibit B)
P Tenant's Liability Insurance Minimum: $3,000,000.00
(S9.1) ------------------------------------
Q Landlord's Address: 2290 North First Street, Suite 300
------------------
(S1.3) San Jose, California 95131
R Tenant's Address: 892 Ross Drive
----------------
(S1.3) Sunnyvale, California 94089
S Retained Real Estate Brokers: Cornish and Carey
----------------------------
(S15.13) 400 Hamilton Avenue
Palo Alto, CA 94301
T Lease: This Lease includes the summary of the Basic Lease Terms, the
-----
(S1.17) Lease, and the following exhibits and addenda:
First Addendum to Lease, Exhibit A (site plan of
---------
the Project containing description of the
Premises), Exhibit B (Improvement Agreement),
---------
Exhibit C (Approved Specifications), Exhibit D
--------- ---------
(acceptance agreement), Exhibit G (form of
---------
subordination agreement), Exhibit H (Hazardous
---------
Materials Questionnaire)
</TABLE>
The foregoing Summary is hereby incorporated into and made a part of this
Lease. Each reference in this Lease to any term of the Summary shall mean the
respective information set forth above and shall be construed to incorporate all
of the terms provided under the particular paragraph pertaining to such
information. In the event of any conflict between the Summary and the Lease, the
Summary shall control.
LANDLORD: TENANT:
Ross Drive Investors Verity, Incorporated
a California general partnership a Delaware corporation
By: /s/ Michael J. Biggar By: /s/ Donald C. McCauley
------------------------ -------------------------------------
Michael J. Biggar Donald C. McCauley
Manager Vice President and CFO
By:_____________________________________
Name:___________________________________
Title:__________________________________
Date: 1/29/96 Date:___________________________________
-------------
2.
<PAGE>
LEASE
This Lease is dated as of the lease reference date specified in Section A
of the Summary and is made by and between the party identified as Landlord in
Section B of the Summary and the party identified as Tenant in Section C of the
Summary.
ARTICLE 1
DEFINITIONS
1.1 General. Any initially capitalized term that is given a special
meaning by this Article 1, the Summary, or by any other provisions of this Lease
(including the exhibits attached hereto) shall have such meaning when used in
this Lease or any addendum or amendment hereto unless otherwise clearly
indicated by the context.
1.2 Additional Rent: The term "Additional Rent" is defined in (S) 3.2.
1.3 Address for Notices: The term "Address for Notices" shall mean the
addresses set forth in Sections O and R of the Summary; provided, however, that
after the Commencement Date, Tenant's Address for Notices shall be the address
of the Premises.
1.4 Agents: The term "Agents" shall mean the following: (i) with respect
to Landlord or Tenant, the agents, employees, contractors, and invitees of such
party; and (ii) in addition with respect to Tenant, Tenant's subtenants and
their respective agents, employees, contractors, and invitees.
1.5 Agreed Interest Rate: The term "Agreed Interest Rate" shall mean that
interest rate determined as of the time it is to be applied that is equal to the
lesser of (i) 5% in excess of the discount rate established by the Federal
Reserve Bank of San Francisco as it may be adjusted from time to time, or (ii)
the maximum interest rate permitted by Law.
1.6 Base Monthly Rent: The term "Base Monthly Rent" shall mean the fixed
monthly rent payable by Tenant pursuant to (S) 3.1 which is specified in Section
K of the Summary.
1.7 Building. The term "Building" shall mean the building in which the
Premises are located which Building is identified in Section F of the Summary,
the gross leasable area of which is referred to herein as the "Building Gross
Leasable Area."
1.8 Commencement Date: The term "Commencement Date" is the date the Lease
Term commences, which term is defined in (S) 2.2.
1.9 Common Area: The term "Common Area" shall mean all areas and
facilities within the Project that are not designated by Landlord for the
exclusive use of Tenant or any other lease or other occupant of the Project,
including the parking areas, access and perimeter roads, pedestrian sidewalks,
landscaped areas, trash enclosures, recreation areas and the like.
3.
<PAGE>
1.10 Common Operating Expenses: The term "Common Operating Expenses" is
defined in (S) 8.2.
1.11 Consumer Price Index: [deleted]
1.12 Effective Date: The term "Effective Date" shall mean the date the last
signatory to this Lease whose execution is required to make it binding on the
parties hereto shall have executed this Lease.
1.13 Event of Tenant's Default: The term "Event of Tenant's Default" is
defined in (S)13.1.
1.14 Hazardous Materials: The terms "Hazardous Materials" and "Hazardous
Materials Laws" are defined in (S) 7.2E.
1.15 Insured and Uninsured Peril: The terms "Insured Peril" and "Uninsured
Peril" are defined in (S) 11.2E.
1.16 Law. The term "Law" shall mean any judicial decision, statute,
constitution, ordinance, resolution, regulation, rule, administrative order, or
other requirement of any municipal, county, state, federal or other government
agency or authority having jurisdiction over the parties to this Lease or the
Premises, or both, in effect either at the Effective Date or any time during the
Lease Term.
1.17 Lease: The term "Lease" shall mean the Summary and all elements of
this Lease identified in Section T of the Summary, all of which are attached
hereto and incorporated herein by this reference.
1.18 Lease Term: The term "Lease Term" shall mean the term of this Lease
which shall commence on the Commencement Date and continue for the period
specified in Section J of the Summary.
1.19 Lender: The term "Lender" shall mean any beneficiary, mortgagee,
secured party, lessor, or other holder of any Security instrument.
1.20 Permitted Use: The term "Permitted Use" shall mean the use specified
in Section N of the Summary.
1.21 Premises: The term "Premises" shall mean that building area described
in Section D of the Summary that is within the Building.
1.22 Project: The term "Project" shall mean that real property and the
improvements thereon which are specified in Section E of the Summary, the
aggregate gross leasable area of which is referred to herein as the "Project
Gross Leasable Area."
1.23 Private Restrictions: The term "Private Restrictions" shall mean all
unrecorded covenants, conditions and restrictions, private agreements,
reciprocal easement agreements, and
4.
<PAGE>
any other recorded instruments affecting the use of the Premises which (i) exist
as of the Effective Date, or (ii) are recorded after the Effective Date and are
approved by Tenant.
1.24 Real Property Taxes. The term "Real Property Taxes" is defined in (S)
8.3.
1.25 Scheduled Commencement Date: The term "Scheduled Commencement Date"
shall mean the date specified in Section I of the Summary.
1.26 Security Instrument: The term "Security Instrument" shall mean any
underlying lease, mortgage or deed of trust which now or hereafter affects the
Project, and any renewal, modification, consolidation, replacement or extension
thereof.
1.27 Summary. The term "Summary" shall mean the Summary of Basic Lease
Terms executed by Landlord and Tenant that is part of this Lease.
1.28 Tenant's Alterations: The term "Tenant's Alterations" shall mean all
improvements, additions, alterations, and fixtures installed in the Premises by
Tenant at its expense which are not Trade Fixtures.
1.29 Tenant's Share: The term "Tenant's Share" shall mean the percentage
obtained by dividing Tenant's Gross Leasable Area by the Building Gross Leasable
Area, which as of the Effective Date is the percentage identified in Section G
of the Summary.
1.30 Trade Fixtures: The term "Trade Fixtures" shall mean (i) Tenant's
inventory, furniture, signs, and business equipment, and (ii) anything affixed
to the Premises by Tenant at is expense for purposes of trade, manufacture,
ornament or domestic use (except replacement of similar work or material
originally installed by Landlord) which can be removed without material injury
to the Premises unless such thing has, by the manner in which it is affixed,
become an integral part of the Premises.
ARTICLE 2
DEMISE, CONSTRUCTION AND ACCEPTANCE
2.1 Demise of Premises: Landlord hereby leases to Tenant, and Tenant
leases from Landlord, for the Lease Term upon the terms and conditions of this
Lease, the Premises for Tenant's own use in the conduct of Tenant's business
together with (i) the non-exclusive right to use the number of Tenant's
Allocated Parking Stalls within the Common Area (subject to the limitations set
forth in (S) 4.5), and (ii) the non-exclusive right to use the Common Area for
ingress to and egress from the Premises. Landlord reserves the use of the
exterior walls, the roof and the area beneath and above the Premises, together
with the right to install, maintain, use, and replace ducts, wires, conduits and
pipes leading through the Premises in locations which will not materially
interfere with Tenant's use of the Premises.
2.2 Commencement Date: The Scheduled Commencement Date shall be only an
estimate of the actual Commencement Date, and subject to the provisions of
Exhibit B, the term of this Lease shall begin on the later to occur of the
following, which shall be the "Commencement Date": (i) the date Landlord offers
to deliver possession of the Premises to
5.
<PAGE>
Tenant following substantial completion of all improvements to be constructed by
Landlord pursuant to (S) 2.3 except for punchlist items which do not prevent
Tenant from using the Premises for the Permitted use and such work as Landlord
is required to perform but cannot complete until Tenant performs necessary
portions of construction work it has elected or is required to do; or (ii) June
1, 1996.
2.3 Construction of Improvements: Prior to the Commencement Date, Landlord
shall construct certain improvements that shall constitute or become part of the
Premises if required by, and then in accordance with, the terms of Exhibit B and
Exhibit C.
2.4 Delivery and Acceptance of Possession: If this Lease provides that
Landlord must deliver possession of the Premises to Tenant on a certain date,
then if Landlord is unable to deliver possession of the Premises to Tenant on or
before such date for any reason whatsoever, this Lease shall not be void or
voidable until December 1, 1996, and Landlord shall not be liable to Tenant for
any loss or damage resulting therefrom. Tenant shall accept possession and enter
into good faith occupancy of the entire Premises and commence the operation of
its business therein within 30 days after the Commencement Date. Tenant
acknowledges that it has had an opportunity to conduct, and has conducted, such
inspections of the Premises as it deems necessary to evaluate its condition.
Except as otherwise specifically provided herein, Tenant agrees to accept
possession of the Premises in its then existing condition, "as-is", including
all patent and latent defects. Tenant's taking possession of any part of the
Premises shall be deemed to be an acceptance by Tenant of any work of
improvement done by Landlord in such part as complete and in accordance with the
terms of this Lease except for defects of which Tenant has given Landlord
written notice prior to the time Tenant takes possession. At the time Landlord
delivers possession of the Preemies to Tenant, Landlord and Tenant shall
together execute an acceptance agreement in the form attached as Exhibit D,
---------
appropriately completed. Landlord shall have no obligations to deliver
possession, nor shall Tenant be entitled to take occupancy, of the Premises
until such acceptance agreement has been executed, and Tenant's obligation to
pay Base Monthly rent and Additional Rent shall not be excused or delayed
because of Tenant's failure to execute such acceptance agreement.
2.5 Early Occupancy. If Tenant enters or permits its contractors to enter
the Premises prior to the Commencement Date with the written permission of
Landlord, it shall do so upon all of the terms of this Lease (including its
obligations regarding indemnity and insurance) except those regarding the
obligation to pay rent, which shall commence on the Commencement Date.
ARTICLE 3
RENT
3.1 Base Month Rent: Commencing on the Commencement Date and continuing
throughout the Lease Term, Tenant shall pay to Landlord the Base Monthly Rent
set forth in Section K of the Summary.
3.2 Additional Rent: Commencing on the Commencement Date and continuing
throughout the Lease Term, Tenant shall pay the following as additional rent
(the "Additional
6.
<PAGE>
Rent"): (i) any late charges or interest due Landlord pursuant to (S) 3.4; (ii)
Tenant's Share of Common Operating Expenses as provided in (S) 8.1; (iii)
Landlord's share of any Subrent received by Tenant upon certain assignments and
sublettings as required by (S) 14.1; (iv) any legal fees and costs due Landlord
pursuant to (S) 15.9; and (v) any other charges due Landlord pursuant to this
Lease.
3.3 Payment of Rent: Concurrently with the execution of this Lease by both
parties, Tenant shall pay to Landlord the amount set forth in Section L of the
Summary as prepayment of rent for credit against the first installment(s) of
Basic Monthly Rent. All rent required to be paid in monthly installments shall
be paid in advance on the first day of each calendar month during the Lease
Term. If Section K of the Summary provides that the Base Monthly Rent is to be
increased during the Lease Term and if the date of such increase does not fall
on the first day of a calendar month, such increase shall become effective on
the first day of the next calendar month. All rent shall be paid in lawful money
of the United States, without any abatement, deduction or offset whatsoever
(except as specifically provided in (S) 11.4 and (S) 12.3), and without any
prior demand therefor. Rent shall be paid to Landlord at its address set forth
in Section P of the Summary, or at such other place as Landlord may designate
from time to time. Tenant's obligation to pay Base Monthly Rent and Tenant's
Share of Common Operating Expenses shall be prorated at the commencement and
expiration of the Lease Term.
3.4 Late Charge and Interest on Rent in Default: If any Base Monthly Rent
or Additional Rent is not received by Landlord from Tenant within three business
days after Landlord has notified Tenant in writing that payment of such rent has
not been received by Landlord, then Tenant shall immediately pay to Landlord a
late charge equal to 5% of such delinquent rent as liquidated damages for
Tenant's failure to make timely payment. In no event shall this provision for a
late charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any rent or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant's failure to pay any rent due under
this Lease in a timely fashion, including any right to terminate this Lease
pursuant to (S) 13.2B. If any rent remains delinquent for a period in excess of
30 days then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
following the date such amount became due until paid.
3.5 Security Deposit: On the Effective Date, Tenant shall deposit with
Landlord the amount set forth in Section M of the Summary as security for the
performance by Tenant of its obligations under this Lease, and not as prepayment
of rent (the "Security Deposit"). Landlord may from time to time apply such
portion of the Security Deposit as is reasonably necessary for the following
purposes: (i) to remedy any default by Tenant in the payment of rent; (ii) to
repair damage to the Premises caused by Tenant; (iii) to clean the Premises upon
termination of the Lease; and (iv) to remedy any other default of Tenant to the
extent permitted by Law and, in this regard, Tenant hereby waives any
restriction on the uses to which the Security Deposit may be put contained in
California Civil Code Section 1950.7. In the event the Security Deposit or any
portion thereof is so used, Tenant agrees to pay to Landlord promptly upon
demand an amount in cash sufficient to restore the Security Deposit to the full
original amount. Landlord shall not be deemed a trustee of the Security Deposit,
may use the Security Deposit in business, and shall not be required to segregate
it from its general accounts. Tenant shall not be entitled to any interest on
the Security Deposit. If Landlord transfers the Premises during the Lease Term,
Landlord
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may pay the Security Deposit to any transferee of Landlord's interest in
conformity with the provisions of California Civil Code Section 1950.7 and/or
any successor statute, in which event the transferring Landlord will be released
from all liability for the return or the Security Deposit.
ARTICLE 4
USE OF PREMISES
4.1 Limitation on Use: Tenant shall use the Premises solely for the
Permitted use specified in Section N of the Summary. Tenant shall not do
anything in or about the Premises which will (i) cause structural injury to the
Building, or (ii) cause damage to any part of the Building except to the extent
reasonably necessary for the installation of Tenant's Trade Fixtures and
Tenant's Alterations, and then only in a manner which has been first approved by
Landlord in writing. Tenant shall not operate any equipment within the Premises
which will (i) materially damage the Building or the Common Area, (ii) overload
existing electrical systems or other mechanically equipment servicing the
Building, (iii) impair the efficient operation of the sprinkler system or the
heating, ventilating or air conditioning ("HVAC") equipment within or servicing
the Building, or (iv) damage, overload or corrode the sanitary sewer system.
Tenant shall not attach, hang or suspend anything from the ceiling, roof, walls
or columns of the Building or set any load on the floor in excess of the load
limits for which such items are designed nor operate hard wheel forklifts within
the Premises. Any dust, fumes, or waste products generated by Tenant's use of
the Premises shall be contained and disposed so that they do not (i) create an
unreasonable fire or health hazard, (ii) damage the Premises, or (iii) result in
the violation of any Law. Except as approved by Landlord, Tenant shall not
change the exterior of the Building or install any equipment or antennas on or
make any penetrations of the exterior roof of the Building. Tenant shall not
commit any waste in or about the Premises, and Tenant shall keep the Premises in
a neat, clean, attractive and orderly condition, free of any nuisances. If
Landlord designates a standard window covering for use throughout the Building,
Tenant shall use this standard window covering to cover all windows in the
Premises. Tenant shall not conduct on any portion of the Premises or the Project
any sale of any kind, including any public or private auction, fire sale, going-
out-of-business sale, distress sale or other liquidation sale.
4.2 Compliance with Regulations: Tenant shall not use the Premises in any
manner which violates any Laws or Private Restrictions which affect the
Premises. Tenant shall abide by and promptly observe and comply with all Laws
and Private Restrictions by any Laws or Private Restrictions for Tenant's
particular use of the Premises. Subject to Landlord's right or reimbursement
under Paragraph 5.4, Landlord shall make any alterations, additions or other
capital improvements which is required by any Laws or Private Restrictions for
buildings in general. Tenant shall not use the Premises in any manner which will
cause a cancellation of any insurance policy covering Tenant's Alterations or
any improvements installed by Landlord at its expense or which poses an
unreasonable risk of damage or injury to the Premises. Tenant shall not sell, or
permit to be kept, used, or sold in or about the Premises any article which may
be prohibited by the standard form of fire insurance policy. Tenant shall comply
with all reasonable requirements of any insurance company, insurance
underwriter, or Board of Fire Underwriters which are necessary to maintain the
insurance coverage carried by either Landlord or Tenant pursuant to this Lease.
8.
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4.3 Outside Areas: No materials, supplies, tanks or containers,
equipment, finished products or semi-finished products, raw materials,
inoperable vehicles or articles of any nature shall be stored upon or permitted
to remain outside of the Premises except in fully fenced and screened areas
outside the Building which have been designed for such purpose and have been
approved in writing by Landlord for such use by Tenant.
4.4 Signs: Tenant shall not place on any portion of the Premises any sign,
placard, lettering in or on windows, banner, displays or other advertising or
communicative material which is visible from the exterior of the Building
without the prior written approval of Landlord. Landlord agrees to cooperate,
with Tenant at Tenant's expense, in seeking governmental approvals for Tenant's
signs. All such approved signs shall strictly conform to all Laws, Private
Restrictions, and Landlord's sign criteria attached as Exhibit F, and shall be
---------
installed at the expense of Tenant. Tenant shall maintain such signs in a good
condition and repair.
4.5 Parking. Tenant is allocated and shall have the non-exclusive right to
use not more than the number of Tenant's Allocated Parking Stalls contained
within the Project described in Section H of the Summary for its use and the use
of Tenant's Agents, the location of which may be designated from time to time by
Landlord. Tenant shall not at any time use more parking spaces than the number
so allocated to Tenant or park its vehicles or the vehicles or others in any
portion of the Project not designated by Landlord as a non-exclusive parking
area. Tenant shall not have the exclusive right to use any specific parking
space. If Landlord grants to any other tenant the exclusive right to use any
specific parking space(s), Tenant shall not use such spaces. Landlord reserves
the right, after having given Tenant reasonable notice, to have any vehicles
owned by Tenant or Tenant's Agents utilizing parking spaces in excess of the
parking spaces allowed for Tenant's use to be towed away at Tenant's cost. All
trucks and delivery vehicles shall be (i) parked at the rear of the Building,
(ii) loaded and unloaded in a manner which does not interfere with the
businesses of other occupants of the Project, and (iii) permitted to remain on
the Project only so long as it is reasonably necessary to complete loading and
unloading. In the event Landlord elects or is required by any Law to limit or
control parking in the Project, whether by validation of parking tickets or any
other method of assessment, Tenant agrees to participate in such validation or
assessment program under such reasonable rules and regulations as are from time
to time established by Landlord. Tenant shall not be required to pay for parking
unless required by Law.
4.6 Rules and Regulations: Landlord may from time to time promulgate
reasonable and nondiscriminatory rules and regulations applicable to all
occupants of the Project for the care and orderly management of the Project and
the safety of its tenants and invitees. Such rules and regulations shall be
binding upon Tenant ten (10) days following delivery of a copy thereof to
Tenant, and Tenant agrees to abide by such rules and regulations. If there is a
conflict between the rules and regulations and any of the provisions of this
Lease, the provisions of this Lease shall prevail. Landlord shall not be
responsible for the violation by any other tenant of the Project of any such
rules and regulations.
9.
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ARTICLE 5
TRADE FIXTURES AND ALTERATIONS
5.1 Trade Fixtures: Throughout the Lease Term, Tenant may provide and
install, and shall maintain in good condition, any Trade Fixtures required in
the conduct of its business in the Premises. All Trade Fixtures shall remain
Tenant's property.
5.2 Tenant's Alterations: Construction by Tenant of Tenant's Alterations
shall be governed by the following:
(a) Tenant shall not construct any Tenant's Alterations or otherwise
alter the Premises without Landlord's prior written approval (which shall not be
reasonably withheld). Tenant shall be entitled, without Landlord's prior
approval, to make Tenant's Alterations (i) which do not affect the structural or
exterior parts or water tight character of the Building, and (ii) the reasonably
estimated cost of which, plus the original cost of any part of the Premises
removed or materially altered in connection with such Tenant's Alterations,
together do not exceed the Permitted Tenant Alterations Limit specified in
Section O of the Summary per work of improvement. In the event Landlord's
approval for any Tenant's Alterations is required, Tenant shall not construct
the Leasehold Improvement until Landlord has approved in writing the plans and
specifications therefor, and such Tenant's Alterations shall be constructed
substantially in compliance with such approved plans and specifications by a
licensed contractor first approved by Landlord. All Tenant's Alterations
constructed by Tenant shall be constructed by a licensed contractor in
accordance with all Laws using a new materials of good quality.
(b) Tenant shall not commence construction of any Tenant's
Alterations until (i) all required governmental approvals and permits have been
obtained, (ii) all requirements regarding insurance imposed by this Lease have
been satisfied, (iii) Tenant has given Landlord at least five days' prior
written notice of its intention to commence such construction, and (iv) if
reasonably requested by Landlord, Tenant has obtained contingent liability and
broad form builders' risk insurance in an amount reasonably satisfactory to
Landlord if there are any perils relating to the proposed construction not
covered by insurance carried pursuant to Article 9.
(c) All Tenant's Alterations shall remain the property of Tenant
during the Lease term but shall not be altered or removed from the Premises. At
the expiration or sooner termination of the Lease Term, all Tenant's Alterations
shall be surrend4red to Landlord as part of the realty and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse Tenant
for all or any portion of the value or cost thereof; provided, however, that if
Landlord requires Tenant to remove any Tenant's Alterations, Tenant shall so
remove such Tenant's Alterations prior to the expiration or sooner termination
of the Lease Term. Notwithstanding the foregoing, Tenant shall not be obligated
to remove any Tenant's Alterations with respect to which the following is true:
(i) Tenant was required, or elected, to obtain the approval of Landlord to the
installation of the Leasehold Improvement in question; (ii) at the time Tenant
requested of Landlord's approval, Tenant requested of Landlord in writing that
Landlord inform Tenant of whether or not Landlord would require Tenant to remove
such Leasehold Improvement at the expiration of the Lease Term; and (iii) at the
time Landlord
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granted its approval, it did not inform Tenant that it would require Tenant to
remove such Leasehold Improvement at the expiration of the Lease Term.
5.3 Alterations Required by Law: Tenant shall make any alteration,
addition or change of any sort to the Premises that is required by any Law
because of (i) Tenant's particular use or change of use of the Premises; (ii)
Tenant's application for any permit or governmental approval; or (iii) Tenant's
construction or installation of any Tenant's Alterations or Trade Fixtures. Any
other alteration, addition, or change required by Law which is not the
responsibility of Tenant pursuant to the foregoing shall be made by Landlord
(subject to Landlord's right to reimbursement from Tenant specified in (S) 5.4).
5.4 Amortization of Certain Capital Improvements: Tenant shall pay
Additional Rent in the event Landlord reasonably elects or is required to make
any of the following kinds of capital improvements to the Project and the cost
thereof is not reimbursable as a Common Operating Expense: (i) capital
improvements required to be constructed in order to comply with any Law
(excluding any Hazardous Material Law) not in effect or applicable to the
Project as of the Effective Date; (ii) modification of existing or construction
of additional capital improvements or building service equipment for the purpose
of reducing the consumption of utility services or Common Operating Expenses of
the Project, (iii) replacement of capital improvements or building service
equipment existing as of the Effective Date when required because of normal wear
and tear; (iv) restoration of any part of the Project that has been damaged by
any peril to the extent the cost thereof is not covered by insurance proceeds
actually recovered by Landlord up to a maximum amount per occurrence of 10% of
the then replacement cost of the Project and (v) any alterations, additions, or
improvements required by any Laws or Private Restrictions and related to
buildings generally. The amount of Additional Rent Tenant is to pay with
respect to each such capital improvement shall be determined as follows:
(a) All costs paid by landlord to construct such improvements
(including financing costs) shall be amortized over the useful life of such
improvement (as reasonably determined by landlord in accordance with generally
accepted accounting principles) with interest o the unamortized balance at the
then prevailing market rate landlord would pay if it borrowed funds to construct
such improvements from an institutional lender, and landlord shall inform Tenant
of the monthly amortization payment required to so amortize such costs, and
shall also provide tenant with the information upon which such determination is
made.
(b) As Additional Rent, Tenant shall pay at the same time the Base
Monthly Rent is due an amount equal to Tenant's share of that portion of such
monthly amortization payment fairly allocable to the Building (as reasonably
determined Landlord) for each month after such improvements are completed until
the first to occur of (i) the expiration of the Lease Term (as it may be
extended), or (ii) the end of the term over which such costs were amortized.
5.5 Mechanic's Liens: Tenant shall keep the Project free from any liens
and shall pay when due all bills arising out of any work performed, materials
furnished, or obligations incurred by Tenant or Tenant's Agents relating to the
Project. If any claim of lien is recorded (except those caused by other tenants
in the Project, landlord or landlord's Agents), Tenant shall bond against or
discharge the same within 10 days after the same has been recorded against the
Project. Should any lien be filed against the Project or any action be
commenced affecting title
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to the Project, the party receiving notice of such lien or action shall
immediately give the other party written notice thereof.
5.6 Taxes on Tenant's Property: Tenant shall pay before delinquency any
and all taxes, assessments, license fees and public charges levied, assessed or
imposed against Tenant or Tenant's estate in this Lease or the property of
Tenant situated within the Premises which become due during the Lease term. If
any tax or other charge is assessed by any government agency because of the
execution of this Lease, such tax shall be paid by Tenant. On demand by
landlord, Tenant shall furnish landlord with satisfactory evidence of these
payments.
ARTICLE 6
REPAIR AND MAINTENANCE
6.1 Tenant's Obligation to Maintain: Except as otherwise provided in
(P)6.2, (P)1.1.1, and (P)1.2.3, Tenant shall be responsible for the following
during the Lease Term:
(a) Tenant shall clean and maintain in good order, condition, and
repair and replace when necessary the premises and every part thereof, through
regular inspections and servicing, including but not limited to: (i) all
plumbing and sewage facilities (including all sinks, toilets, faucets and
drains), and all ducts, pipes, vents or other parts of the HVAC or plumbing
system; (ii) all fixtures, interior walls, floors, carpets and ceilings; (iii)
all windows, doors, entrances, plate glass, showcases and skylights (including
cleaning both interior and exterior surfaces); (iv) all electrical facilities
and all equipment (including all lighting fixtures, lamps, bulbs, tubes, fans,
vents, exhaust equipment and systems); and (v) any automatic fire extinguisher
equipment in the Premises.
(b) With respect to utility facilities serving the Premises
(including electrical wiring and conduits, gas lines, water pipes, and plumbing
and sewage fixtures and pipes). Tenant shall be responsible for the maintenance
and repair of any such facilities which serve only the Premises, including all
such facilities that are within the walls or floor, or on the roof of the
Premises, and any part of such facility that is not within the Premises, but
only up to the point where such facilities join a main or other junction (e.g.,
sewer main or electrical transformer) from which such utility services are
distributed to other parts of the Project as well as to the Premises. Tenant
shall replace any damaged or broken glass in the premises (including all
interior and exterior doors and windows) with glass of the same kind, size and
quality. Tenant shall repair any damage to the premises (including exterior
doors and windows) caused by vandalism or any unauthorized entry.
(c) Tenant shall (i) maintain, repair and replace when necessary all
HVAC equipment which services only the Premises, and shall keep the same in good
condition through regular inspection and servicing, and (ii) maintain
continuously throughout the Lease Term a service contract for the maintenance of
all such HVAC equipment with a licensed HVAC repair and maintenance contractor
approved by Landlord, which contract provides for the periodic inspection and
servicing of the HVAC equipment at least once every 60 days during the Lease
Term. Notwithstanding the foregoing, landlord may elect at any time to assume
responsibility for the maintenance, repair and replacement of such HVAC
equipment which serves only the
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Premises. Tenant shall maintain continuously throughout the Lease Term a service
contract for the washing of all windows (both interior and exterior surfaces) in
the Premises with a contractor approved by landlord, which contract provides for
the periodic washing of all such windows at least once every 60 days during the
Lease Terms, or Tenant may provide such service itself provided that the quality
of work is reasonably consistent with that of professional contractors. Tenant
shall furnish landlord with copies of all such service contracts, which shall
provide that they may not be cancelled or changed without at least 30 days'
prior written notice to landlord.
(d) All repairs and replacements required of tenant shall be promptly
made with new materials of like kind and quality. If the work affects the
structural parts of the Building or if the estimated cost of any item of repair
or replacement is in excess of the Permitted Tenant's Alterations Limit, then
Tenant shall first obtain landlord's written approval of the scope of the work,
plans therefor, materials to be used, and the contractor. See First Addendum to
Lease Paragraph 7.
6.2 Landlord's Obligation to Maintain: Landlord shall repair, maintain
and operate the Common Area and repair and maintain the roof, exterior and
structural parts of the building(s) including the structural components of the
floor slab, foundation, and bearing walls located on the Project so that the
same are kept in good order and repair. If there is central HVAC or other
building service equipment and/or utility facilities serving portions of the
Common Area and/or both the Premises and other parts of the Building, Landlord
shall maintain and operate (and replace when necessary) such equipment.
Landlord shall not be responsible for repairs required by an accident, fire or
other peril or for damage caused to any part of the Project by any act or
omission of Tenant or Tenant's Agents except as otherwise required by Article 11
and subject to Paragraph 9.4. Landlord may engage contractors of its choice to
perform the obligations required of it by this Article, and the necessity of any
expenditure to perform such obligations shall be at the sole but reasonable
discretion of Landlord.
6.3 Control of Common Area: landlord shall at all times have exclusive
control of the Common area. Landlord shall have the right, without the same
constituting an actual or constructive eviction and without entitling Tenant to
any abatement of rent, to: (i) close any part of the Common Area to whatever
extent required in the opinion of Landlord's counsel to prevent a dedication
thereof or the accrual of any prescriptive rights therein; (ii) temporarily
close the Common Area to perform maintenance or for any other reason deemed
sufficient by Landlord; (iii) change the shape, size, location and extent of the
Common Area; (iv) eliminate from or add to the Project any land or improvement,
including multi-deck parking structures; (v) make changes to the Common Area
including, without limitation, changes in the location of driveways, entrances,
passageways, doors and doorways, elevators, stairs, restrooms, exits, parking
spaces, parking areas, sidewalks or the direction of the flow of traffic and the
site of the Common Area; (vi) remove unauthorized persons from the Project;
and/or (vii) change the name or address of the Building or Project. Tenant
shall keep the Common Area clear of all obstructions created or permitted by
Tenant. If in the opinion of Landlord unauthorized persons are using any of the
Common Area by reason of the presence of tenant in the Building, tenant, upon
demand of Landlord, shall restrain such unauthorized use by appropriate
proceedings. In exercising any such rights regarding the Common Area, (i)
Landlord shall make a reasonable effort to minimize any disruption to Tenant's
business, and (ii) Landlord shall not exercise its rights to control the Common
Area in a manner that would materially interfere with Tenant's use of the
Premises
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without first obtaining Tenant's consent. Landlord shall have no obligation to
provide guard services or other security measures for the benefit of the
Project. Tenant assumes all responsibility for the protection of Tenant and
Tenant's Agents from acts of third parties; provided, however; that nothing
contained herein shall prevent landlord, at its sole option, from providing
security measures for the Project.
ARTICLE 7
WASTE DISPOSAL AND UTILITIES
7.1 Waste Disposal: Tenant shall store its waste either inside the
Premises or within outside trash enclosures that are fully fenced and screened
in compliance with all Private Restrictions, and designed for such purpose. All
entrances to such outside trash enclosures shall be kept closed, and waste shall
be stored in such manner as not to be visible from the exterior of such outside
enclosures. Tenant shall keep all fire corridors and mechanical equipment rooms
in the premises free and clear of all obstructions at all times.
7.2 Hazardous Materials: Landlord and Tenant agree as follows with
respect to the existence or use of hazardous materials on the Project:
(a) Any handling, transportation, storage, treatment, disposal or use
of Hazardous Materials by Tenant and Tenant's Agents after the Effective Date in
or about the Project shall strictly comply with all applicable Hazardous
Materials Laws. Tenant shall indemnify, defend upon demand with counsel
reasonably acceptable to Landlord, and hold harmless Landlord from and against
any liabilities, losses, claims, damages, lost profits, consequential damages,
interest, penalties, fines, monetary sanctions, attorneys' fees, experts' fees,
court costs, remediation costs, investigation costs, and other expenses which
result from or arise in any manner whatsoever out of the use, storage,
treatment, transportation, release, or disposal of Hazardous Materials on or
about the Project by Tenant or Tenant's Agents after the Effective Date.
(b) If the presence of Hazardous materials on the project caused or
permitted by Tenant or Tenant's Agents after the Effective Date results in
contamination or deterioration of water or soil resulting in a level of
contamination greater than the levels established as acceptable by any
governmental agency having jurisdiction over such contamination, then Tenant
shall promptly take any and all action necessary to investigate and remediate
such contamination if required by Law or as a condition to the issuance or
continuing effectiveness of any governmental approval which relates to the use
of the Project or any part thereof. Tenant shall further be solely responsible
for, and shall defend, indemnify and hold landlord and its agents harmless from
and against, all claims, costs and liabilities, including attorneys' fees and
costs, arising out of or in connection with any investigation and remediation
required hereunder to return the Project to its condition existing prior to the
appearance of such Hazardous Materials caused or permitted by Tenant or Tenant's
Agents.
(c) Landlord and Tenant shall each give written notice to the other
as soon as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Project, and (ii) any contamination of the
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Project by Hazardous Materials which constitutes a violation of any Hazardous
Materials Law. Tenant may use small quantities of household chemicals such as
adhesives, lubricants, and cleaning fluids in order to conduct its business at
the Premises and such other Hazardous Materials as are necessary for the
operation of Tenant's business of which Landlord receives notice prior to such
Hazardous Materials being brought onto the Premises and which Landlord consents
in writing may be brought onto the Premises. At any time during the lease Term,
Tenant shall, within five business days after written request therefor received
from landlord, disclose in writing all hazardous materials that are being used
by Tenant on the Project, the nature of such use, and the manner of storage and
disposal.
(d) Landlord may cause testing wells to be installed on the Project,
and may cause the ground water to be tested to detect the presence of Hazardous
Materials by the use of such tests as are then customarily used for such
purposes. If Tenant so requests, Landlord shall supply Tenant with copies of
such test results. The cost of such tests and of the installation, maintenance,
repair and replacement of such wells shall be paid by Tenant if such tests
disclose the existence of facts which give rise to liability of Tenant pursuant
to its indemnity given in (P) 7.2A and/or (P) 7.2B; otherwise, such costs shall
be paid entirely by Landlord.
(e) As used herein, the term "Hazardous Material," means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government. The term "Hazardous Material," includes, without limitation,
petroleum products, asbestos, PCB's, and any material or substance which is (i)
listed under Article 9 or defined as hazardous or extremely Hazardous pursuant
to Article 11, of Title 22 of the California Administrative Code, Division 4,
Chapter 20, (ii) defined as a "hazardous waste" pursuant to Section 1004 of the
of the Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.
(42 U.S.C. 6903), or (iii) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental response; Compensation and
Liability Act, 41 U.S.C. 9601 et seq. (42 U.S.C. 9601). As used herein, the term
"Hazardous Material Law" shall mean any statute, law, ordinance, or regulation
of any governmental body or agency (including the U.S. environmental Protection
Agency, the California Regional Water Quality Control Board, and the California
Department of Health Services) which regulates the use, storage, release or
disposal of any Hazardous Material.
(f) The obligations of Landlord and Tenant under this (P)7.2 shall
survive the expiration or earlier termination of the Lease Term. The rights and
obligations of landlord and Tenant with respect to issues relating to Hazardous
Materials are exclusively established by this (P)7.2. In the event of any
inconsistency between any other part of this lease and this (P)7.2, the terms of
this (P)7.2 shall control.
7.3 Utilities: Tenant shall promptly pay, as the same become due, all
charges for water, gas, electricity, telephone, sewer service, waste pick-up and
any other utilities, materials or services furnished directly to or used by
Tenant on or about the premises during the Lease Term, including, without
limitation, (i) meter, use and/or connection fees, hook-up fees, or standby fee
(excluding any connection fees or hook-up fees which relate to making the
existing electrical, gas, and water service available to the Premises as of the
Commencement Date), and (ii) penalties for discontinued or interrupted service.
If any utility service is not separately metered to the premises, then Tenant
shall pay its pro rata share of the cost of such utility service
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with all others served by the service not separately metered. However, if
Landlord reasonably determines that Tenant is using a disproportionate amount of
any utility service not separately metered, then Landlord at its election may
(i) periodically charge Tenant, as Additional Rent, a sum equal to landlord's
reasonable estimate of the cost of Tenant's excess use of such utility service,
or (ii) install a separate meter (at Tenant's expense) to measure the utility
service supplied to the Premises.
7.4 Compliance with Governmental Regulations: Landlord and Tenant shall
comply with all rules, regulations and requirements promulgated by nations,
state or local governmental agencies or utility suppliers concerning the use of
utility services, including any rationing, limitation or other control. Tenant
shall not be entitle to terminate this Lease not to any abatement in rent by
reason of such compliance.
ARTICLE 8
COMMON OPERATING EXPENSE
8.1 Tenant's Obligation to Reimburse: As additional Rent, Tenant shall pay
Tenant's Share (specified in Section G of the Summary) o all Common Operating
Expenses; provided, however, if the Project contains more than one building,
then Tenant shall pay Tenant's Share of all Common Operating expenses fairly
allocable to the Building, including (i) all Common Operating Expenses paid with
respect to the maintenance, repair, replacement and use of the Building, and
(ii) a proportionate share (based on the Building Gross Leasable Area as a
percentage of the Project Gross Leasable Area) of all Common Operating Expenses
which relate to the Project in general are not fairly allocable to any one
building that is part of the Project. Tenant shall pay such share of the actual
Common Operating Expenses incurred or paid by landlord but not theretofore
billed to Tenant within 10 days after receipt of a written bill therefor from
Landlord, on such periodic basis as landlord shall designate, but in no event
more frequently than once a month. Alternatively, Landlord may from time to time
require that Tenant pay Tenant's Share of Common Operating Expenses in advance
in estimated monthly installments, in accordance with the following: (i)
Landlord shall deliver to Tenant Landlord's reasonable estimate of the Common
Operating expenses it anticipates will be paid or incurred for the Landlord's
fiscal year in questions; (ii) during Landlord's fiscal year Tenant shall pay
such share of the estimated Common Operating Expense sin advance in monthly
installments as requested by Landlord due with the installment of Base Monthly
Rent; and (iii) within 90 days after the end of each Landlord's fiscal year,
Landlord shall furnish to Tenant a statement in reasonable detail of the actual
Common Operating Expenses paid or incurred by Landlord during the just ended
Landlord's fiscal year and thereupon there shall be an adjustment between
Landlord and Tenant, with payment to Landlord or credit (or cash if at the end
of the Lease Term) by Landlord against the next installment of Base Monthly
Rent, as the case may require, within 10 after delivery by Landlord to tenant of
said statement, so that Landlord shall receive the entire amount of Tenant's
Share of all Common Operating Expenses for such Landlord's fiscal year and not
more. Tenant shall have the right at its expense, exercisable upon reasonable
prior written notice to Landlord, to inspect at Landlord's office during normal
business hours Landlord's books and records as they relate to Common Operating
Expenses. Such inspection must be within 30 days of Tenant's receipt of
Landlord's annual statement for the same, and
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shall be limited to verification of the charges contained in such statement.
Tenant may not withhold payment of such bill pending completion of such
inspection.
8.2 Common Operating Expenses Defined: The term "Common Operating
Expenses" shall mean the following:
(a) All costs and expenses paid or incurred by landlord in doing the
following (including payments to independent contractors providing services
related to the performance of the following): (i) maintaining, cleaning,
repairing and resurfacing the roof (including repair of leaks) and the exterior
surfaces (including painting) of all buildings located on the Project; (ii)
maintenance of the liability, fire and property damage insurance covering the
Project carried by landlord pursuant to (P)9.2 (including the prepayment of
premiums for coverage of up to one year); (iii) maintaining, repairing,
operating and replacing when necessary HVAC equipment, utility facilities and
other building service equipment; (iv) providing utilities to the Common Area
(including lighting, trash removal and water for landscaping irrigation); (v)
complying with all applicable Laws and Private Restrictions; (vi) operating,
maintaining, repairing, cleaning, painting, restriping and resurfacing the
Common Area; (vii) replacement or installation of lighting fixtures, directional
or other signs and signals, irrigation systems, trees, shrubs, ground cover and
other plant materials, and all landscaping in the Common Area; and (viii)
providing security; for the purpose of determining operating expenses as set
forth in Paragraph 8.2 hereof, "Common Operating Expenses" shall in no event
include expenses incurred for the following: (i) Leasing commissions, attorney's
fees, costs and disbursement and other expenses incurred in connection with
negotiations or disputes with tenants, other occupants, or prospective tenants
or other occupants; (ii) Depreciation; and (iii) Advertising and promotional
expenditures;
(b) The following costs: (i) Real Property Taxes as defined in
(P)8.3; (ii) the amount of any "deductible" paid by Landlord with respect to
damage caused by any Insured Peril; (ii) the cost to repair damage caused by an
Uninsured Peril up to a maximum amount in any 12 month period equal to 2% of the
replacement cost of the buildings or other improvements damaged; and(iv) that
portion of all compensation (including benefits and premiums for workers'
compensation and other insurance) paid to or on behalf of employees of Landlord
but only to the extent they are involved in the performance of the work
described by (P)8.2A that is fairly allocable to the Project;
(c) Fees for management services rendered by either landlord or a
third party manager engaged by Landlord (which may be a party affiliated with
landlord), except that the total amount charged for management services and
included in Tenant's Share of Common Operating Expenses shall not exceed the
monthly rate of 4% of the Base Monthly Rent.
(d) All additional costs and expenses incurred by landlord with
respect to the operation, protection, maintenance, repair and replacement of the
project which would be considered a current expense (and not a capital
expenditure) pursuant to generally accepted accounting principles; provided,
however, that Common Operating Expenses shall not include any of the following:
(i) payments on any loans or ground leases affecting the Project; (ii)
depreciation of any buildings or any major systems of building service equipment
within the Project; (iii) leasing commissions; (iv) the cost of tenant
improvements installed for the
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exclusive use of other tenants of the project; and (v) any cost incurred in
complying with Hazardous Materials Laws, which subject is governed exclusively
by (P)7.2.99
8.3 Real Property Taxes Defined: The term "Real Property Taxes" shall
mean all taxes, assessments, levies, and other charges of any kind or nature
whatsoever, general and special, foreseen and unforeseen (including all
installments of principal and interest required to pay any existing or future
general or special assessments for public improvements, services or benefits,
and any increases resulting form reassessments resulting from a change in
ownership, new construction, or any other cause), now or hereafter imposed by
any governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of all or any
portion of the Project (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed) or Landlord's interest therein, the
fixtures, equipment and other property of Landlord, real or personal, that are
an integral part of and located on the project, the gross receipts, income, or
rentals from the project, or the use of parking areas, public utilities, or
energy within the Project, or landlord's business of leasing the Project. If at
any time during the Lease Term the method of taxation or assessment of the
project prevailing as of the Effective date shall be altered so that in lieu of
or in addition to any Real property tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge (i) on the value, use or occupancy of the Project or
landlord's interest therein, or (ii) on or measured by the gross receipts,
income or rentals from the project, on landlord's business of leasing the
project, or computed in any manner with respect to the operation of the Project,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for the purposes of this Lease. If
any Real Property Tax is based upon property or rents unrelated to the Project,
then only that part of such Real Property Tax that is fairly allocable to the
project shall be included within the meaning of the term "Real Property Taxes".
Notwithstanding the foregoing, the term "Real Property Taxes" shall not include
estate, inheritance, transfer, gift or franchise taxes of Landlord or the
federal or state net income tax imposed on Landlord's income from all sources.
ARTICLE 9
INSURANCE
9.1 Tenant's Insurance: Tenant shall maintain insurance complying with
all of the following:
(a) Tenant shall procure, pay for and keep in full force and effect
the following:
(1) Commercial general liability insurance, including
property damage, against liability for personal injury, bodily injury, death and
damage to property occurring in or about, or resulting from an occurrence in or
about, the Premises with combined single limit coverage of not less than the
amount of Tenant's Liability Insurance Minimum specified in Section P of the
Summary, which insurance shall contain a "contractual liability"
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endorsement insuring Tenant's performance of Tenant's obligation to indemnify
Landlord contained in (P)10.3.
(2) Fire and property damage insurance in so-called "all
risk" form insuring Tenant's Trade Fixtures and Tenant's Alterations for the
full actual replacement cost thereof;
(3) Such other insurance that is reasonably required by any
Lender,
(b) Where applicable and required by Landlord, each policy of
insurance required to be carried by Tenant pursuant to this (P)9.1: (i) shall
name Landlord and such other parties in interest as Landlord reasonably
designates as additional insured; (ii) shall be primary insurance which provides
that the insurer shall be liable for the full amount of the loss up to and
including the total amount of liability set forth in the declarations without
the right of contribution from any other insurance coverage of Landlord; (ii)
shall be in a form satisfactory to Landlord; (iv) shall be carried with
companies reasonably acceptable to landlord; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least 30
days prior written notice to Landlord so long as such provision of 30 days
notice is reasonably obtainable, but in any event not less than 10 days prior
written notice; (vi) shall not have a "deductible" in excess of such amount as
is approved reasonably by Landlord; (vii) shall contain a cross liability
endorsement; and (viii) shall contain a "severability" clause. If Tenant has in
full force and effect a blanket policy of liability insurance with the same
coverage for the Premises as described above, as well as other coverage of other
premises and properties of Tenant, or in which Tenant has some interest, such
blanket insurance shall satisfy the requirements of this (P)9.1.
(c) A copy of each paid-up policy evidencing the insurance required
to be carried by Tenant pursuant to this (P)9.1 (appropriately authenticated by
the insurer) or a certificate of the insurer, certifying that such policy has
been issued, providing the coverage required by this (P)9.1, and containing the
provisions specified herein, shall be delivered to Landlord prior to the time
Tenant or any of its Agents enters the Premises and upon renewal of such
policies, but not less than 5 days prior to the expiration of the terms of such
coverage. Landlord may, at any time, and from time to time, inspect and/or copy
any and all insurance policies required to be procured by Tenant pursuant to
this (P)9.1. If any Lender or insurance advisor reasonably determines at any
time that the amount of coverage required for any policy of insurance Tenant is
to obtain pursuant to this (P)9.1 is not adequate, not to exceed the level of
coverage for such insurance commonly carried by comparable businesses similarly
situated.
9.2 Landlord's Insurance: landlord shall have the following obligations
and options regarding insurance:
(a) Landlord shall maintain a policy or policies of fire and property
damage insurance in so-called "all risk" form insuring Landlord (and such others
as Landlord may designate) against loss of rents for a period of not less than
12 months and from physical damage to the Project with coverage of not less than
the full replacement cost thereof. Landlord may so insure the Project
separately, or may insure the Project with other property owned by landlord
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which Landlord elects to insure together under the same policy or policies.
Such fire and property damage insurance (i) may be endorsed to cover loss caused
by such additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and to provide such additional coverage as Landlord
reasonably requires, and (ii) shall contain reasonable "deductible" which , in
the case of earthquake and flood insurance, may be up to 15% of the replacement
value of the property insured or such higher amount as is then commercially
reasonable. Landlord shall not be required to cause such insurance to cover any
Trade Fixtures or Tenant's Alterations of Tenant.
(b) Landlord may maintain a policy or policies of commercial general
liability insurance insuring landlord (and such others as are designated by
Landlord) against liability for personal injury, bodily injury, death and damage
to property occurring or resulting from an occurrence in, on or about the
Project, with combined single limit coverage in such amount as Landlord from
time to time determines is reasonably necessary for its protection.
(c) The insurance Landlord is required to maintain by this lease
shall be provided by insurance companies having a Bests rating no less than the
Bests rating landlord shall require for the insurance companies providing the
insurance Tenant is required to maintain by this Lease.
9.3 Tenant's Obligation to Reimburse: If Landlord's insurance rates forth
Building are increased at any time during the Lease Term as a result of the
nature of Tenant's use of the Premises, Tenant shall reimburse Landlord for the
full amount of such increase immediately upon receipt of a bill from Landlord
therefor.
9.4 Release and Waiver of Subrogation: The parties hereto release each
other, and their respective agents and employees, from any liability for injury
to any person or damage to property that is caused by or results from any risk
insured against under any valid and collectible insurance policy carried by
either of the parties which contains a waiver of subrogation by the insurer and
is in force at the time of such injury or damage; subject to the following
limitations: (i) the foregoing provision shall not apply to the commercial
general liability insurance described by subparagraphs (P)9.1A and (P)9.2B; (ii)
such release shall apply to liability resulting from any risk insured against or
covered by self-insurance maintained or provided by Tenant to satisfy the
requirements of (P)9.1 to the extent permitted by this Lease; and (iii) Tenant
shall not be released from any such liability to the extent any damages
resulting from such injury or damage are not covered by the recovery obtained by
Landlord from such insurance, but only if the insurance in question permits such
partial release in connection with obtaining a waiver of subrogation from the
insurer. This release shall be in effect only so long as the applicable
insurance policy contains a clause to the effect that this release shall not
affect the right of the insured to recover under such policy. Each party shall
use reasonable efforts to cause each insurance policy obtained by it to provide
that the insurer waives all right of recovery by way of subrogation against the
other party and its agents and employees in connection with any injury or damage
covered by such policy. However, if any insurance policy cannot be obtained
with such a waiver of subrogation, or if such waiver of subrogation is only
available at additional cost and the party for whose benefit the waiver is to be
obtained does not pay such additional cost, then the party obtaining such
insurance shall notify the other party of that tact and thereupon shall be
relieved of the obligation to obtain such waiver of subrogation rights from the
insurer with respect to the
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particular insurance involved. This waiver shall also apply in any situation
where there is no "valid and collectible" insurance policy due to a failure of a
party in breach of this lease to maintain insurance required hereunder.
ARTICLE 10
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
10.1 Limitation on Landlord's Liability: Landlord shall not be liable to
Tenant, nor shall Tenant be entitled to terminate this lease or to any abatement
of rent (except as expressly provided otherwise herein), for any injury to
tenant or tenant's agents, damage to the property of Tenant or Tenant's Agents,
or loss to Tenant's business resulting form any cause, including without
limitation any: (i) failure, interruption or installation of any HVAC or other
utility system or service; (ii) failure to furnish or delay in furnishing any
utilities or services when such failure or delay is caused by fire or other
peril, the elements, labor disturbances of any character, or any other accidents
or other conditions beyond the reasonable control of Landlord; (iii) limitation,
curtailment, rationing or restriction on the use of water or electricity, gas or
any other form of energy or any services or utility serving the project; (iv)
vandalism or forcible entry by unauthorized persons or the criminal act of any
person; or (v) penetration of water into or onto any portion of the premises or
the building through roof leaks or otherwise. Notwithstanding the foregoing but
subject to (P)9.4, Landlord shall be liable for any such injury damage or loss
which is proximately caused by Landlord's or its agents willful misconduct or
active negligence of which landlord has actual notice and a reasonable
opportunity to cure but which it fails to so cure.
10.2 Limitation on Tenant's Recourse: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity: (i) the obligation of Landlord shall not constitute personal obligations
of the officers, directors, trustees, partners, joint venturers, members,
owners, stockholders, or other principals or representatives of such business
entity; and (ii) Tenant shall not have recourse to the assets of such officers,
directors, trustees, partners, joint venturers, members, owners, stockholders,
principals or representatives except to the extent of their interest in the
Project. Tenant shall have recourse only to the interest of landlord in the
Project for the satisfaction of the obligations of landlord and shall not have
recourse to any other assets of landlord for the satisfaction of such
obligations.
10.3 Indemnification of Landlord: Subject to Paragraph 9.4, Tenant shall
hold harmless, indemnify and defend Landlord, and its employees, agents and
contractors, with competent counsel reasonably satisfactory to Landlord (and
Landlord agrees to accept counsel that any insurer requires be used), from all
liability, penalties, losses, damages, costs, expenses, causes of action, claims
and or judgments arising by reason of any death, bodily injury, personal injury
or property damage resulting from (i) any cause or causes whatsoever (other than
he willful misconduct or active negligence of landlord of which Landlord has had
notice and a reasonable time to cure, but which Landlord has failed to cure)
occurring in or about or resulting from an occurrence in or about the premises
during the lease Term, (ii) the negligence or willful misconduct of Tenant or
its agents, employees and contractors, wherever the same may occur, or (iii) an
Event of tenant's Default. The provisions of this (P)10.3 shall survive the
expiration or sooner termination of this Lease.
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ARTICLE 11
DAMAGE TO PREMISES
11.1 Landlord's Duty to Restore: If the premises are damaged by any peril
after the Effective Date, Landlord shall restore the Premises unless the Lease
is terminated by Landlord pursuant to (P)11.2 or by Tenant pursuant to (P)11.3.
all insurance proceeds available from the fire, and property damage insurance
carried by Landlord pursuant to (P)9.2 shall be paid to and become the property
of Landlord. If this Lease is terminated pursuant to either (P)11.2, or
(P)11.3, then all insurance proceeds available from insurance carried by Tenant
which covers loss to property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become the
property of Landlord. If this Lease is not so terminated, then upon receipt of
the insurance proceeds (if the loss is covered by insurance) and the issuance of
all necessary governmental permits, Landlord shall commence and diligently
prosecute to completion the restoration of the Premises, to the extent then
allowed by Law, to substantially the same condition in which the Premises were
immediately prior to such damage. Landlord's obligation to restore shall be
limited to the Premises and interior improvements constructed by Landlord as
they existed as of the Commencement Date, excluding any Tenant's Alterations,
Trade Fixtures and/or personal property constructed or installed by Tenant in
the Premises. Tenant shall forthwith replace or fully repair all Tenant's
Alterations and Trade Fixtures installed by Tenant and existing at the time of
such damage or destruction, and all insurance proceeds received by Tenant from
the insurance carried by it pursuant to (P)9.1A(2) shall be sued for such
purpose.
11.2 Landlord's Right to Terminate: Landlord shall have the right to
terminate this Lease in the event any of the following occurs, which right may
be exercised only by delivery to Tenant of a written notice of election to
terminate within 30 days after the date of such damage.:
(a) Either the project or the Building is damaged by an Insured Peril
to such an extent that the estimated cost to restore exceeds 33% of the then
actual replacement cost thereof;
(b) Either the Project or the Building is damaged by an Uninsured
Peril to such as extent that the estimated cost to restore exceeds 2% of the
then actual replacement cost thereof; provided, however, that Landlord may not
terminate this Lease pursuant to this (P)11.2B if one or more tenants of the
Project agree in writing to pay the amount by which the cost to restore the
damage exceeds such amount and subsequently deposit such amount with Landlord
within 30 days after Landlord has notified Tenant of its election to terminate
this lease;
(c) The Premises are damaged by any peril within 12 months of the
last day of the Lease Term to such an extent that the estimated cost to restore
equals or exceeds an amount equal to six times the Base Monthly Rent then due;
provided, however, that Landlord may not terminate this Lease pursuant to this
(P)11.2C if Tenant, at the time of such damage, has a then valid express written
option to extend the Lease Term and Tenant exercises such option to extend the
Lease term within 15 days following the date of such damage; or
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(d) Either the Project or the Building is damaged by any peril and,
because of the laws then in force, (i) cannot be restored at reasonable cost to
substantially the same condition in which it was prior to such damage, or (ii)
cannot be used for the same use being made thereof before such damage if
restored as required by this Article.
(e) As used herein, the following terms shall have the following meanings:
(i) the term "Insured Peril" shall mean a peril actually insured or required
hereunder to be insured against for which the insurance proceeds actually
received by Landlord are sufficient (except for any "deductible" amount
specified by such insurance) to restore the Project under then existing building
codes to the condition existing immediately prior to the damage; and (ii) the
term "Uninsured Peril" shall mean any peril which is not an Insured Peril.
Notwithstanding the foregoing, if the "deductible" for earthquake or flood
insurance exceeds 2% of the replacement cost of the improvements insured, such
peril shall be deemed an "Uninsured Peril".
11.3 Tenant's Right to Terminate: If the Premises are damaged by any peril
and Landlord does not elect to terminate this Lease or is not entitled to
terminate this Lease pursuant to Paragraph 11.2, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the right to
terminate this Lease in the event any of the following occurs, which right may
be exercised only by delivery to Landlord of a written notice of election to
terminate within 15 days after Tenant receives from Landlord the estimate of the
time needed to complete such restoration.
(a) The Premises are damaged by any peril and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration of
the Premises cannot be substantially completed within 180 days after the date of
such damage; or
(b) The Premises are damaged by any peril within 12 months of the
last day of the Lease Term and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Premises cannot be
substantially completed within 90 days after the date of such damage and such
damage renders unusable more than 30% of the Premises.
11.4 Abatement of Rent: In the event of damage to the Premises which does
not result in the termination of this Lease, the Base Monthly Rent and the
Additional Rent shall be temporarily abated during the period of restoration in
proportion to the degree to which Tenant's use of the Premises is impaired by
such damage. Tenant shall not be entitled to any compensation or damages from
Landlord for loss of Tenant's business or property or for any inconvenience or
annoyance caused by such damage or restoration. Tenant hereby waives the
provisions of California Civil Code Sections 1932(2) and 1933(4) and the
provisions of any similar law hereinafter enacted.
ARTICLE 12
CONDEMNATION
12.1 Landlord's Termination Right: Landlord shall have the right to
terminate this Lease if, as a result of a taking by means of the exercise of the
power of eminent domain
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(including a voluntary sale or transfer by Landlord to a condemnor under threat
of condemnation), (I) all or any part of the Premises is so taken, (ii) more
than 10% of the Building Leasable Area is so taken, or (iii) more than 50% of
the Common Area is so taken. Any such right to terminate by Landlord must be
exercised within a reasonable period of time, to be effective as of the date
possession is taken by the condemnor.
12.2 Tenant's Termination Right: Tenant shall have the right to terminate
this Lease if, as a result of any taking by means of the exercise of the power
of eminent domain (including any voluntary sale or transfer by Landlord to any
condemnor under threat of condemnation), (I) 10% or more of the Premises is so
taken and that part of the Premises that remains cannot be restored within a
reasonable period of time and thereby made reasonably suitable for the continued
operation of the Tenant's business, or (ii) there is a taking affecting the
Common Area and, as a result of such taking, Landlord cannot provide parking
spaces within reasonable walking distance of the Premises equal in number to at
least 80% of the number of spaces allocated to Tenant by Paragraph 2.1, whether
by rearrangement of the remaining parking areas in the Common Area (including
construction of multi-deck parking structures (which Landlord shall build, if at
all, at its sole cost or restriping for compact cars where permitted by Law) or
by alternative parking facilities on other land. Tenant must exercise such
right within a reasonable period of time, to be effective on the date that
possession of that portion of the Premises or Common Area that is condemned is
taken by the condemnor.
12.3 Restoration and Abatement of Rent: If any part of the Premises or the
Common Area is taken by condemnation and this Lease is not terminated, then
landlord shall restore the remaining portion of the Premises and Common Area and
interior improvements constructed by landlord as they existed as of the
Commencement Date, excluding any Tenant's Alterations, Trade Fixtures and/or
personal property constructed or installed by Tenant. Thereafter, except in the
case of a temporary taking, as of the date possession is taken the Base Monthly
Rent shall be reduced in the same proportion that the floor area of that part of
the Premises so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Premises.
12.4 Temporary Taking: If any portion of the Premises is temporarily taken
for one year or less, this Lease shall remain in effect. If any portion of the
Premises is temporarily taken by condemnation for a period which exceeds one
year or which extends beyond the natural expiration of the Lease Term, and such
taking materially and adversely affects Tenant's ability to use the Premises for
the Permitted Use, then Tenant shall have the right to terminate this Lease,
effective on the date possession is taken by the condemnor.
12.5 Division of Condemnation Award: Any award made as a result of any
condemnation of the Premises or the Common Area shall belong to and be paid to
Landlord, and Tenant hereby assigns to Landlord all of its right, title and
interest in any such award; provided, however, that Tenant shall be entitled to
receive any condemnation award that is made directly to Tenant for the following
so long as the award made to Landlord is not thereby reduced: (i) for the taking
of personal property or Trade Fixtures belonging to Tenant; (ii) for the
interruption of Tenant's business or its moving costs; (iii) for loss of
Tenant's goodwill; or (iv) for any temporary taking where this Lease is not
terminated as a result of such taking. The rights of Landlord and Tenant
regarding any condemnation shall be determined as provided in this
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Article, and each party hereby waives the provisions of California Code of Civil
Procedure Section 1265.130 and the provisions of any similar law hereinafter
enacted allowing either party to petition the Superior Court to terminate this
Lease in the event of a partial taking of the Premises.
ARTICLE 13
DEFAULT AND REMEDIES
13.1 Events of Tenant's Default: Tenant shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):
(a) Tenant shall have failed to pay Base Monthly Rent or Additional
Rent when due, and such failure is not cured within 3 business days after
delivery of written notice from Landlord specifying such failure to pay; or
(b) Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Base Monthly Rent
or Additional Rent, and Tenant shall have failed to cure such breach within 30
days after written notice from Landlord specifying the nature of such breach
where such breach could reasonably be cured within said 30 day period, or if
such breach could not be reasonably cured within said 30 day period, Tenant
shall have failed to commence such cure within said 30 day period and thereafter
continue with due diligence to prosecute such cure to completion within such
time period as is reasonably needed but not to exceed 90 days from the date of
Landlord's notice; or
(c) Tenant shall have sublet the Premises or assigned its interest in
the Lease in violation of the provisions contained in Article 14; or
(d) Tenant shall have abandoned the Premises or left the Premises
substantially vacant unless Tenant actively attempts to sublet the Premises or
assign the Lease during the period of such abandonment or vacancy; or
(e) The occurrence of the following: (i) the making by Tenant of any
general arrangements or assignments for the benefit of creditors; (ii) Tenant
becomes a "debtor" as defined in 11 USC (S)191 or any successor statute thereto
(unless, in the case of a petition filed against Tenant, the same is dismissed
within 60 days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within 30 days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within 30 days;
provided, however, in the event that any provision of this Section 13.1(e) is
contrary to any applicable Law, such provisions hall be of no force or effect;
or
(f) Tenant shall have failed to deliver documents required of it
pursuant to Paragraph 15.4 or Paragraph 15.6 within the time periods specified
therein. See First Addendum to Lease Paragraph 6.
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13.2 Landlord's Remedies: If an Event of Tenant's Default occurs, Landlord
shall have the following remedies, in addition to al other rights and remedies
provided by any Law or otherwise provided in this Lease, to which Landlord may
resort cumulatively or in the alternative:
(a) Landlord may keep this Lease in effect and enforce by an action
at law or in equity all of its rights and remedies under this Lease, including
(i) the right to recover the rent and other sums as they become due by
appropriate legal action, (ii) the right to make payments required of Tenant or
perform Tenant's obligations and be reimbursed by Tenant for the cost thereof
with interest at the Agreed Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of
injunctive relief and specific performance to compel Tenant to perform its
obligations under this Lease. Notwithstanding anything contained in this Lease,
in the event of a breach of an obligation by Tenant which results in a condition
which poses an imminent danger to safety of persons or damage to property, an
unsightly condition visible from the exterior of the Building, or a threat to
insurance coverage, then if Tenant does not cure such breach within 3 business
days after delivery to it of written notice from Landlord identifying the
breach, Landlord may cure the breach of Tenant and be reimbursed by Tenant for
the cost thereof with interest at the Agreed Interest Rate from the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant.
(b) Landlord may enter the Premises and release them to third parties
for Tenant's account for any period, whether shorter or longer than the
remaining Lease Term. Tenant shall be liable immediately to Landlord for all
reasonable costs Landlord incurs in releasing the P remises, including brokers'
commissions, expenses of altering and preparing the Premises required by the
releasing. Tenant shall pay to Landlord the rent and other sums due under this
Lese on the date the rent is due, less the rent and other sums Landlord received
from any releasing. No act by Landlord allowed by this subparagraph shall
terminate this Lease unless Landlord notifies Tenant in writing that Landlord
elects to terminate this Lease. Notwithstanding any releasing without
termination, Landlord may later elect to terminate this Lease because of the
default by Tenant.
(c) Landlord may terminate this Lease by giving Tenant written notice
of termination, in which event this Lease shall terminate on the date set forth
for termination in such notice. Any termination under this Paragraph 13(c) shall
not relieve Tenant from its obligation to pay sums then due Landlord or from any
claim against Tenant for damages or rent previously accrued or then accruing. In
no event shall any one or more of the following actions by Landlord, in the
absence of a written election by Landlord to terminate this Lease, constitute a
termination of this Lease: (i) appointment of a receiver or keeper in order to
protect Landlord's interest hereunder; (ii) consent to any subletting of the
Premises or assignment of this Lease by Tenant, whether pursuant to the
provisions hereof or otherwise; or (iii) any other action by Landlord or
Landlord's Agents intended to mitigate the adverse effects of any breach of this
Lease by Tenant, including without limitation any action taken to maintain and
preserve the Premises or any action taken to relet the Premises or any portions
thereof to the extent such actions do not affect a termination of Tenant's right
to possession of the Premises.
(d) In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so
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terminate this Lease. No act by or on behalf of Landlord intended to mitigate
the adverse effect of such breach, including those described by Paragraph 13(c),
shall constitute a termination of Tenant's right to possession unless Landlord
gives Tenant written notice of termination. Should Landlord not terminate this
Lease by giving Tenant written notice, Landlord may enforce all its rights and
remedies under this Lease, including the right to recover the rent as it becomes
due under the Lease as provided in California Civil Code Section 1951.4.
(e) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date. For
purposes of computing damages pursuant to California Civil Code Section 1951.2,
(i) an interest rate equal to the Agreed Interest Rate shall be used where
permitted, and (ii) the term "rent" includes Base Monthly Rent and Additional
Rent. Such damages shall include:
(1) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%); and
(2) Any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would be
likely to result therefrom, including the following: (i) expenses for cleaning,
repairing or restoring the Premises; (ii) expenses for altering, remodeling or
otherwise improving the Premises for the purpose of reletting, including
installation of leasehold improvements (whether such installation be funded by a
reduction of rent, direct payment or allowance to a new tenant, or otherwise);
(iii) broker's fees, advertising costs and other expenses of reletting the
Premises; (iv) costs of carrying the Premises, such as taxes, insurance
premiums, utilities and security precautions; (v) expenses in retaking
possession of the Premises; and (vi) attorneys' fees and court costs incurred by
Landlord in retaking possession of the Premises and in releasing the Premises or
otherwise incurred as a result of Tenant's default.
(f) Nothing in this Paragraph 13.2 shall limit Landlord's right to
indemnification from Tenant as provide din Paragraphs 7.2 and 10.3. Any notice
given by Landlord in order to satisfy the requirements of Paragraphs 13.1(a) or
13.1(b) above shall also satisfy the notice requirements of California Code of
Civil Procedure Section 1161 regarding unlawful detainer proceedings.
13.3 Waiver. One party's consent to or approval of any act by the other
party requiring the first party's consent or approval shall not be deemed to
waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any rent
or payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in writing
and signed by Landlord. No delay or omission in the exercise of any right or
remedy accruing to either party upon any breach by the other party under this
Lease shall impair such right or remedy or be construed as a waiver of any such
breach theretofore or thereafter
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occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
of any other provisions herein contained.
13.4 Limitation on Exercise of Rights. At any time that an Event of
Tenant's Default has occurred and remains uncured, (i) it shall not be
unreasonable for Landlord to deny or withhold any consent or approval requested
of it by Tenant which Landlord would otherwise be obligated to give, and (ii)
Tenant may not exercise any option to extend, right to terminate this Lease, or
other right granted to it by this Lease which would otherwise be available to
it.
13.5 Waiver by Tenant of Certain Remedies. Tenant waives the provisions of
Sections 1932(1), 1941 and 1942 of the California Civil Code and any similar or
successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs form the rent due under this
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, including the provisions of Sections 1174 and 1179 of the California Code
of Civil Procedure. Nothing herein, however shall be construed so as to
preclude Tenant from making repairs if Landlord fails to do so and thereafter
bringing suit for reimbursement.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 Transfer By Tenant: The following provisions shall apply to any
assignment, subletting or other transfer by Tenant or any subtenant or assignee
or other successor in interest of the original Tenant (collectively referred to
in this Paragraph 14.1 as "Tenant"):
(a) Tenant shall not do any of the following (collectively referred
to herein as a "Transfer"), whether voluntarily, involuntarily or by operation
of law, without the prior written consent of Landlord, which consent shall not
be unreasonably withheld or delayed: (i) sublet all or any part of the Premises
or allow it to be sublet, occupied or used by any person or entity other than
Tenant; (ii) assign its interest in this Lease; (iii) mortgage or encumber the
Lease (or otherwise use the Lease as a security device) in any manner; or (iv)
materially amend or modify an assignment, sublease or other transfer that has
been previously approved by Landlord. Tenant shall reimburse Landlord for all
reasonable costs and attorneys' fees incurred by Landlord up to $1,000.00 in
connection with the evaluation, possessing, and/or documentation of any
requested Transfer, whether or not Landlord's consent is granted. Landlord's
reasonable costs shall include the cost of any review or investigation performed
by Landlord or consultant acting on Landlord's behalf of (i) Hazardous Materials
(as defined in Section 7.2(e) of this Lease) used, stored, released, or disposed
of by the potential Subtenant or Assignee, and/or (ii) violations of Hazardous
Materials Law (as defined in Section 7.2(e) of this Lease) by the Tenant or the
proposed Subtenant or Assignee. Any attempted Transfer without Landlord's
consent shall constitute an Event of Tenant's Default and shall be voidable at
Landlord's option. Landlord's consent to any one Transfer shall not constitute a
waiver of the provisions of this Paragraph 14.1 as to any subsequent Transfer or
a consent to any subsequent Transfer. No Transfer or a consent to any subsequent
Transfer. No Transfer, even with the consent of Landlord, shall relieve Tenant
of its personal and primary obligation to pay the rent and to perform all of the
other obligations
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to be performed by Tenant hereunder. The acceptance of rent by Landlord from any
person shall not be deemed to be a waiver by Landlord of any provision of this
Lease nor to be a consent to any Transfer.
(b) At least 15 days before a proposed Transfer is to become
effective, Tenant shall give Landlord written notice of the proposed terms of
such Transfer and request Landlord's approval, which notice shall include the
following: (i) the name and legal composition of the proposed transferee; (ii) a
current financial statement of the transferee, financial statements of the
transferee, financial statements of the transferee covering the preceding three
years if the same exist, and (if available) an audited financial statement of
the transferee for a period ending not more than one year prior to the proposed
effective date of the Transfer, all of which statements are prepared in
accordance with generally accepted accounting principles; (iii) the nature of
the proposed transferee's business to be carried on in the Premises; (iv) all
consideration to be given on account of the Transfer; (v) a current financial
statement of Tenant; and (vi) an accurately filled out response to Landlord's
standard Hazardous Materials Questionnaire. Tenant shall provide to Landlord
such other information as may be reasonably requested by Landlord within seven
days after Landlord's receipt of such notice from Tenant. Landlord shall respond
in writing to Tenant's request for Landlord's consent to a Transfer within the
later of (i) 15 days of receipt of such request together with the required
accompanying documentation, or (ii) seven days after Landlord's receipt of all
information which Landlord reasonably requests within seven days after it
receives Tenant's first notice regarding the Transfer in question. If Landlord
fails to respond in writing within said period, Landlord will be deemed to have
withheld consent to such Transfer. Tenant shall immediately notify Landlord of
any material modification to the proposed terms of such Transfer.
(c) In the event that Tenant seeks to make any Transfer of the entire
Premises (excluding permitted transfers), Landlord shall have the right to
terminate this Lease, either (i) on the condition that the proposed transferee
immediately enter into a direct lease of the Premises with Landlord on the same
terms and conditions contained in Tenant's notice, or (ii) so that Landlord is
thereafter free to lease the Premises to whomever it pleases on whatever terms
are acceptable to Landlord. In the event Landlord elects to terminate this
Lease, then (i) if such termination is conditioned upon the execution of a lease
between Landlord and the proposed transferee, Tenant's obligations under this
Lease shall not be terminated until such transferee executes a new lease with
Landlord specifying a Commencement Date and commences the payment of rent, and
(ii) if Landlord elects simply to terminate this Lease (or, in the case of a
partial sublease, terminate this Lease as to the portion to be so sublet), the
Lease shall so terminate in its entirety fifteen (15) days after Landlord has
notified Tenant in writing of such election. Upon such termination, Tenant shall
be released from any further obligation under this Lease. Landlord and Tenant
shall execute a cancellation and release with respect to the Lease to effect
such termination.
(d) If Landlord consents to a Transfer proposed by Tenant, Tenant may
enter into such Transfer, and if Tenant does so, the following shall apply:
(1) Tenant shall not be released of its liability for the
performance of all of its obligations under the Lease.
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(2) If Tenant assigns its interest in this Lease, then
Tenant shall pay to Landlord 50% of all Subrent (as defined in Paragraph
14.1(d)(5)) received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease, and (ii) all Permitted
Transfer Costs related to such assignment. In the case of assignment, the amount
of Subrent owed to Landlord shall be paid to Landlord on the same basis, whether
periodic or in lump sum, that such Subrent is paid to Tenant by the assignee.
(3) If Tenant sublets any part of the Premises, then with
respect to the space so subleased, Tenant shall pay to Landlord 50% of the
positive difference, if any, between (i) all Subrent paid by the subtenant to
Tenant, less (ii) the sum of all Base Monthly Rent and Additional Rent allocable
to the space sublet and all Permitted Transfer Costs related to such sublease.
Such amount shall be paid to Landlord on the same basis, whether periodic or in
lump sum, that such Subrent is paid to Tenant by its subtenant. In calculating
Landlord's share of any periodic payments, all Permitted Transfer Costs shall be
first recovered by Tenant.
(4) Tenant's obligations under this Paragraph 14.1(d) shall
survive any Transfer, and Tenant's failure to perform its obligations hereunder
shall be an Event of Tenant's Default. At the time Tenant makes any payment to
Landlord required by this Paragraph 14.1(d), Tenant shall deliver an itemized
statement of the method by which the amount to which Landlord is entitled was
calculated, certified by Tenant as true and correct. Landlord shall have the
right at reaosnable intervals to inspect Tenant's books and records relating to
the payments due hereunder. Upon request therefor, Tenant shall deliver to
Landlord copies of all bills, invoices or other documents upon which its
calculations are based. Landlord may condition its approval of any Transfer upon
obtaining a certification from both Tenant and the proposed transferee of all
Subrent and other amounts that are to be paid to Tenant in connection with such
Transfer.
(5) As used in this Paragraph 14.1(d), the term "Subrent"
shall mean any consideration of any kind received, or to be received, by Tenant
as a result of the Transfer, if such sums are related to Tenant's interest in
this Lease or in the Premises, including payments form or on behalf of the
transferee (in excess of the book value thereof) for Tenant's assets, fixtures,
leasehold improvements, inventory, accounts, goodwill, equipment, furniture, and
general intangibles. As used in this Paragraph 14.1(d), the term "Permitted
Transfer Costs" shall mean (i) all reaosnable leasing commissions paid to third
parties not affiliated with Tenant in order to obtain the Transfer in question,
(ii) all reasonable attorneys' fees incurred by Tenant with respect to the
Transfer in question, and (iii) tenant improvements.
(e) If Tenant is a corporation, the following shall be deemed a
voluntary assignment of Tenant's interest in this Lease: (i) any dissolution,
merger, consolidation, or other reorganization of or affecting Tenant, whether
or not Tenant is the surviving corporation; and (ii) if the capital stock of
Tenant is not publicly traded, the sale or transfer to one person or entity (or
to any group of related persons or entities) stock possessing more than 50% of
the total combined voting power of all classes of Tenant's capital stock issued,
outstanding and entitled to vote for the election of directors. If Tenant is a
partnership, any withdrawal or substitution (whether voluntary, involuntary or
by operation of law, and whether occurring at one time or over a period of time)
of any partner owning 25% or more (cumulatively) of any interest in the capital
or
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profits of the partnership, or the dissolution of the partnership, shall be
deemed a voluntary assignment of Tenant's interest in this Lease.
(f) Notwithstanding anything contained in Paragraph 14.1, so long as
Tenant otherwise complies with the provision of Paragraph 14.1 Tenant may enter
into any of the following transfers (a "Permitted Transfer") without Landlord's
prior written consent, and Landlord shall not be entitled to terminate the Lease
pursuant to Paragraph 14.1(c) or to receive any part of any Subrent resulting
therefrom that would otherwise be due it pursuant to Paragraph 14.1(d):
(1) Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with the original Tenant to this Lease
by means of an ownership interest of more than 50%;
(2) Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction; and
(3) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as such acquiring corporation has a net worth at the time of
such assignment that is equal to or greater than the net worth of Tenant
immediately prior to such transaction.
14.2 Transfer By Landlord: Landlord and its successors in interest shall
have the right to transfer their interest in this Lease and the Project at any
time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent transfer,
the transferror) from the date of such transfer, shall be automatically
relieved, without any further act by any person or entity, of all liability for
the performance of the obligations of the Landlord hereunder which may accrue
after the date of such transfer except for the obligation to return the Security
Deposit to Tenant (unless the Security Deposit is transferred to the Landlord's
transferee). After the date of any such transfer, the term "Landlord" as used
herein shall mean the transferee of such interest in the Premises.
ARTICLE 15
GENERAL PROVISIONS
15.1 Landlord's Right to Enter: Landlord and its agents may enter the
Premises at any reasonable time after giving at least 24 hours' prior notice to
Tenant (and immediately in the case of emergency) for the purpose of: (i)
inspecting the same; (ii) posting notices of non-responsibility; (iii) supplying
any service to be provided by Landlord to Tenant; (iv) showing the Premises to
prospective purchasers, mortgagees or tenants; (v) making necessary alterations,
additions or repairs; (vi) performing Tenant's obligations when Tenant has
failed to do so after written notice from Landlord; (vii) placing upon the
Premises ordinary "for lease" signs (during
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the last nine (9) months of the Lease Term) or "for sale signs; and (viii)
responding to an emergency. Landlord shall reasonably have the right to use any
and all means Landlord may deem necessary and proper to enter the Premises in an
emergency. Any entry into the Premises obtained by Landlord in accordance with
this (P)15.1 shall not be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction, actual or constructive, of Tenant from the
Premises.
15.2 Surrender of the Premises: Upon the expiration or sooner termination
of this Lease, Tenant shall vacate and surrender the Premises to landlord in the
same condition as existed at the Commencement Date, except for (i) reasonable
wear and tear, (ii) damage caused by any peril or condemnation, (iii)
contamination by Hazardous Materials for which Tenant is not responsible
pursuant to (P)7.2A or (P)7.2B, and (iv) Landlord's negligence, willful
misconduct and/or breach of the Lease. In this regard, normal wear and tear
shall be construed to mean wear and tear caused to the Premises by the natural
aging process and normal use which occurs in spite of prudent application of the
best standards for maintenance, repair and janitorial practices, and does not
include items of neglected or deferred maintenance for which Tenant or its
agents are responsible. In any event, Tenant shall cause the following to be
done prior to the expiration or the sooner termination of this Lease: (i) all
interior walls shall be painted or cleaned so that they appear freshly painted;
(ii) all tiled floors shall be cleaned and waxed; (iii) all carpets shall be
cleaned and shampooed; (iv) all broken, marred, stained or nonconforming
acoustical ceiling tiles shall be replaced; (v) all windows shall be washed;
(vi) the HVAC system shall be serviced by a reputable and licensed service firm
and left in good operating condition and repair as so certified by such firm;
and (vii) the plumbing and electrical systems and lighting shall be placed in
good order and repair (including replacement of any burned out, discolored or
broken light bulbs, ballasts, or lenses). If Landlord so requests, Tenant
shall, prior to the expiration or sooner termination of this Lease, (i) remove
any Tenant's Alterations which Tenant is required to remove pursuant to (P)5.2
and repair all damage caused by such removal, and (ii) return the Premises or
any part thereof to its original configuration existing as of the time the
Premises were delivered to Tenant unless Landlord has provided prior written
approval for any change made since the Commencement Date which Landlord does not
require to be returned to its original condition. Tenant shall have no
obligation to remove the Interior Improvements constructed pursuant to Exhibit
B. If the Premises are not so surrendered at the termination of this Lease,
Tenant shall be liable to Landlord for all costs incurred by Landlord in
returning the Premises to the required condition, plus interest on all costs
reasonably incurred at the Agreed Interest Rate. Tenant shall indemnify
Landlord against loss or liability resulting from delay by Tenant in so
surrendering the Premises, including, without limitation, any claims made by any
succeeding tenant or losses to Landlord due to lost opportunities to lease to
succeeding tenants.
15.3 Holding Over: This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holder over by Tenant after expiration of
the Lease Term shall not constitute a renewal or extension of the Lease or give
Tenant any rights in or to the Premises except as expressly provided in the
Lease. Any holding over after such expiration with the written consent of
Landlord shall be construed to be a tenancy from month to month on the same
terms and conditions herein specified insofar as applicable except that Base
Monthly Rent shall be increased to an amount equal to 125% of the Base Monthly
Rent payable during the last full calendar month of the Lease Term.
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15.4 Subordination: The following provisions shall govern the
relationship of the Lease to any Security Instrument:
(a) The Lease is subject and subordinate to all Security
Instruments existing as of the Effective Date. However, if any Lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.
(b) At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and performs
all of its obligations under this Lease, unless this Lease is otherwise
terminated pursuant to its terms.
(c) Tenant shall upon request execute any document or instrument
reasonably required by any Lender to make this Lease either prior or subordinate
to a Security Instrument, which may include such other matters as the Lender
customarily and reasonably requires in connection with such agreements,
including provisions that the Lender not be liable for (i) the return of any
security deposit unless the Lender receives it from landlord, and (ii) any
defaults on the part of Landlord occurring prior to the time the Lender takes
possession of the Project in connection with the enforcement of its Security
Instrument. Tenant's failure to execute any such document or instrument within
15 days after written demand therefor shall constitute an Event of Tenant's
Default. Tenant approves as reasonable the form of subordination agreement
attached to this Lease as Exhibit G.
(d) Landlord shall use its reasonable efforts to obtain a Non-
Disturbance Agreement from holder(s) of all existing Security Instruments. If a
holder required payment of fees and/or costs as a condition of such an
Agreement, Tenant shall pay such fees and/or costs. Notwithstanding any other
provision hereof, Tenant's obligation to subordinate this Lease to any future
Security Instrument shall be conditioned upon the execution of a Non-Disturbance
Agreement by the holder of such Security Instrument on the holder's standard
form.
15.5 Mortgagee Protection and Attornment: In the event of any default on
the part of the Landlord, Tenant will use reasonable efforts to give notice by
registered mail to any Lender whose name has been provided to Tenant and shall
offer such Lender whose name has been provided to Tenant and shall offer such
Lender a reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings, if such should prove necessary to effect a cure.
Tenant shall attorn to any purchaser of the Premises at any foreclosure sale or
private sale conducted pursuant to any Security Instrument encumbering the
Premises, or to any grantee or transferee designated in any deed given in lieu
of foreclosure.
15.6 Estoppel Certificates and Financial Statements: At all times during
the Lease Term, each party agrees, following any request by the other party,
promptly to execute and deliver to the requesting party within 15 days following
delivery of such request an estoppel certificate: (i) certifying that this
Lease is unmodified and in full force and effect or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect, (ii) stating the date to which the rent and other
charges are paid in advance, if
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any, (iii) acknowledging that there are not, to the certifying party's
knowledge, any uncured defaults on the part of any party hereunder or, if there
are uncured defaults, specifying the nature of such defaults, and (iv)
certifying such other information about the Lease as may be reasonably required
by the requesting party. A failure to deliver an estoppel certificate within 15
days after delivery of a request therefor shall be a conclusive admission that,
as of the date of the request for such statement: (i) this Lease is unmodified
except as may be represented by the requesting party in said request and is in
full force and effect, (ii) there are no uncured defaults in the requesting
party's performance, and (iii) no rent has been paid more than 30 days in
advance. At any time during the Lease Term Tenant shall, upon 15 days' prior
written notice from Landlord, provide Tenant's most recent financial statement
and financial statements covering the 24 month period prior to the date of such
most recent financial statement to any existing Lender or to any potential
Lender or buyer of the Premises. Such statements shall be prepared in accordance
with generally accepted accounting principles and, if such is the normal
practice of Tenant, shall be audited by an independent certified public
accountant.
15.7 Reasonable Consent: Whenever any party's approval or consent is
required by this Lease before an action may be taken by the other party, such
approval or consent shall not be unreasonably withheld or delayed.
15.8 Notices: Any notice required or desired to be given regarding this
Lease shall be in writing and may be given by personal delivery, by facsimile
telecopy, by courier service, or by mail. A notice shall be deemed to have been
given (i) on the third business day after mailing if such notice was deposited
in the United States mail, certified or registered, postage prepaid, addressed
to the party to be served at its Address for Notices specified in Section O or
---------
Section R of the Summary (as applicable), (ii) when delivered if given by
- ---------
personal delivery, and (iii) in all other cases when actually received at the
party's Address for Notices. Either party may change its address by giving
notice of the same in accordance with this (P) 15.8, provided, however, that any
address to which notices may be sent must be a California address.
15.9 Attorneys' Fees: In the event either Landlord or Tenant shall bring
any action or legal proceeding for an alleged breach of any provision of this
Lease, to recover rent, to terminate this Lease or otherwise to enforce, protect
or establish any term or covenant of this Lease, the prevailing party shall be
entitled to recover as a part of such action or proceeding, or in a separate
action brought for that purposes, reasonable attorneys' fees, court costs, and
experts' fees as may be fixed by the court.
15.10 Corporate Authority: If Tenant is a corporation (or partnership),
each individual executing this Lease on behalf of Tenant represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of such
corporation in accordance with the by-laws of such corporation (or partnership
in accordance with the partnership agreement of such partnership) and that this
Lease is binding upon such corporation (or partnership) in accordance with its
terms. Each of the persons executing this Lease on behalf of a corporation does
hereby covenant and warrant that the party for whom it is executing this Lease
is a duly authorized and existing corporation, that it is qualified to do
business in California, and that the corporation has full right and authority to
enter into this Lease.
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15.11 Miscellaneous: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. The captions used in this Lease are for convenience only and shall not
be considered in the construction or interpretation of any provision hereof. Any
executed copy of this Lease shall be deemed an original for all purposes. This
Lease shall, subject to the provisions regarding assignment, apply to any bind
the respective heirs, successors, executors, administrators and assigns of
Landlord and Tenant. "Party" shall mean Landlord or Tenant, as the context
implies. If Tenant consists of more than one person or entity, then all members
of Tenant shall be jointly and severally liable hereunder. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. When the context of this Lease requires, the neuter gender
includes the masculine, the feminine, a partnership or corporation or joint
venture, and the singular includes the plural. The terms "shall", "will" and
"agree" are mandatory. The term "may" is permissive. When a party is required to
do something by this Lease, it shall do so at its sole cost and expense without
right of reimbursement from the other party unless a provision of this Lease
expressly requires reimbursement. Landlord and Tenant agree that (i) the gross
leasable area of the Premises includes any atriums, depressed loading docks,
covered entrances or egresses, and covered loading areas, (ii) each has had an
opportunity to determine to its satisfaction the actual area of the Project and
the Premises, (iii) all measurements of area contained in this Lease are
conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more or
less than the amount of area reflected in this Lease, and (iv) any such
subsequent determination that the area is more or less than shown in this Lease
shall not result in a change in any of the computations of rent, improvement
allowances, or other matters described in this Lease where area is a factor.
Where a party hereto is obligated not to perform any act, such party is also
obligated to restrain any others within its control from performing said act,
including the Agents of such party. Landlord shall not become or be deemed a
partner or a joint venturer with Tenant by reason of the provisions of this
Lease.
15.12 Termination by Exercise of Right: If this Lease is terminated
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease shall
terminate 30 days after the date the right to terminate is properly exercised
(unless another date is specified in that part of the Lease creating the right,
in which event the date so specified for termination shall prevail), the rent
and all other charges due hereunder shall be prorated as of the date of
termination, and neither Landlord nor Tenant shall have any further rights or
obligations under this Lease except for those that have accrued prior to the
date of termination or those obligations which this Lease specifically provides
are to survive termination. This (P)15.12 does not apply to the termination of
this Lease by Landlord as a result of an Event of Tenant's Default.
15.13 Brokerage Commissions: Each party hereto (i) represents and warrants
to the other that it has not had any dealings with any real estate brokers,
leasing agents or salesmen, or incurred any obligations for the payment of real
estate brokerage commissions or finder's fees which would be earned or due and
payable by reason of the execution of this Lease, other than to
35.
<PAGE>
the Retained Real Estate Brokers described in Section S of the Summary, and (ii)
---------
agrees to indemnify, defend, and hold harmless the other party from any claim
for any such commission or fees which result from the actions of the
indemnifying party. Landlord shall be responsible for the payment of any
commission owed to the Retained Real Estate Brokers if there is a separate
written commission agreement between Landlord and the Retained Real Estate
Brokers for the payment of a commission as a result of the execution of this
Lease.
15.14 Force Majeure: Any prevention, delay or stoppage due to strikes,
lock-outs, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental restrictions,
regulations, controls, action or inaction, civil commotion, fire or other acts
of God, and other causes beyond the reasonable control of the party obligated to
perform (except financial inability) shall excuse the performance, for a period
equal to the period of any said prevention, delay or stoppage, of any obligation
hereunder except the obligation of Tenant to pay rent or any other sums due
hereunder.
15.15 Entire Agreement: This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that neither
Landlord nor Landlord's Agents has made any legally binding representation or
warranty as to any matter except those expressly set forth herein, including any
warranty as to (i) whether the Premises may be used for Tenant's intended use
under existing Law, (ii) the suitability of the Premises or the Project for the
conduct of Tenant's business, or (iii) the condition of any improvements. There
are not oral agreements between Landlord and Tenant affecting this Lease, and
this Lease supercedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease. This instrument shall not be legally binding until it is executed
by both Landlord and Tenant. No subsequent change or addition to this Lease
shall be binding unless in writing and signed by Landlord and Tenant.
In Witness Whereof, Landlord and Tenant have executed this Lease with the
intent to be legally bound thereby, to be effective as of the Effective Date.
LANDLORD: TENANT:
Ross Drive Investors Verity, Inc.
a California general partnership a Delaware corporation
By: /s/ Michael J. Biggar By: /s/ Donald C. McCauley
------------------------------ ----------------------------------
Michael J. Biggar Donald C. McCauley
Manager Vice President and CFO
Date: January 29, 1996 Date:__________________________________
----------------------------
36.
<PAGE>
FIRST ADDENDUM TO LEASE
This First Addendum is dated for reference purposes as January 22, 1996,
and is made a part of that Lease Agreement (the "Lease") dated January 22, 1996,
by and between Ross Drive Investors, a California general partnership
("Landlord") and Verity, Inc., a Delaware corporation ("Tenant") affecting
certain real property commonly known as 894 Ross Drive, Sunnyvale, California,
with reference to the following facts:
1. Option to Extend Lease Term: Landlord hereby grants to Tenant one
option to extend the Lease Term for a five (5) year term on the following terms
and conditions:
A. Tenant must give Landlord notice in writing of its exercise of
the option in question no earlier than two hundred seventy (270) days and no
later than one hundred eighty (180) days before the date the Lease Term would
end but for said exercise.
B. Tenant may not extend the Lease Term pursuant to any option
granted by this paragraph if an Event of Tenant's Default exists as of the date
of exercise of the option in question or as of the date this Lease would have
been terminated but for said exercise.
C. All term and conditions of this Lease shall apply during the
Option Period, except that the Base Monthly Rent for the Option Period shall be
determined as provided in Paragraph D.
D. The Base Monthly Rent for the Option Period shall be the greater
of (i) one hundred percent (100%) of the Base Monthly Rent due the last month of
the previous Lease Term, or (ii) one hundred percent (100%) of the then fair
market monthly rent determined as of the commencement of the Option Period in
question based upon like buildings with like improvements in the Mountain
View/Sunnyvale/Santa Clara area taking into account tenant improvement
allowances and other concessions which may be available in the market.. If the
parties are unable to agree upon the fair market monthly rent for the Premises
for the Option Period in question at lean seventy-five (75) days prior to the
commencement of the Option Period in question, then the fair market monthly rent
shall be determined by appraisal conducted pursuant to subparagraph E.
E. In the event it becomes necessary to determine by appraisal the
fair market rent of the Premises for the purpose of establishing the Base
Monthly Rent during the Option Period, then such fair market monthly rent shall
be determined by three (3) real estate appraisers, all of whom shall be members
of the American Institute of Real Estate Appraisers with not less than five (5)
years experience appraising real property (other than residential or
agricultural property) located in Santa Clara County, California, in accordance
with the following procedures:
(1) The party demanding an appraisal (the "Notifying Party")
notify the other party (the "Non-Notifying Party") thereof by delivering a
written demand for appraisal, which demand, to be effective, must give the name,
address, and qualifications of an appraiser selected by the Notifying Party.
Within ten (10) days of receipt of said demand, the Non-Notifying Party shall
select its appraiser and notify the Notifying Party, in writing, of the name,
1.
<PAGE>
address, and qualifications of an appraiser selected by it. Failure by the Non-
Notifying Party to select a qualified appraiser within said ten (10) day period
shall be deemed a waiver of its right to select a second appraiser on its own
behalf and the Notifying Party shall select a second appraiser on behalf of the
Non-Notifying Party within five (5) days after the expiration of said ten (10)
day period. Within ten (10) days from the date the second appraiser shall have
been appointed, the two (2) appraisers so selected shall appoint a third
appraiser. If the two appraisers fad to select a third qualified appraiser, the
third appraiser shall be selected by the American Arbitration Association or if
it shall refuse to perform this function, then at the request of either Landlord
or Tenant, such third appraiser shall be promptly appointed by the then
Presiding Judge of the Superior Court of the State of California for the County
of Santa Clara.
(2) The three (3) appraisers so selected shall meet not later
than twenty (20) days following the selection of the third appraiser. At said
meeting the appraisers so selected shall attempt to determine the fair market
monthly rent of the Premises for the option period in question (including the
timing and amount of periodic increases).
(3) If the appraisers so selected are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of the first
meeting, in an attempt to have at least two (2) of them agree. If, at the
initial meeting or at any time during said fifteen (15) day period, two (2) or
more of the appraisers so selected agree on the fair market rent of the Leased
Premises, such agreement shall be determinative and binding on the parties
hereto, and the agreeing appraisers shall, in simple letter form executed by the
agreeing appraisers, forthwith notify both Landlord and Tenant of the amount set
by such agreement.
(4) If two (2) or more appraisers do not so agree within said
fifteen (15) day period, then each appraiser shall, within five (5) days after
the expiration of said fifteen (15) day period, submit his independent appraisal
in simple letter form to Landlord and Tenant stating his determination of the
fair market rent of the Premises for the Option Period in question. The parties
shall then determine the fair market rent for the Premises by determining the
average of the fair market rent set by each of the appraisers. However, if the
lowest appraisal is less than eighty-five percent (85%) of the middle appraisal
then such lowest appraisal Wall be disregarded and/or if the highest appraisal
is greater than one hundred fifteen percent (115%) of the middle appraisal then
such highest appraisal shall be disregarded. If the fair market rent set by any
appraisal is so disregarded, then the average shall be determined by computing
the average set by the other appraisals that have not been disregarded.
(5) Nothing contained herein shall prevent Landlord and Tenant
from jointly selecting a single appraiser to determine the fair market raw of
the Premises, in which event the determination of such appraisal shall be
conclusively deemed the fair market rent of the Premises.
(6) Each party shall bear the fees and expenses of the appraiser
selected by or for it, and the few and expenses of the third appraiser (or the
joint appraiser if one joint appraiser is used) shall be home fifty percent
(50%) by Landlord and fifty percent (50%) by Tenant.
2.
<PAGE>
2. Tenant Improvement Allowance: The term "Tenant Improvement Allowance"
shall mean the maximum amount Landlord is required to spend toward the payment
of Interior Improvement Costs for all Interior Improvements constructed in the
Premises, which amount is
3. Condition of Premises: Landlord shall provide the Premises with all
existing electrical, HVAC and plumbing in good and workable condition, and to
the extent that there are any warranties available, Landlord agrees to provide
Tenant with the benefits of those warranties. Except as specifically provided
in the Lease, in this Paragraph 3 and in Exhibit "B", the Interior Improvement
Agreement, Tenant accepts the Premises based upon its own investigation and
research, without warranty by Landlord, and in its "AS-IS" condition, provided
that Landlord shall cause each tenant currently occupying any portion of the
Premises to surrender same at the end of its respective lam term in the
condition required by its lease or applicable termination agreement.
4. Security Deposit:
5. Lease of Additional Space: Pursuant to this Lease, Tenant is leasing
all rentable space in the Budding with the exception of Suite 203, consisting of
5,070 rentable square feet of space, and Suite 205, consisting of 5,021 square
feet of space (referred to jointly as the "Expansion Space" and individually as
"Suite 203", and "Suite 205" or a ("Suite"). In addition to the space currently
defined herein as the "Premises", Tenant agrees to lease from Landlord, and
Landlord agrees to Lease to Tenant, the Expansion Space, on the following terms
and conditions:
A. The Lease Term for the Expansion Space shall begin for each Suite
(the "Expansion Space Commencement Date") on the day following the expiration or
earlier termination of the Lease Term including any exercised option periods of
the tenant currently occupying the Suite and the tenant's removal of all of its
furnishings, fixtures and equipment and its (or Landlord's) satisfaction of the
surrender obligations under its Lease. Landlord shall bear all costs for
removing all such tenants from the Suites at the end of their respective Lean
Tam and Landlord represents and warrants to Tenant that to the best of Landlords
knowledge (which shall mean Michael J. Biggar's knowledge) without investigation
or duty to investigate, no other persons or entities have any rights or claims
of occupancy to such Suites.
B. The Lease Term for each Suite shall run from the Expansion Space
Commencement Date to the end of the Lean Term of this Lease.
C. As of the Expansion Space Commencement Date for each Suite, the
Base Monthly Rent set forth herein shall be increased by applying the per
rentable square foot rental rate which is effective under the Summary, Paragraph
K, as of said date, to the additional rentable square footage added to the
Premises by the addition of the Suite(s). Thereafter, the dates for increases in
the Base Monthly Rent specified in this Lean shall continue in effect without
change, but the Base Monthly Rent following each such increase date shall
include an additional amount reflecting the added space. For purposes of
example, if both Suites became available at any time during the first 24 months
following the Commencement Date hereunder, the rent would be increased by
3.
<PAGE>
D. The Lease Term for each Suite shall be extended if Tenant
exercises the Option to Extend Lease Term granted in Paragraph 1 of this
Addendum. Rent in the extended term provided under such option to extend shall
be determined as set forth in Paragraph 1
E. Tenant will accept such Suite based solely on its own
investigation and research, without warranty by Landlord, in its then existing
"AS-IS" condition, with all faults, latent or patent. Landlord will not have any
duty to provide or pay for any tenant improvements to the Expansion Space
provided that Landlord shall cause each tenant currently occupying a Suite to
surrender same at the end of its respective lease term in the condition required
by its Lease.
6. [text missing from original]
7. [text missing from original]
(1) [text missing from original]
(2) HVAC maintenance, repair and replacement as provided in
Section 6.1.C of the Lease; and
(3) Maintaining and controlling access to the Building
electrical room.
At such time as the Expansion Space Commencement Date has occurred for both
Suite 203 and Suite 205 as provided in Paragraph 7 of this Addendum, Tenant
shall assume responsibility for the items (1), (2) and (3) above.
8. Condition to Landlord's Performance: Landlord's execution of this
lease is conditioned upon satisfactory early termination of the existing lease
for 892 Ross Drive with Novell by written agreement received and executed by
Landlord no later than the date Landlord executes this Lease.
LANDLORD: TENANT:
Ross Drive Investors, Verity, Incorporated,
a California general partnership a Delaware corporation
By: /s/ Michael J. Biggar By: /s/ Davic C. McCauley
----------------------------- ---------------------------------
Michael J. Biggar Donald C. McCauley
Manager Vice President and CFO
Date: 1/29/96 Date:_____________________________
----------------------------
4.
<PAGE>
Exhibit B
INTERIOR IMPROVEMENT AGREEMENT
This Improvement Agreement is made part of that Lease dated January 22,
1996, (the "Lease") by and between Ross Drive Investors ("Landlord"), and
Verity, Inc. ("Tenant"). Landlord and Tenant agree that the following terms are
part of the Lease:
1. Purpose of Improvement Agreement: The purpose of this Improvement
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of Interior Improvements within the Premises prior
to the Commencement Date.
2. Definitions: As used in this Interior Improvement Agreement, the
following terms shall have the following meanings, and terms which are not
defined below, but which are defined in the Lease and which are used in this
Interior Improvement Agreement, shall have the meanings ascribed to them by the
Lease:
A. Approved Specifications: The term "Approved Specifications" shall
mean those specifications for the Interior Improvements to be constructed by
Landlord which are described by Exhibit "C" to the Lease.
B. Interior Improvements: The tam "Interior Improvements" shall mean
all interior improvements to be constructed by Landlord in accordance with the
Approved Specifications (e.g., HVAC equipment and distribution, transformer and
power distribution, partitions, floor, wall, and window covering, righting
fixtures).
C. Interior Improvement Costs: The term "Interior Improvement Costs*
shall mean the following: (i) the total amount due pursuant to the general
construction contract entered into by Landlord to construct the Interior
Improvements, including the cost of construction associated with compliance with
ADA or other governmental requirements necessitated by such Interior
Improvements; (ii) the cost of all governmental approvals required as a
condition to the construction of the Interior Improvements (including all
construction taxes imposed by the City of Sunnyvale) in connection with the
issuance of a building permit for the Interior Improvements; (iii) all utility
connection or use fees; (iv) fees of architects or engineers for services
rendered in connection with the design and construction of the Interior
Improvements; (v) the cost of payment and performance bonds obtained by Landlord
or Prime Contractor to assure completion of the Interior Improvement, and (vi) a
construction management fee of three percent (3%) of the amount due under
section (i) of this paragraph; provided however, that such fee shall only be
applicable to the portion of such amount that exceeds Landlord's required
contribution under Paragraph 2 of the First Addendum to Lease and that such fee,
together with the management fee payable pursuant to the 892 Lease (as defined
in the Addendum), in the aggregate [text missing from original] shall in no
event exceed $37,500.00.
D. Substantial Completion and Substantially Complete: The terms
"Substantial Completion" and "Substantially Complete" shall each mean the date
when all of the following have occurred with respect to the Interior
Improvements in question: (i) the construction of the Interior Improvements in
question has been substantially completed in accordance with the requirements of
this Lease; (ii) the architect responsible for preparing the
3.
<PAGE>
plans shall have executed a certificate or statement representing that the
Interior Improvements in question have been substantially completed in
accordance with the plans and specifications therefor, and (iii) the Building
Department of the City of Sunnyvale has completed its final inspection of such
improvements and has "signed off" the building inspection card approving such
work as complete.
3. Schedule of Performance: Set forth in this paragraph is a schedule of
certain critical dates relating to Landlord's and Tenant's respective
obligations regarding the construction of the Interior Improvements (the
"Schedule of Performance"). Landlord and Tenant shall each be obligated to use
reasonable efforts to perform their respective obligations within the time
periods set forth in the Schedule of Performance and elsewhere in this Interior
Improvement Agreement. The Schedule of Performance is as follows:
<TABLE>
<CAPTION>
Responsible
Action Items Due Date Party
----------------------- --------------------------------- ----------------
<S> <C> <C> <C>
A. Delivery to Landlord of By January 26, 1996 Tenant
Tenant's Interior
Requirements
B. Delivery to Tenant of Within fourteen (14) days after Landlord
Preliminary Interior delivery to Landlord of conceptual
Improvement Plans plans for the Interior Improvements
C. Approval by Tenant of Within seven (7) days after Tenant
Preliminary Interior Plans Tenant receives Preliminary
Interior Plans.
D. Delivery to Tenant of Final Within twenty-one (21) days after Landlord
Interior Plans approval of the Preliminary
Interior Plans
E. Approval by Tenant of Final Within seven (7) days after Tenant Tenant
Interior Plans receives Final Interior Plans
F. Commencement of Within five (5) days after Landlord
construction of Interior issuance of all necessary
Improvement governmental approvals
G. Substantial Completion of Within forty-nine (49) days after Landlord
Interior Improvements issuance of building permit for
the Interior Improvements
</TABLE>
2.
<PAGE>
4. Construction of Interior Improvements: Landlord shall, at its sole
cost and expense, construct the Interior Improvements in accordance with the
following:
A. Development and Approval of Preliminary Interior Plans: On or
before the due date specified in the Schedule of Performance, Tenant shall
deliver to Landlord a proposed floor plan identifying its requirements for the
Interior Improvements that is consistent with the Approved Specifications
("Tenant's Interior Requirements"). On or before the due date specified in the
Schedule of Performance, Landlord shall and deliver to Tenant for its review and
approval preliminary plans for the Interior Improvements which are consistent
with and conform to Tenant's Interior Requirements and the Approved
Specifications (the "Preliminary Interior Plans"). On or before the due date
specified in the Schedule of Performance, Tenant shall either approve such plans
or notify Landlord in writing of its specific objections to the Preliminary
Interior Plans. If Tenant so objects, Landlord shall revise the Preliminary
Interior Plans to address such objections in a manner consistent with the
parameters for the Interior Improvements set forth in this Improvement Agreement
and the Approved Specifications and shall resubmit such revised H Preliminary
Interior Plans as soon as reasonably practicable to Tenant for its approval.
When such revised Preliminary Interior Plans are resubmitted to Tenant, it shall
either approve such plans or notify Landlord of any further objections in
writing within five (5) business days after receipt thereof. If Tenant has
further objections to the revised Preliminary Interior Plans, the parties shall
meet and confer to develop Preliminary Interior Plans that are reasonably
acceptable to both Landlord and Tenant within five (5) business days after
Tenant has notified Landlord of its second set of objections. In the event
Tenant and Landlord do not resolve all of Tenant's objections within such five
(5) business day period, Landlord and Tenant shall immediately cause Landlord's
architect to meet and confer with Tenant's architect or construction consultant,
who shall apply the standards set forth in this Improvement Agreement to resolve
Tenant's objections and incorporate such resolution into the Preliminary
Interior Plans, which process Landlord and Tenant shall cause to be completed
within five (5) business days after the conclusion of the five (5) business day
period referred to in the immediately preceding sentence.
B. Development and Approval of Final Interior Plans: Once the
Preliminary Interior Plans have been approved by Landlord and Tenant (including
all changes made to resolve Tenant's objections approved by Landlord's architect
and Tenant's architect or construction consultant pursuant to subparagraph 4A),
Landlord shall complete and submit to Tenant for its approval final working
drawings for the Interior Improvements by the due date specified in the Schedule
of Performance. Tenant shall approve the final plans for the Interior
Improvements or notify Landlord in writing of its specific objections by the due
date specified in the Schedule of Performance. If Tenant so objects, the parties
shall confer and reach agreement upon final working drawings for the Interior
improvements within five (5) business days after Tenant has notified Landlord of
its objections. In the event Tenant and Landlord do not resolve all of Tenant's
objections within such five (5) business day period, Landlord and Tenant shad
immediately cause Landlord's architect to meet and confer with Tenant's
architect or construction consultant, who shall apply the standards set forth in
the Improvement Agreement to resolve Tenant's objections and incorporate such
resolution into the Final Interior Plans, which process Landlord and Tenant
shall cause to be completed within five (5) business days after the conclusion
of the five (5) business day period referred to in the immediately preceding
sentence. The final working drawings so approved by Landlord and Tenant
(including off
3.
<PAGE>
changes made to resolve Tenant's objections approved by Landlord's architect and
Tenant's architect or construction consultant) are referred to herein as the
"Final Interior Plans".
C. Building Permit: As soon as the Final Interior Plans have been
approved by Landlord and Tenant, Landlord shall apply for a building permit for
the Interior Improvements, and shall diligently prosecute to completion such
approval process.
D. Construction Contract: Landlord and Tenant shall cooperate to
cause the Interior Improvements to be constructed by a general contractor who is
engaged by Landlord in accordance with whichever of the procedures set forth in
either subparagraph 4D (1) or 4D (2) hereof that is approved by Landlord and
Tenant; provided, however, that if Landlord and Tenant do not agree on which
method to use for selecting the general contractor and awarding the construction
contact within five (5) days after either party requests the other to approve
one of the two methods set forth herein, then the general contractor shall be
selected and the general construction contract awarded in accordance within the
provisions of subparagraph 4D (1) hereof
(1) The job of constructing the Interior Improvements shall be
offered for "competitive bid", on a fixed price basis, to at few three (3) but
no more than five (5) general contractors reasonably approved by Landlord and
Tenant. The construction contract shall be awarded to the bidder selected by
Tenant and reasonably approved by Landlord, who may or may not be the bidder
submitting the lowest bid for the job. Landlord shall submit to Tenant a list of
general contractors acceptable to Landlord to whom the job may be bid, and
Tenant shall notify Landlord within three (3) business days after receipt of
such fist of its objection to any proposed contractor. Tenant's failure to
object within such period of time shall be deemed to be its approval of all
bidders on the list so submitted by Landlord.
(2) The Interior Improvements may be constructed pursuant to a
"cost plus" construction contract awarded to a general contractor selected by
Landlord and approved by Tenant. Landlord shall submit to Tenant Landlords
recommendation of the general contractor and the terms of the *cost plus"
construction contract for the Interior Improvements for Tenant's approval, which
shall be deemed given if objection is not made by Tenant within two (2) business
days after receipt of such proposal from Landlord. If this method of awarding
the construction contract is selected, the general construction contract shall
provide that all major subcontractors for the Interior Improvements shall be
chosen by a competitive bid process where (i) Tenant shall have the right to
approve subcontractors who bid on specific parts of the job, and (ii) Tenant
shall have the right to cause a major subcontract to rebid if Tenant does not
approve the low bid, if such low bid would cause the total Interior Improvement.
Costs to exceed the amount stated in Paragraph 2 of the First Addendum to Lease
and requests that changes be made to the Final Interior Plans (subject to
Landlord's approval) for the purpose of lowering the total Interior Improvement
Costs to a level that does not exceed the amount stated in Paragraph 2 of the
First Addendum to Lease. Delays caused by any modifications to the Final
Interior Plans and rebidding requested by Tenant shall be deemed delays caused
by Tenant for Purposes of paragraph 7 hereof.
(3) Landlord and Tenant shall use their best efforts to approve
the general contractor and all subcontractors so that the construction contract
may be executed as soon as possible.
4.
<PAGE>
E. Commencement of Interior Improvements: On or before the due date
specified in the Schedule of Performance, Landlord shall commence construction
for the Interior Improvements and shall diligently prosecute such construction
to completion, using all reasonable efforts to achieve Substantial Completion of
the Interior Improvements by the due date specified in the Schedule of
Performance.
5. Payment of Interior Improvement Costs: Landlord and Tenant shall have
the following obligations with respect to the payment of Interior Improvement
Costs:
A. Landlord shall be obligated to pay an amount equal to the Team
Improvement Allowance as provided for in Paragraph 2 of the First Addendum To
Lean for the Payment of Interior Improvement costs. If the total of Interior
Improvement Costs exceeds the amount of Landlord's required contribution, Tenant
shall be obligated to pay the entire mount of such excess. In no event shag
Landlord be obligated to pay for Interior Improvement Costs in excess of the
allowances provided for in Paragraph 2 of the First Addendum To Lease. Tenant
must pay for such excess. If Tenant becomes obligated to contribute toward
paying Interior Improvement Costs pursuant to this subparagraph 5A, then
Landlord shall estimate the amount of such excess prior to commencing
construction of the Interior Improvements and Tenant shall pay to Landlord a
proportionate share of each progress payment due to the general contractor which
bears the same relationship to the total amount of the progress payment in
question as the amount Tenant is obligated to contribute to the payment of
Interior Improvement Costs bean to the total estimated Interior Improvement
Costs. Tenant shall pay Tenant's share of any progress payment to Landlord
within five (5) business days after receipt of a statement therefor from
landlord. At the time the final accounting is rendered by Landlord pursuant to
subparagraph 5C hereof, there shall be an adjustment between Landlord and Tenant
such that each shall only be required to contribute to the payment of Interior
Improvement Costs in accordance with the obligations set forth in this
subparagraph 5A, which adjustment shall be made within five (5) days after
Landlord notifies Tenant of the required adjustment. If Tenant is required to
make a payment to Landlord. Tenant shall make such payment even if Tenant elects
to audit the statement submitted by Landlord pursuant to subparagraph 5C. In the
event Tenant's audit discloses that an overpayment or underpayment was made by
Tenant, there shall be an adjustment between Landlord and Tenant as soon as
reasonably practicable such that each shall only be required to contribute to
the payment of costs in accordance with the obligations set forth in this
subparagraph 5A.
B. If Tenant fails to pay any amount when due pursuant to this
paragraph 5, then (i) Landlord may (but without the obligation to do so) advance
such funds on Tenant's behalf, and Tenant shall be obligated to reimburse
Landlord for the amount of funds so advanced on its behalf and (ii) Tenant shall
be liable for the payment of a late charge and interest in the same manner as if
Tenant had failed to pay Base Monthly Rent when due as described in paragraph
3.4 of the Lease. Any amounts paid to Landlord by Tenant pursuant to this
subparagraph shall be held by Landlord as Tenant's agent, for disbursal to the
general contractor in payment for work costing in excess of Landlord's required
contribution.
C. When the Interior Improvements are Substantially Completed,
Landlord shall submit to Tenant a final and detailed accounting of all Interior
Improvement Costs paid by Landlord, certified as true and correct by Landlord's
financial officers. Term shall have the right
5.
<PAGE>
to audit the books, records, and supporting documents of Landlord to the extent
necessary to determine the accuracy of such accounting during normal business
hours after giving Landlord at least two (2) days prior written notice. Tenant
shall bear the cost of such audit, unless such audit discloses that Landlord has
overstated the total of such costs by more than two percent (2%) of the actual
amount of such costs, in which event Landlord shall pay the cost of Tenant's
audit. Any such audit must be conducted, if at all, within ninety (90) days
after Landlord delivers such accounting to Tenant.
6. Changes to Approved Plans: Once the Final Interior Plans have been
approved by Landlord and Tenant, neither shag have the right to order extra work
or change orders with respect to the construction of the Interior Improvements
without the prior written consent of the other. All extra work or change orders
requested-by either Landlord or Tenant A" be made in writing, shall specify any
added or reduced cost and/or construction time resulting therefrom, and shall
become effective and a pan of the Final Interior Plans once approved in writing
by both parties. If a change order requested by Tenant results in an increase in
the cost of constructing the Interior Improvements, Tenant shall pay the amount
of such increase caused by the change order requested by Tenant at the time the
change order is approved by both Landlord and Tenant if and to the extent such
change order causes the Interior Improvement Costs to exceed Landlord's required
contribution thereto described in subparagraph 5A. Landlord acknowledges and
agrees that if Tenant seeks to construct Interior Improvements costing in excess
of three times the Tenant Improvement Allowance, then, in recognition of the
fact that Tenant will be paying more than twice the Tenant Improvement Allowance
to construct the Interior Improvements, Tenant shall not have to pay for change
orders until invoices therefor are submitted by the contractor. If a change
order results in an increase in the amount of construction time needed by
landlord to complete the Interior Improvements, paragraph 7 hereof may apply.
7. Delay in Completion Caused by Tenant. The parties hereto acknowledge
that the date on which Tenant's obligation to pay the Base Monthly Rent and the
Additional Rent would otherwise commence may be delayed because of (i) Tenant's
failure to submit necessary information to Landlord when required, (ii) Tomes
failure to promptly review and approve the plans for the Interior Improvements
in accordance with the Schedule for Performance, (iii) any ad by Tenant which
interferes with or delays the completion of the plans for the Interior
Improvements or Landlord's construction work, (iv) change orders requested by
Tenant and approved by Landlord, or (v) special materials or equipment ordered
or specified by Tenant that cannot be obtained by Landlord at normal cost within
a reasonable period of time because of limited availability. It is the intent of
the parties hereto that the commencement of Tenant's obligation to pay the Base
Monthly Rent and all Additional Rent not be delayed by any of such causes or by
any other act of Tenant and in the event it is so delayed, Tenant's obligation
to pay the base Monthly Rent and all Additional Rent shall commence as of the
date it would otherwise have commenced absent delay caused by Tenant, provided
that within a reasonable period of time after learning of the occurrence of the
cause of any such delay, Landlord notifies Tenant in writing of the fact that
such delay has occurred and the known or anticipated extent of any such delay.
6.
<PAGE>
8. Delivery of Possession, Punch List, and Acceptance Agreement: As soon
as the Interior Improvements are Substantially Completed, Landlord and Tenant
shall together walk through the Premises and inspect all Interior Improvements
so completed, using reasonable efforts to discover all uncompleted or defective
construction in the Interior Improvements. After such inspection has been
completed, each party shall sign an acceptance agreement in the form attached to
the Lease as Exhibit "D", which shall (i) include a list of all "punch list"
items which the parties agree are to be corrected by Landlord and (ii) shall
state the Commencement Date and the initial Ban Monthly Rent. As soon as such
inspection has been completed and such acceptance agreement executed, Landlord
shall deliver possession of the Premises to Tenant. Landlord shall use
reasonable efforts to complete and/or repair such "punch list" items within
thirty (30) days after executing the acceptance agreement. Landlord shall have
no obligation to deliver possession of the Premises to Tenant until such
procedures regarding the preparation of a punch fist and the execution of the
acceptance agreement have been completed. Tenant's taking possession of any
part of the Premises shall be deemed to be an acceptance by Tenant of Landlord's
work of improvement in such part as complete and in accordance with the tam of
the Lease except for the punch fist item noted and latent defects that could not
reasonable have been discovered by Tenant during its inspection of the Interior
Improvements prior to completion of the acceptance agreement. Notwithstanding
anything contained herein, Tenants obligation to pay the Base Monthly Rent and
Additional Rent shall commence as provided in the Lease, regardless of whether
Tenant completes such inspection or executes such acceptance agreement.
9. Standard of Construction and Warranty: Landlord hen by warrants that
the Interior Improvements shall be constructed substantially in accordance with
the Final Interior Plans (as modified by change orders approved by Landlord and
Tenant), the Approved Specifications, all Private Restrictions and all Laws, in
a good and workmanlike manner, and all materials and equipment furnished shall
conform to such final plans and shall, be new and otherwise of good quality.
The foregoing warranty shall be subject to, and limited by, that following:
A. Once Landlord is notified in writing of any breach of the above-
described warranty, Landlord shall promptly commence the cure of such breach and
complete such cure with diligence at Landlord's sole cost and expense.
B. Landlord's liability pursuant to such warranty shall be limited
to the cost of correcting the defect or other miner in question. In no event
shag Landlord be liable to Tenant for any damages or liability incurred by
Tenant as a result of such defect or other matter, including without limitation
damages resulting from any loss of business by Taunt or other consequential
damages.
C. Notwithstanding anything contained herein, Landlord shall not be
liable for any defect in design, construction, or equipment furnished which is
discovered and of which Landlord receives written notice from Tenant after the
firm (1st) anniversary of the recordation of a notice of completion for the work
of improvement affected by the defect.
D. With respect to defects for which Landlord is not responsible
pursuant to subparagraph 9C, Tenant shall have the benefit of any construction
or equipment warranties existing in favor of Landlord that would assist Tenant
in correcting such defect and in
7.
<PAGE>
discharging its obligations regarding the repair and maintenance of the
Premises. Upon request by Tenant, Landlord shall inform Tenant of all written
construction and equipment warranties existing in favor of Landlord which affect
the Interior Improvements. At Tames request, Landlord shall cooperate with
Tenant in enforcing such warranties and in bringing any suit that may be
necessary to enforce liability with regard to any defect for which Landlord is
not responsible pursuant to this paragraph so long as Tenant pays all costs
reasonably incurred by Landlord in so acting.
E. Landlord makes no other express or implied warranty with respect
to the design, construction or operation of the Interior Improvements except as
set that forth in this paragraph.
10. Condition to Landlord's Performance: Landlord's obligations under the
Lease am subject to the satisfaction or waiver of the condition that Landlord
obtain all budding permits and other governmental approvals required in order to
commence construction of the Interior Improvements by the due dates specified in
the Schedule of Performance. If such condition is not satisfied or waived
within the applicable time period, Landlord shall have the option of terminating
the Lease provided such condition is not reasonably likely to be satisfied
within one hundred twenty (120) days; provided, however, that Landlord shall
have the option to extend the time period for the satisfaction of such condition
for a period of up to one hundred twenty. (120) days to enable Landlord to
continue its efforts to cause such condition to be satisfied. If any such
option to extend the time for satisfaction of this condition is exercised, (i)
Landlord shall continue to use reasonable efforts to cause the condition to be
satisfied; (ii) all other time periods contained in the Schedule of Performance
which are impacted by such extension shall be appropriately adjusted; and (Hi)
such extension shad not constitute a delay caused by Tenant pursuant to
paragraph 7 hereof, nor shall Landlord in any way be penalized for exercising
such option to obtain additional time to cam the condition to be satisfied. If
landlord becomes entitled to and elects to so terminate the Lease, the Lease
shall terminate on the dated notice is so given to Tenant. Landlord shall be
under an obligation of good faith to use all reasonable efforts to cam the
condition to be satisfied.
11. Tenant's Right to Install Trade Fixtures: When the construction of the
Interior Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Premises can be commenced in
accordance with good construction practices. Landlord also shall notify Tenant
to that effect and shall permit Tenant, and its authorized representatives and
contractors, to have access to the Premises for the purpose of installing Tomes
trade fixtures and equipment. Any such installation work by Tenant, or its
authorized representatives and contractors, shall be undertaken at their sole
risk, flu from rent, and upon the following conditions:
A. If the entry into the Premises by Tenant, or its representatives
or contractors, interferes with or delays Landlord's construction work, after
twenty-four (24) hours notice of such fad to Tenant (i) Tenant shall cause the
party responsible for such interference or delay to leave the Premises, or (ii)
Tenant shall cause to be taken such steps as may be reasonably necessary in the
Prime Contractors opinion to alleviate such interference or delay,
8.
<PAGE>
B. Any contractor used by Tenant in connection with such entry and
installation shall be subject to Landlords approval, which approval shall not be
unreasonably withheld, but which may be withheld if such contractor is non-union
and its entry on the Premises would interfere with Landlord's work;
C. If Tenant's entry or installation causes any strike or other
labor dispute which materially and adversely affects construction of the
Premises, upon Landlord's demand Tenant shall withdraw its contractors and
representatives from the Premises or take such other steps as Landlord shall
deem appropriate to remedy the situation; and
D. Tenant shall have such obligations under the Lease as are
specified in paragraph 2.5 of the Lease (e.g., indemnification and insurance).
12. Effect of Agreement: In the event of any inconsistency between this
Improvement Agreement and the Lease, the terms of this Improvement agreement
shall prevail.
LANDLORD: TENANT:
Ross Drive Investors, Verity, Incorporated,
a California general partnership a Delaware corporation
By: /s/ Michael J. Biggar By: /s/ Donald C. McCauley
------------------------------- ---------------------------------
Michael J. Biggar Donald C. McCauley
Manager Vice President and CFO
Date: January 29, 1996 Date: January 29, 1996
----------------------------- -------------------------------
9.
<PAGE>
Exhibit "C"
APPROVED SPECIFICATIONS
(To Be Attached)
1.
<PAGE>
Acceptance Agreement
This Acceptance Agreement is made as of ________, 1996 by and between the
parties hereto with regard to that Lease dated _______, 1996 by and between Ross
Drive Investors, a California general partnership, as Landlord ("Landlord"), and
____________ as Tenant ("Tenant"), affecting those Premises commonly known as
___________, San Jose, California. The parties hereto agree as follows:
1. All improvements required to be constructed by Landlord by the Lease
have been completed in accordance with the terms of the Lease and are hereby
accepted by Tenant, subject to the completion of punch list items identified on
Exhibit "A" attached hereto.
2. Possession of the Premises has been delivered to Tenant and Tenant has
accepted and taken possession of the Premises.
3. The Commencement Date of the Lease Term is _______________ and the
Least Term shall expire on ___________ unless sooner terminated according to the
terms of the Lease or by mutual agreement.
4. The Base Monthly Rent initially due pursuant to the Lease is
___________/100 Dollars ($________) per month, subject to any subsequent
adjustments required by the Lease.
5. Landlord has received a Security Deposit in the amount of _________
Dollars ($______). In addition, Tenant has prepaid rent in the amount of
____________ Dollars ($______), which shall be applied to the first installment
of Base Monthly Rent.
6. The Lease is in full force and effect, neither party is in default of
its obligations under the Lease, and Tenant has no setoffs, claims, or defenses
to the enforcement of the Lease.
LANDLORD: TENANT:
Ross Drive Investors ______________________________________
a California general partnership a ______ corporation
By:____________________________ By:___________________________________
Michael J. Biggar Name:_________________________________
Manager Title:________________________________
Date:__________________________ Date:_________________________________
3.
<PAGE>
Exhibit "E"
Description of Recording Information
for Private Restrictions
Not Applicable
1.
<PAGE>
Exhibit "F"
Sign Criteria
(To be Attached)
Not Applicable
1.
<PAGE>
Second Addendum To Lease
This Second Addendum is dated for reference purposes as January 22, 1996,
and is made a part of that Lease Agreement (the "Lease") dated January 22, 1996,
by and between Ross Drive Investors, a California general partnership
("Landlord") and Verity, Inc., a Delaware corporation ("Tenant") affecting
certain real property commonly known as 894 Ross Drive, Sunnyvale, California,
with reference to the following facts:
1. Parking: Notwithstanding, anything to the contrary in Paragraph 4.5,
-------
five (5) of Tenant's allocated parking Stalls may, at Tenant's option, be
designated for Tenant's exclusive use as "Visitor" spaces. If Tenant desires to
mark and use such stalls, it shall be under the following terms and conditions:
A. All expenses associated with the marking of such exclusive
parking spaces shall be paid by Tenant.
B. The exclusive parking spaces shall be located reasonably near to
the entrance to the Building, with due regard for the rights of other tenants of
the Building. Their exact location, and the location and nature of any
associated signage or markings, shall be submitted to and approved in writing by
Landlord before work is commenced.
C. If Tenant elects to paint the parking lot with markings relating
to its exclusive spaces, or to erect signs relating thereto, then on expiration
or earlier termination of this Lease, Tenant shall remove the signs and markings
and restore the parking lot to its condition prior to their placement, to
Landlord's satisfaction, and at Tenant's expense.
D. Landlord shall not be responsible for enforcing the exclusive use
of said stall, provided, however, that Landlord will not grant to any other
Tenant of the Project the right to use such stalls.
LANDLORD: TENANT:
Ross Drive Investors, Verity, Incorporated,
a California general partnership a Delaware corporation
By: /s/ Michael J. Biggar By: /s/ Donald C/ McCauley
_______________________________ __________________________________
Michael J. Biggar Donald C. McCauley
Manager Vice President and CFO
Date: January 29, 1996 Date: January 29, 1996
_____________________________ ________________________________
1.
<PAGE>
Exhibit 10.11
AMENDMENT TO SUBLEASE AGREEMENT
This Amendment to Sublease Agreement is made effective as of the ___ day of
November, 1998, by and between Verity, Inc., a Delaware corporation ("Verity"),
as Sublessor, and TIVO, a California corporation ("TIVO"), formerly known as
Teleworld, Inc., as Sublessee.
RECITALS:
A. Verity and TIVO entered into that certain Sublease Agreement dated
effective as of February 23, 1998, respecting those certain premises identified
as Suite 100 (the "Original Premises") of the building (the "Building") located
at 894 Ross Drive, Sunnyvale, California. All capitalized terms used herein
shall have the same meaning ascribed to them in the Sublease Agreement, unless
expressly defined in this Amendment. In event of any conflict between the terms
and conditions of this Amendment and those of the Sublease Agreement, the terms
and conditions of this Amendment shall control.
B. Verity and TIVO desire to amend the Sublease Agreement to add to the
Premises subleased by TIVO under the Sublease Agreement those certain premises
identified as Suite 205 of the Building, containing approximately 4,524 square
feet, on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, Verity and TIVO hereby agree as follows:
1. Additional Premises. Effective February 1, 1999, the portion of the
-------------------
Building identified as Suite 205, and consisting of approximately 4,524 square
feet (the "Additional Premises"), shall be added to the Premises subleased by
TIVO under the Sublease Agreement for all purposes of the Sublease Agreement.
2. Rent. TIVO shall pay to Verity, as Rent for the Additional Premises
----
for each month of the term of this Sublease during which TIVO subleases the
Additional Premises as set forth below, the sum of Eleven Thousand Three Hundred
Ten Dollars ($11,310). Such Rent shall be a full service rental on the terms
and conditions set forth in the Sublease Agreement.
3. Term For Additional Premises. TIVO shall sublease the Additional
----------------------------
Premises under the terms of the Sublease Agreement and this Amendment for a term
commencing February 1, 1999, and ending March 31, 2000. The term for the
Additional Premises set forth in the preceding sentence shall have no effect
upon the Scheduled Expiration Date for the Original Premises under the Sublease
Agreement.
4. Parking. Effective upon the commencement of the term for the
-------
Additional Premises, TIVO shall have the right to use an additional seventeen
(17) parking stalls in the parking areas of the Project. In the event that the
term of the Sublease Agreement is not extended for the Original Premises
pursuant to the provisions of Paragraph 3.2 of the Sublease
1.
<PAGE>
Agreement, then such number of parking stalls set forth above shall be the only
parking stalls which TIVO is entitled to use from and after the Scheduled
Expiration Date.
5. Acceptance and Condition of Additional Premises. Verity shall deliver
-----------------------------------------------
the Additional Premises to TIVO at the commencement of the term therefor in
broom-clean condition. TIVO acknowledges it had the right to inspect the
Additional Premises prior to execution of this Amendment. By executing this
Amendment, TIVO shall be deemed to have accepted the Additional Premises in
their "AS-IS" condition, subject to any circumstances, defects, or conditions
therein, and without any representations or warranties from Verity.
6. Signage. TIVO show have the right, at its sole cost and expense, to
-------
place a sign on the suite door of the Additional Premises, and to place standard
identification on the Lobby Directory applicable to the Additional Premises.
7. Correction of Right of Offer. Verity and TIVO agree that Paragraph 10
----------------------------
of the Sublease Agreement shall be modified with the effect that the right of
offer extended to TIVO therein shall apply to Suites 200, 201, 202 and 203 of
the Building, notwithstanding the provisions of such paragraph to the contrary.
8. Consent of RDI. This Amendment, and the sublease of the Additional
--------------
Premises by Verity to TIVO, shall be subject to the consent of RDI on the terms
set forth in Paragraph 15 of the Sublease Agreement. If such consent is not
obtained by December 31, 1998, this Amendment shall be of no further force or
effect.
9. Brokers. A commission shall be paid to Cornish & Carey Commercial
-------
("C&C") under a separate agreement between C&C and Verity. Except for the
foregoing, each party warrants and represents to the other than it has retained
no broker or other party that is entitled to any fee or commission in connection
with this Amendment, and each agrees to indemnify, defend and hold harmless the
other party from any and all liabilities, claims or damages arising out of such
party's breach of the foregoing warranty and representation.
10. Counterparts. This Amendment may be executed in counterparts and
------------
delivered by and to the respective parties by facsimile transmission, and each
such counterpart copy hereof so executed and delivered shall constitute an
original, and all such counterparts together shall constitute a single
agreement.
2.
<PAGE>
11. No Further Modifications. Except as expressly modified by the terms of
------------------------
this Amendment, the terms and conditions of the Sublease Agreement shall remain
in full force and effect.
SUBLESSEE:
Verity, Inc., a Delaware corporation
By: /s/ [illegible]
--------------------------------------
Its: V.P. Administration & Controller
-------------------------------------
SUBLESSOR:
TIVO, a California corporation
By: /s/ Michael Ramsay
--------------------------------------
Its: CEO
-------------------------------------
3.
<PAGE>
EXHIBIT 10.12
SECOND AMENDMENT TO SUBLEASE AGREEMENT
This Second Amendment to Sublease Agreement is made effective as of the
____ day of March, 1999, by and between Verity, Inc., a Delaware corporation
("Verity"), as Sublessor, and TIVO, a Delaware corporation ("TIVO"), formerly
known as Teleworld, Inc., as Sublessee.
RECITALS:
A. Verity and TIVO entered into that certain Sublease Agreement dated
effective as of February 23, 1998, respecting those certain premises identified
as Suite 100 (the "Original Premises") of the building (the "Building) located
at 894 Ross Drive, Sunnyvale, California. Verity and TIVO also entered into that
certain Amendment to Sublease Agreement (the "First Amendment") dated November
____, 1998, by which Suite 205 ("Suite 205") of the Building was added to the
Premises subleased by TIVO under the Sublease Agreement. The original Sublease
Agreement, as modified by the First Amendment, shall be collectively referred to
below as the "Sublease Agreement".
B. All capitalized terms used herein shall have the same meaning ascribed
to them in the Sublease Agreement, unless expressly defined in this Second
Amendment. In event of any conflict between the terms and conditions of this
Second Amendment and those of the Sublease Agreement, the terms and conditions
of this Second Amendment shall control.
C. Verity and TIVO desire to amend the Sublease Agreement to add to the
Premises subleased by TIVO under the Sublease Agreement those certain premises
identified as Suite 202 of the Building, containing approximately 3,854 square
feet, on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, Verity and TIVO hereby agree as follows:
1. Additional Premises. Effective July 1, 1999, the portion of the
-------------------
Building identified as Suite 202, and consisting of approximately 3,854 square
feet ("Suite 202"), shall be added to the Premises subleased by TIVO under the
Sublease Agreement for all purposes of the Sublease Agreement, as modified by
this Second Amendment.
2. Additional Premises Rent. TIVO shall pay to Verity, as Rent for Suite
------------------------
202 for each month of the term of this Sublease during which TIVO subleases
Suite 202 as set forth below, the sum of Nine Thousand Six Hundred Thirty-Five
Dollars ($9,635). Such Rent shall be a full service rental on the terms and
conditions set forth in the Sublease Agreement.
3. Term For Additional Premises. TIVO shall sublease Suite 202 under the
----------------------------
terms of the Sublease Agreement and this Second Amendment for a term commencing
July 1, 1999, and ending June 30, 2000. The term for Suite 202 set forth in the
preceding sentence shall have no effect upon the expiration dates of the term
for the Original Premises or Suite 205 under the Sublease Agreement.
1.
<PAGE>
4. Original Premises Extension.
---------------------------
(a) Extended Term. Pursuant to the provisions of Paragraph 3.2 of the
-------------
Sublease Agreement dated February 23, 1998, the term during which TIVO shall
sublease the Original Premises from Verity under the terms of the Sublease
Agreement and this Second Amendment shall be extended for a period of six (6)
months (the "Extended Term"). The Extended Term shall commence on October 1,
1999, and expire on March 31, 2000. The Extended Term for the Original Premises
set forth in the preceding sentence shall have no effect upon the term for Suite
205 set forth in the First Amendment, or the term for Suite 202 set forth in
Paragraph 3 above.
(b) Extended Term Rent. TIVO shall pay to Verity, as Rent for the
------------------
Original Premises for each month of the Extended Term, the sum of Seventy-Two
Thousand Five Hundred Sixty-Four Dollars and Ten Cents ($72,564.10). Such Rent
shall be a full service rental on the terms and conditions set forth in the
Sublease Agreement.
5. Parking. Effective upon the commencement of the term for Suite 202,
-------
TIVO shall have the right to use an additional fifteen (15) parking stalls in
the parking areas of the Project.
6. Acceptance and Condition of Additional Premises. Verity shall deliver
-----------------------------------------------
Suite 202 to TIVO at the commencement of the term therefor in broom-clean
condition. TIVO acknowledges it had the right to inspect Suite 202 prior to
execution of this Second Amendment. By executing this Second Amendment, TIVO
shall be deemed to have accepted Suite 202 in its "AS-IS" condition, subject to
any circumstances, defects, or conditions therein, and without any
representations or warranties from Verity.
7. Signage. TIVO shall have the right, at its sole cost and expense, to
-------
place a sign on the suite door of Suite 202, and to place standard
identification on the Lobby Directory applicable to Suite 202.
8. Consent of RDI. This Second Amendment, and the sublease of Suite 202
--------------
by Verity to TIVO, shall be subject to the consent of RDI on the terms set forth
in Paragraph 15 of the Sublease Agreement dated February 23, 1998. If such
consent is not obtained by May 15, 1999, this Second Amendment shall be of no
further force or effect.
9. Brokers. A commission shall be paid to Cornish & Carey Commercial
-------
("C&C") under a separate agreement between C&C and Verity. Except for the
foregoing, each party warrants and represents to the other than it has retained
no broker or other party that is entitled to any fee or commission in connection
with this Second Amendment, and each agrees to indemnify, defend and hold
harmless the other party from any and all liabilities, claims or damages arising
out of such party's breach of the foregoing warranty and representation.
10. Counterparts. This Second Amendment may be executed in counterparts
------------
and delivered by and to the respective parties by facsimile transmission, and
each such counterpart copy hereof so executed and delivered shall constitute an
original, and all such counterparts together shall constitute a single
agreement.
2.
<PAGE>
11. No Further Modifications. Except as expressly modified by the terms
------------------------
of this Second Amendment, the terms and conditions of the Sublease Agreement
shall remain in full force and effect.
SUBLESSEE:
Verity, Inc., a Delaware corporation
By: /s/ [illegible]
--------------------------------
Its: V.P. Finance and Administration
---------------------------------
SUBLESSOR:
TIVO, a California corporation
By: /s/ Michael Ramsay
--------------------------------
Its: CEO
--------------------------------
3.
<PAGE>
EXHIBIT 10.13
Consent Of Landlord
-------------------
Pursuant to a Lease and First Addendum to Lease dated for reference
purposes as of January 22, 1996, as modified by a First Amendment to Lease dated
as of June 20, 1996, a Second Amendment to Lease dated as of November 5, 1996,
and a Third Amendment to Lease dated as of January 17, 1997 (referred to
collectively as the "Lease") between Ross Drive Investors, a California general
partnership and David J. Brown, as tenants in common ("Landlord"), as successors
to Ross Drive Investors, a California general partnership ("Former Landlord")
and Verity, Inc., a Delaware corporation ("Tenant"), relating to premises
commonly known as 894 Ross Drive, Sunnyvale, California, in the County of Santa
Clara (the "Premises"), Tenant has requested that Landlord consent to Tenant's
Sublease to Teleworld, Inc., a Delaware corporation ("Subtenant") of the 24,598
rentable square feet of space commonly referred to and identified as Suite 100
of the Premises (the "Subleased Premises") on the terms and conditions set forth
in the Sublease dated February 23, 1998 and attached to this Consent as Exhibit
"A" (the "Sublease").
Landlord is the successor in interest to Former Landlord, and has assumed
ownership and the obligations of the landlord under the Lease. Tenant has
attorned to and recognized Landlord as the owner of the Premises and successor
to Former Landlord under the Lease.
In consideration of Tenant's and Subtenant's execution of this Consent of
Landlord and agreement to the terms and conditions set forth in this Consent,
Landlord consents to the Sublease on the following terms and conditions:
1. Subrent: Tenant represents and warrants to Landlord that the Sublease
-------
contains a complete and accurate statement of all Subrent (as such term is
defined in the Lease, Article 14) received or to be received from Subtenant.
2. No Waiver: This Consent does not constitute consent to any subsequent
---------
subletting or assignment, nor a waiver of the restriction on assignment and
subletting contained in Paragraph 14.1 of the Lease.
3. Tenant's Primary Obligations: Nothing herein shall release or alter
----------------------------
the primary obligations of Tenant under the Lease, nor shall this Consent be
deemed to create contractual obligations on the part of Landlord to the
Subtenant. By executing this Consent, Subtenant agrees to assume all
obligations of Tenant under the Lease related to the Subleased Premises arising
after the date hereof and to remain jointly and severally liable therefore with
Tenant.
4. Costs and Attorney's Fees: This consent is conditional upon Landlord's
-------------------------
receipt of the Landlord's reasonable costs and attorney's fees, to which
Landlord is entitled under Paragraph 14.lA of the Lease. Tenant shall
immediately reimburse Landlord for such fees and costs upon receipt of
Landlord's statement.
5. No Effect On Lease: In no event shall Landlord's consent to this
------------------
Sublease be, or be construed as, a modification of the terms of the Lease except
as explicitly set forth herein, and
1.
<PAGE>
in the event of any inconsistency between any term of the Sublease and the terms
of the Lease, the terms of the Lease shall prevail.
6. Hazardous Materials: (a) Subtenant, at its sole cost, shall comply
-------------------
with all laws relating to the storage, use, and disposal of Hazardous Materials
(as defined in the Lease) that Subtenant, its agents, employees, contractors, or
invitees bring or permit to be brought on to the Subleased Premises or on the
Premises or the Property. If Subtenant does store, use, or dispose of any
Hazardous Materials, Subtenant shall notify Landlord in writing at least five
(5) days prior to their first appearance on the Subleased Premises, and unless
disclosed prior to the execution of this Consent in a response provided by
Subtenant to Landlord's Hazardous Materials Questionnaire or other written
disclosure, such Hazardous Materials shall not be stored, used, or disposed of
on the Subleased or Premises without Landlord's advance written approval.
Subtenant shall be subject to all obligations of Tenant under the Lease relating
to Hazardous Materials, including but not limited to the provisions of Paragraph
7.2, Hazardous Materials, of the Lease.
(b) Subtenant shall be responsible for and shall defend, indemnify, and
hold Landlord and its agents harmless from and against all claims, costs and
liabilities, including attorney's fees and costs, arising out of or in
connection with the storage, use, or disposal of Hazardous Materials in or about
the Subleased Premises, the Premises, or the Property by Subtenant, its agents,
employees, contractors, or invitees which occur prior to or after the Effective
Date, but Tenant shall remain responsible for any such matters to the extent set
forth in the Lease, and Subtenant's responsibility and duty as set forth above
shall not relieve Tenant of its responsibilities and duties pursuant to the
Lease.
7. Construction and Signage: Any and all construction to be performed by
------------------------
Tenant or Subtenant on the Subleased Premises shall be subject to the advance
written approval of Landlord as set forth in the Lease. Any signage called for
in the Sublease shall be subject to Landlord's approval as per the terms of the
Lease, and subject to the procurement of approval and permits from the City of
San Jose. By approving the Sublease, Landlord shall not be deemed to have
approved any signage or construction referenced therein.
8. Insurance: The Subtenant shall comply with all of the provisions of
---------
the Lease, Article 9, as if it were the Tenant named thereunder, and shall name
the Landlord as an additional insured on all policies of insurance required by
the Sublease and Lease, and provide the Landlord with a documentary proof
thereof as required by the Lease.
9. Use: Subtenant shall use the Subleased Premises only for the following
---
uses and for no other purpose: Only those uses and purposes specifically set
forth and authorized in the Lease, and not for manufacturing processes of any
kind under any circumstances.
10. Assignment Of Tenant's Rights: Tenant irrevocably assigns to Landlord,
-----------------------------
as security for the performance of each and all of Tenant's obligations under
the Lease, all rent and other consideration received or to be received from
Subtenant. Landlord, as assignee of Tenant, or a receiver for Tenant appointed
on Landlord's application, may (but is not required to) collect such rent or
other consideration, provided, however, that until and unless Tenant commits an
Event of Default under the Lease, Tenant shall have the right to collect such
rent or other
2.
<PAGE>
consideration (subject to any obligation set forth in the Lease whereby Tenant
is to pay all or a part of such rent or other consideration to Landlord). Such
assignment shall be subject to the following terms and conditions:
(a) Landlord may collect such rent or other consideration from
Subtenant only so long as Tenant shall continue to be in default of its
obligations under the Lease.
(b) Upon Landlord's written request following the occurrence of an
Event of Default under the Lease, Tenant shall execute such documents as
are reasonably requested by Landlord for the purpose of confirming to
Subtenant that Landlord has the right to collect all rent and other
consideration otherwise due to Tenant from such subtenant or assignee.
(c) Subtenant has the right and duty to pay rent or other
consideration otherwise due to Tenant directly to Landlord upon receipt
from Landlord of a declaration under penalty of perjury stating that an
Event of Tenant's Default exists under the Lease, and in such event, each
payment made to Landlord shall be deemed to satisfy the obligations of
Subtenant to Tenant, but only to the extent of such payment.
(d) Subtenant's payment to Landlord pursuant to this assignment shall
not create or evidence any direct landlord tenant relationship between
Subtenant and Landlord, and Landlord may exercise all remedies to terminate
the Lease (including the termination of Subtenant's possession of the
Premises or the Subleased Premises) in the event of any Event of Default by
Tenant, notwithstanding its receipt of any payment from Subtenant pursuant
to this assignment, unless the receipt of such payment completely cures
Tenant's default. The acceptance of a payment from Subtenant pursuant to
this assignment shall not affect Landlord's right to its remedies with
regard to all defaults remaining uncured after such payment.
11. Brokerage Commissions: Notwithstanding anything set forth in the
---------------------
Sublease, Landlord has no obligation to pay and will not pay commissions or fees
to any broker or finder in regard to the Sublease or Landlord's consent thereto.
Tenant and Subtenant will hold Landlord harmless and indemnify and defend
Landlord against any claims for brokerage commissions arising in regard to the
Sublease or Landlord's consent thereto.
3.
<PAGE>
12. Termination: The Sublease is and remains subject and subordinate to
-----------
the Lease, and a termination of the Lease for any reason (including but not
limited to a default of Tenant) shall terminate the Sublease.
LANDLORD: TENANT:
Ross Drive Investors, a California general Verity, Inc., a Delaware corporation
partnership
/s/ James E. Ticehurst
/s/ David J. Brown --------------------------------------
- --------------------------------
By: David J. Brown, Manager James E. Ticehurst
By: V.P. Administration & Controller
--------------------------------
David J. Brown, individually [Print Name and Title]
Dated:________________________________
SUBTENANT:
/s/ David J. Brown
- --------------------------------
By: David J. Brown Teleworld, Inc., a Delaware corporation
/s/ Michael Ramsay
Dated: 3/17/98 --------------------------------------
-------------------------- By: Michael Ramsay, Pres. & CEO
--------------------------------
[Print Name and Title]
Dated: 3-12-98
--------------------------------
4.
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made effective as of the 23rd
day of February, 1998 (the "Effective Date") between Verity, Inc., a Delaware
corporation ("Verity"), as Sublessor, and Teleworld, Inc., a Delaware
corporation ("Teleworld"), as Sublessee.
RECITALS:
A. Verity and Ross Drive Investors, a California general partnership
("RDI"), are parties to that certain Lease dated January 22, 1996, as amended
June 20, 1996, November 5, 1996, and January 17, 1997 (collectively, the
"Lease"), pursuant to which Verity leases from RDI that certain building
containing approximately 43,925 gross leasable square feet of space located at
894 Ross Drive, Suite 100, Sunnyvale, California (the "Master Premises").
B. Verity desires to sublet approximately 24,598 square feet of space
constituting Suite 100 of the Master Premises (the "Premises"), to Teleworld and
Teleworld desires to sublet the same from Verity. The Premises include the
right to use the office cubicles, furniture and network and data wiring
(excluding the T 1 line) currently located in or serving the Premises and set
forth on Exhibit A attached hereto.
NOW, THEREFORE, in consideration of the mutual covenants herein provided
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. Unless otherwise defined, all capitalized terms used
-----------
herein shall have the same meanings as given them in the Lease. A copy of the
Lease is attached hereto as Exhibit B.
2. Sublease.
--------
2.1 Incorporation of Lease Terms. Verity hereby subleases to
----------------------------
Teleworld and Teleworld hereby subleases from Verity, the Premises. Except as
otherwise expressly herein provided, such sublease of the Premises shall be on
all of the terms, covenants, conditions and provisions in the Lease, which
terms, covenants, conditions and provisions are incorporated in and made a part
hereof as if fully set forth herein, and are imposed upon the respective parties
of this Sublease, with Verity hereunder being substituted for Landlord under the
Lease, and Teleworld hereunder being substituted for Tenant under the Lease;
provided that the following provisions of the Lease are not incorporated into
this Sublease: Section 2.1 (first sentence only), Section 2.2, Section 2.3,
Section 3.1, Section 5.4, Section 7.3, Article 8, First Addendum to Lease dated
January 22, 1996, Second Addendum to Lease dated January 22, 1996, First
Amendment to Lease dated June 20, 1996, Second Amendment to Lease dated November
5, 1996, and Third Amendment to Lease dated January 17, 1997. Teleworld shall
comply with all of the terms and conditions applicable to Tenant under the Lease
in connection with, but only with respect to, its occupancy and use of the
Premises and the Common Area. Teleworld shall have the right to use eighty-
seven (87) parking stalls in the parking areas of the Project. To the
1.
<PAGE>
extent the provisions of this Sublease are inconsistent with or different from
the provisions of the Lease, the provisions of this Sublease shall control the
rights and obligations of Verity and Teleworld with respect to the use and
occupancy of the Premises and the Common Area.
2.2 Limitations to Responsibility. Notwithstanding the incorporation
-----------------------------
of the provisions of the Lease into this Sublease, Verity shall not be held
accountable for any representations and warranties made by RDI as Landlord under
the Lease, nor shall be Verity be responsible for the performance of any
obligations to be performed by Landlord under the Lease, and Teleworld agrees to
look solely to RDI for the performance of such obligations. At Teleworld's
request (and at Teleworld's cost, which shall be paid in advance), Verity shall
use commercially reasonable efforts to cause RDI to perform its obligations
under the Lease, but in no event shall Verity be obligated to initiate or
participate in any legal proceedings or actions intended to compel RDI to
perform or undertake any other action with respect to RDI that may impair
Verity's relations with RDI. The failure by RDI to perform its obligations under
the Lease shall not excuse performance by Verity or Teleworld of their
obligations hereunder.
3. Term. Subject to Paragraph 3.1 below, the term of this Sublease shall
----
be eighteen (18) months, commencing March 15, 1998. Sublessee shall be
permitted early occupancy to install its phone systems and wiring, subject to
all the provisions of this Sublease except the obligation to pay Rent (as
defined in Paragraph 5.1 below), which shall begin on the Commencement Date (as
defined in Paragraph 3.1 below).
3.1 Initial Term. The initial term of the Sublease contemplated
------------
hereby (the "Term") shall commence on the later of: (a) the date which is two
(2) days following receipt by Verity of RDI's written consent to this Sublease,
or (b) March 15, 1998 (the "Commencement Date"). The Term shall expire on
September 30, 1999 (the "Scheduled Expiration Date"), subject to extension in
accordance with and subject to Paragraph 3.2 below.
3.2 Extension Period. Should Teleworld desire to extend the term of
----------------
this Sublease by up to six (6) additional months, Teleworld shall notify Verity
of such desire not less than one hundred eighty (180) days prior to the
Scheduled Expiration Date. Following Verity's receipt of such notice, Verity
shall decide in its sole and absolute discretion whether and on what terms
Verity would make the Premises available to Teleworld following the Scheduled
Expiration Date, provided, however, that the monthly Rent payable during the
first six (6) months following the Scheduled Expiration Date shall not exceed
Seventy Two Thousand Five Hundred Sixty Four Dollars and Ten Cents ($72,564.10).
If Verity decides to make the Premises available to Teleworld following the
Scheduled Expiration Date, Verity shall, not less than ninety (90) days prior to
the Scheduled Expiration Date, give notice thereof to Teleworld, including the
terms on which Verity would be willing to make the Premises available. If
Verity does not give such notice to Teleworld (or does not otherwise respond to
Teleworld regarding the availability of the Premises after the Scheduled
Expiration Date) at least ninety (90) days prior to the Scheduled Expiration
Date, Verity shall be deemed to have decided not to make the Premises available
to Teleworld after the Scheduled Expiration Date and this Sublease shall expire
on the Scheduled Expiration Date. Nothing herein shall be construed so as to
obligate Verity to make the Premises available to Teleworld following the
Scheduled Expiration Date on any terms. If Verity decides to make the Premises
available to Teleworld after the Scheduled Expiration Date and Verity and
Teleworld thereafter are able to agree upon the terms and
2.
<PAGE>
conditions of this Sublease with respect to the time period following the
Scheduled Expiration Date (such period is referred to herein as the "Extension
Period"), then such agreed upon terms and conditions shall be in effect during
the Extension Period. If Verity and Teleworld are unable to agree upon such
terms and conditions of this Sublease prior to the commencement of the Extension
Period, this Sublease shall terminate on the Scheduled Expiration Date.
4. Use. Teleworld shall use the Premises in accordance with the terms
---
set forth in Article 4 of the Lease. The Premises shall not be used for
manufacturing processes of any kind.
5. Rent; Security Deposit.
----------------------
5.1 Monthly Rent. Teleworld agrees to pay to Verity, as rent
------------
("Rent") for the Premises for each month of the term of this Sublease, the sum
of: (a) Seventy Thousand One Hundred Four Dollars and Thirty Cents ($70,104.30)
for the first twelve (12) months of the Term, and (b) Seventy One Thousand Three
Hundred Thirty Four Dollars and Twenty Cents ($71,343.20) for the balance of the
Term up to the Scheduled Expiration Date. The foregoing amount represents the
monthly base rent plus an additional sum to cover Teleworld's share of the
monthly building expenses for the Premises totaling Two and 85/100 Dollars
($2.85) per square foot per month for the first twelve (12) months of the Term,
and Two and 90/100 Dollars ($2.90) per square foot per month for the balance of
the Term up to the Scheduled Expiration Date. Teleworld and Verity acknowledge
and agree that such Rent includes payment for use of the items set forth on
Exhibit A attached hereto at the rate of fifty cents ($.50) per square foot per
month. The first month's Rent shall be due on the Commencement Date, provided
that such amount shall be prorated to reflect the partial month, based on the
number of clays from and including the Commencement Date to and including March
31, 1998. Teleworld shall have no additional obligation to pay for utilities,
heating, ventilation, or air conditioning repairs and maintenance, insurance,
property taxes, or repairs that are the responsibility of Verity under Paragraph
7.3(e) below, or common area maintenance, including janitorial expenses and
Common Operating Expenses, except as expressly provided herein.
5.2 Place of Payment of Rent. The Rent and all other amounts payable
------------------------
to Verity hereunder shall be paid to Verity when due, without prior notice or
demand and without deduction or offset, in lawful money of the United States by
check payable to Verity, Inc. and mailed to: Verity, Inc., 892 Ross Drive,
Sunnyvale, California 94089, Attention: Accounts Receivable.
5.3 Security Deposits. Teleworld shall pay Seventy Two Thousand Five
-----------------
Hundred Sixty Four Dollars and Ten Cents ($72,564.10) on the Effective Date as
security for the performance of Teleworld's obligations under this Sublease.
Teleworld shall also pay One Hundred Forty Five Thousand Dollars ($145,000.00)
on the Effective Date as a security deposit with respect to Teleworld's
obligations to maintain and return in good condition the office cubicles,
furniture and network and data wiring which Teleworld is permitted to use under
this Sublease. Teleworld acknowledges and agrees that Verity shall be entitled
to withhold from such security deposit amounts to perform necessary repair or
replacement of any of the items listed on Exhibit A at the expiration of the
Term of this Sublease.
3.
<PAGE>
5.4 Discounted Payment. Notwithstanding the amount of monthly Rent
------------------
set forth in Paragraph 5.1 above, Teleworld shall have the option to pay all
Rent due under this Sublease in a single payment upon the Commencement Date,
which single payment shall be equal to all amounts of Rent to be paid by
Teleworld under this Sublease, discounted to its present value as of the
Commencement Date utilizing a discount rate of ten percent (10%) per annum.
6. Acceptance and Condition of Premises. Verity shall deliver the
------------------------------------
Premises to Teleworld on the Commencement Date in broom-clean condition.
Teleworld acknowledges that it had the right to inspect the Premises and the
items listed on Exhibit A prior to commencing occupancy. By executing this
Sublease, Teleworld shall be deemed to have accepted the same in their "AS-IS"
condition, subject to any circumstances, defects, or conditions therein, and
without any representations or warranties from Verity.
7. Related Provisions.
------------------
7.1 Insurance. With respect to the tenant's insurance to be provided
---------
by Teleworld as described in Paragraph 9.1 of the Lease, such policies of
insurance shall include as named insureds RDI, Verity and Teleworld.
7.2 Waiver of Subrogation. With respect to the waiver of subrogation
---------------------
contained in Paragraph 9.4 of the Lease, such waiver shall be deemed to be
modified to constitute an agreement by and among RDI, Verity, and Teleworld (and
RDI's consent to this Sublease, if given, shall be deemed to constitute its
approval of this modification).
7.3 Building Services and Repairs and Maintenance.
---------------------------------------------
(a) Teleworld shall be entitled to use of common areas in or
relating to the Master Premises.
(b) Teleworld shall be responsible for keying its locks and
otherwise providing its own security for the Premises. Teleworld shall deliver
two copies of each new key to Verity.
(c) Verity shall make available to Teleworld the janitorial
service serving the balance of the Master Premises, at no additional charge to
Teleworld. Such service shall include removal of Teleworld's waste,
notwithstanding the provisions of the second to last sentence of Section 7.1 of
the Lease to the contrary, provided that such waste is of the type and quantity
generated by typical office use. Verity reserves the right to charge Teleworld
reasonable amounts for removal of wastes if extraordinary types or quantities of
waste are generated by Teleworld.
(d) Teleworld shall be responsible for installation and service
for telephone and data transmission lines; provided Teleworld may use the
network and data wiring set forth on Exhibit A which is already installed in or
serving the Premises, which Teleworld acknowledges does not include the T 1
line.
4.
<PAGE>
(e) Teleworld shall be responsible, at its own expense, for
repair and maintenance as set forth in Paragraph 6.1 of the Lease with respect
only to the Premises, but shall not be responsible for repair and maintenance of
HVAC equipment, utility facilities or other such building systems and equipment
that serve the Master Premises as a whole. Teleworld, at its cost, shall
maintain in good condition all items of office cubicles, furniture and network
and data wiring set forth on Exhibit A attached hereto. Such items shall be
returned by Teleworld to Verity upon the expiration of the Term in the condition
in which they were delivered to Teleworld.
(f) If Verity determines in the reasonable exercise of its
discretion that Teleworld is utilizing a disproportionate share of utilities,
heating, ventilation and/or air conditioning or that Teleworld is regularly
using such utilities and services beyond the base business hours of 8:00 a.m. to
8:00 p.m. Monday through Friday, Verity reserves the right to charge Teleworld
for any such disproportionate or excess usage (and Teleworld shall pay to Verity
within thirty (30) days of Verity's request) at the rate of Ten Cents ($.10) per
rentable foot of the Premises per month; provided that this excess charge shall
apply only for so long as the electrical service capacity of the Premises
remains at the level that exists as of the date of this Sublease, and if
Teleworld increases or otherwise changes such capacity, then Landlord reserves
the right to charge Teleworld the actual charges incurred by Verity for
Teleworld's disproportionate or excess usage, as evidenced by Verity's
calculation thereof.
8. Signage. Teleworld shall have the right, at its sole cost and
-------
expense, to place a sign on the suite door and the monument sign outside the
Building, and to place standard identification on the lobby directory, provided
any such signs shall be consistent in size and character with existing signage
of other subtenants of Verity and Teleworld obtains the prior written consent of
RDI and Verity (which consent Verity shall not unreasonably withhold) prior to
installing such sign. Upon termination of this Sublease, Teleworld shall remove
the sign and repair any damage caused by the installation or removal of the
sign.
9. Assignment and Subletting. Teleworld shall have no right to assign
-------------------------
this Sublease or any of its rights hereunder or sublet all or any portion of the
Premises, without the prior written consent of Verity (which Verity may grant or
withhold in its sole discretion), and without the consent of RDI to the extent
required under the Lease.
10. Right of Offer. In the event Verity determines to further sublease
--------------
suites 202, 203 or 204 of the Master Premises during the Term of this Sublease,
Verity shall advise Teleworld of the terms and conditions on which Verity is
willing to sublease such space. Within five (5) days of receipt of such
information, Teleworld shall advise Verity in writing whether Teleworld desires
to sublease such space on the terms and conditions delivered to Teleworld by
Verity. In the event Teleworld elects to sublease, such space shall be added to
this Sublease by execution of an appropriate addendum as soon as practical. In
the event Teleworld fails to notify Verity in writing of its acceptance of the
proposed terms and conditions within such five (5) days, then Verity shall be
free to sublease such space to third parties on terms and conditions acceptable
to Verity, in its sole discretion, which terms and conditions may be different
from those previously communicated to Teleworld. The right of offer granted to
Teleworld in this Paragraph 10 shall be subject to any prior rights of first
offer, rights of first refusal or similar rights granted by Verity to any other
subtenant of the Master Premises as of the Effective Date.
5.
<PAGE>
11. Notices. All notices, demands, requests, advices, or designations
-------
which may be or are required to be given by either party to the other hereunder
shall be in writing. All notices, demands, requests, advices or designations
shall be sufficiently given by personal delivery, by certified or registered
mail, return receipt requested, postage prepaid, or by Federal Express or
similar overnight courier and addressed to Verity at the address specified in
Paragraph 5.2 of this Sublease, or to Teleworld at the Premises. Either party
may by notice to the other specify a different address for notice purposes.
Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed delivered only upon delivery.
12. Brokers. A commission shall be paid to Cornish & Carey Commercial
-------
("C&C") under a separate agreement between C&C and Verity. Except for the
foregoing, each party warrants and represents to the other that it has retained
no broker or other party that is entitled to any fee or commission in connection
with this Sublease, and each agrees to indemnify, defend and hold harmless the
other party from any and all liabilities, claims or damages arising out of such
party's breach of the foregoing warranty and representation.
13. Termination of Lease. This Sublease is and shall at all times be
--------------------
subordinate to the Lease. In the event the Lease is terminated for any reason,
then this Sublease shall automatically terminate on the date of such
termination, and shall be of no further force and effect. If Verity has actual
advance knowledge of any termination, Verity shall promptly advise Teleworld
thereof. If the termination of the Lease (and resulting termination of this
Sublease) occurs through no fault of Verity, Verity shall have no liability
therefor to Teleworld.
14. Surrender of the Premises. Upon expiration or termination of this
-------------------------
Sublease, Teleworld shall comply with Paragraph 15.2 of the Lease except that
Teleworld shall have no obligation to (i) have the HVAC system serviced, (ii)
wax the floors, (iii) shampoo the carpets, and/or (iv) paint the walls of the
Premises (or clean the walls so that they appear freshly painted); except that
Teleworld shall be obligated to paint the walls of the Premises (or clean the
walls so that they appear freshly painted) if as a result of holes, other
damage, and/or marring of the walls such painting or cleaning is appropriate to
put the Premises in reasonable condition for use and occupancy for the purposes
permitted by Article 4 of the Lease. Upon expiration or termination of the Term
of this Sublease, Verity and Teleworld shall inspect the Premises and the items
listed on Exhibit A to determine whether any repairs or replacements are
necessary. Verity shall have no obligation to return the security deposits made
by Teleworld under this Sublease until completion of such inspection and
determination of necessary repair or replacement costs, if any.
15. Consent of RDI. Whenever the consent of Landlord is required under the
--------------
Lease, Teleworld acknowledges the consent of Verity and RDI shall be required.
Furthermore, this Sublease shall not be operative or deemed effective for any
purpose whatsoever unless and until the consent of RDI to this Sublease has been
obtained. Teleworld and Verity shall use their commercially reasonable efforts
to obtain such consent on or before March 6, 1998. If such consent is not
obtained by March 31, 1998, Verity shall return to Teleworld all sums paid to
Verity by Teleworld pursuant hereto, and this Sublease shall be of no further
force or effect.
16. Counterparts. This Sublease may be executed in counterparts and
------------
delivered by and to the respective parties by facsimile transmission, and each
such counterpart copy hereof so
7.
<PAGE>
executed and delivered shall constitute an original, and all such counterparts
together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
by their duly authorized representatives as of the day and year first above
written.
VERITY:
Verity, Inc., a Delaware corporation
By: /s/ James E. Ticehurst
-----------------------------------
Its: Vice President and Controller
-------------------------------
Teleworld:
Teleworld, Inc., a Delaware corporation
By: /s/ Michael Ramsay
-----------------------------------
Its: CEO
-----------------------------------
7.
<PAGE>
EXHIBIT 10.14
SILICON VALLEY BANK
QUICKSTART LOAN AND SECURITY AGREEMENT
Borrower: Teleworld Inc. Address: 2500 Augustine Drive, Building 5,
Suite 201, Santa Clara, CA 95054
Date: December 15, 1997
SILICON'S OFFER TO EXTEND FINANCING ON THE TERMS SET FORTH HEREIN SHALL EXPIRE
IF THIS AGREEMENT IS NOT EXECUTED BY BORROWER AND RETURNED TO SILICON WITHIN 30
DAYS OF THE ABOVE DATE.
This Loan And Security Agreement is entered into on the above date between
Silicon Valley Bank ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (jointly and severally, the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address").
1. Loans. Silicon will make loans to Borrower (the "Loans") up to the
amount (the "Credit Limit") shown on the Schedule to this Agreement (the
"Schedule"), provided no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default has occurred. All
Loan and other monetary Obligations will bear interest at the rate shown on the
Schedule. interest will be payable monthly, on the date shown on the monthly
billing from Silicon. Silicon may, in its discretion, charge interest due under
this Agreement to Borrower's deposit accounts maintained with Silicon.
2. Security Interest. As security for all present and future
indebtedness, guarantees, liabilities, and other obligations, of Borrower to
Silicon (collectively, the "Obligations"), Borrower hereby grants Silicon a
continuing security interest in all of Borrower's interest in the following
types of property, whether now owned or hereafter acquired, and wherever located
(collectively, the "Collateral"): All "accounts," "general intangibles,"
"contract rights," "chattel paper," "documents," "letters of credit,"
"instruments," "deposit accounts," "inventory," "farm products," "investment
property", "fixtures" and "equipment," as such terms are defined in Division 9
of the California Uniform Commercial Code in affect on the date hereof, and all
products, proceeds and insurance proceeds of the foregoing. Notwithstanding the
forgoing, "general intangibles" shall specifically exclude "intellectual
property".
3. Representatives And Agreements Of Borrower. Borrower represents to
Silicon as follows, and Borrower agrees that the following representations will
continue to be true, and that Borrower will comply with all of the following
agreements throughout the term of this Agreement:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby have been duly and validly authorized, and do not violate
any law or any provision of, and are not grounds for acceleration under, any
agreement or instrument which is binding upon Borrower.
1.
<PAGE>
3.2 Name; Places of Business. The name of Borrower set forth in this
Agreement is its correct name. Borrower shall give Silicon 15 days prior written
notice before changing its name. The address set forth in the heading to this
Agreement is Borrower's chief executive office. In addition, Borrower has places
of business and Collateral is located only at the locations set forth on the
Schedule. Borrower will give Silicon at least 15 days prior written notice
before changing its chief executive office or locating the Collateral at any
other location.
3.3 Collateral. Silicon has and will at all times continue to have a
first-priority perfected security interest in all of the Collateral to which
Silicon has made the necessary filings other than specific equipment not
financed by Silicon. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.4 Financial Condition and Statements. All financial statements now or in
the future delivered to Silicon have been, and will be, prepared in conformity
with generally accepted accounting principles. Since the last date covered by
any such statement, there has been no material adverse change in the financial
condition or business of Borrower. Borrower will provide Silicon: (i) within 30
days after the end of each month, a monthly financial statement prepared by
Borrower, and such other information as Silicon shall reasonably request; (ii)
within 120 days following the end of Borrower's fiscal year ending December 31,
1998 and each fiscal year ending thereafter, complete annual financial
statements, certified by independent certified public accountants acceptable to
Silicon and accompanied by the unqualified report thereon by said independent
certified public accountants; and (iii) other financial information reasonably
requested by Silicon from time to time.
3.5 Taxes; Compliance with Law. Borrower has filed, and will file, when
due, all tax returns and reports required by applicable law, and Borrower has
paid, and will pay, when due, all taxes, assessments, deposits and contribution
now or in the future owed by Borrower. Borrower has complied, and will comply,
in all material respects, with all applicable laws, rules and regulations.
3.6 Insurance. Borrower shall at all times insure all of the tangible
personal property Collateral and carry such other business insurance as is
customary in Borrower's industry.
3.7 Access to Collateral and Books and Records. At reasonable times, on
one business day notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
3.8 Operating Accounts. Borrower shall maintain its primary operating
accounts with Bank.
3.9 Additional Agreements. Borrower shall not, without Silicon's prior
written consent, which consent shall not be unreasonably withheld, do any of the
following: (i) enter into any transaction outside the ordinary course of
business except for a) the sale of capital stock to (1) venture capital
investors or (2) through a public offering registered under the Act, b) the
granting of non-exclusive licenses, cross-licenses or other similar arrangements
for the use of Borrower's property or c) the disposal of worn-out or obsolete
equipment; (ii) sell or transfer any Collateral, except in the ordinary course
of business; (iii) pay or declare any dividends on
2.
<PAGE>
Borrower's stock (except for dividends payable solely in stock of Borrower); or
(iv) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's stock other than the repurchase of up to five percent (5%) of
Borrower's then issued stock in any fiscal year from Borrower's employees or
directors pursuant to written agreement with Borrower. Notwithstanding anything
to the contrary contained herein, Borrower is permitted to merge or consolidate
with any other business organization, or acquire all or substantially all of the
capital stock or property of another business organization, provided that in
such merger, consolidation and acquisition, Borrower is the surviving entity and
an Event of Default does not exist before and after giving effect to such
transaction.
4. Term. This Agreement shall continue in effect until the maturity due
set forth on the Schedule (the "Maturity Date"). This Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (i) by
Borrower, effective three business days after written notice of termination is
given to Silicon; or (ii) by Silicon at any time after the occurrence of an
Event of Default, without notice, effective immediately. On the Maturity Date or
on any earlier effective date of termination, Borrower shall pay all Obligations
in full, whether or not such Obligations are otherwise then due and payable. No
termination shall in any way affect or impair any security interest or other
right or remedy of Silicon, nor shall any such termination relieve Borrower of
any Obligation to Silicon, until all of the Obligations have been paid and
performed in full.
5. Events of Default and Remedies. The occurrence of any of the
following events shall constitute an "Event of Default" under this Agreement:
(a) Any representation, statement, report or certificate given to Silicon by
Borrower or any of its officers, employees or agents, now or in the future, is
untrue or misleading in a material respect; or (b) Borrower fails to pay when
due any Loan or any interest thereon or any other monetary Obligation; or (c)
the total Obligations outstanding at any time exceed the Credit Limit; or (d)
Borrower fails to perform any other non-monetary Obligation, which failure is
not cured within 5 business days after the date due; or (e) Dissolution,
termination of existence (other than as specifically permitted herein),
insolvency or business failure of Borrower, or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by or against
Borrower under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (f) a material adverse change
in the business, operations, or financial or other condition of Borrower. If an
Event of Default occurs, Silicon, shall have the right to accelerate and declare
all of the Obligations to be immediately due and payable, increase the interest
rate by an additional four percent per annum, and exercise all rights and
remedies accorded it by applicable law.
6. General. If any provision of this Agreement is held to be
unenforceable, the remainder of this Agreement shall still continue in full
force and effect. This Agreement and any other written agreements, documents and
instruments executed in connection herewith are the complete agreement between
Borrower and Silicon and supersede all prior and contemporaneous negotiations
and oral representations and agreements, all of which are merged and integrated
in this Agreement. There are no oral understandings, representations or
agreements between the parties which are not in this Agreement or in other
written agreements signed by the parties in connection this Agreement. The
failure of Silicon at any time to require Borrower to comply
3.
<PAGE>
strictly with any of the provisions of this Agreement shall not waive Silicon's
right later to demand and receive strict compliance. Any waiver of a default
shall not waive any other default. None of the provisions of this Agreement may
be waived except by a specific written waiver signed by an officer of Silicon
and delivered to Borrower. The provisions of this Agreement may not be amended,
except in a writing signed by Borrower and Silicon. Borrower shall reimburse
Silicon for all reasonable attorneys' fees and all other reasonable costs
incurred by Silicon, in connection with this Agreement (whether or not a lawsuit
is filed). If Silicon or Borrower files any lawsuit against the other predicated
on a breach of this Agreement, the prevailing party shall be entitled to recover
its reasonable costs and attorneys' fees from the non-prevailing party. Borrower
may not assign any rights under this Agreement without Silicon's prior written
consent. This Agreement shall be governed by the laws of the State of
California.
7. Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF
SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR AFFILIATES.
Borrower:
TELEWORLD INC.
By: /s/ Michael Ramsay
-------------------------------------
President of Vice President
Silicon:
SILICON VALLEY BANK
By: /s/ John M. Swift
-------------------------------------
Title: Vice President
-------------------------------------
4.
<PAGE>
SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (MASTER)
BORROWER: Teleworld Inc.
DATE: December 15, 1997
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Credit Limit (Aggregate)
(Section 1): $750,000.00 (includes, without limitation,
Equipment Advances and the Merchant Services
and Business Visa Reserve, if any)
Interest Rate (Section 1): A rate equal to the "Prime Rate" in effect
from time to time, plus 0.75% per annum.
Interest shall be calculated on the basis of
a 360-day year for the actual number of days
elapsed. "Prime Rate" means the rate
announced from time to time by Silicon as its
"prime rate;" it is a base rate upon which
other rates charged by Silicon are based, and
it is not necessarily the best rate available
at Silicon. The interest rate applicable to
the Obligations shall change on each date
there is a change in the Prime Rate.
Maturity Date (Section 4): June 15, 1999
Other Locations and Addresses
(Section 3.2):
Other Agreements: Borrower also agrees as follows:
1. Loan Fee. Borrower shall concurrently
pay Silicon a non-refundable Loan Fee in the
amount of $1,000.00.
2. Banking Relationship. Borrower shall at
all times maintain its primary banking
relationship with Silicon.
Borrower: Silicon:
Teleworld Inc. Silicon Valley Bank
By: /s/ Michael Ramsay By: /s/ John M. Swift
-------------------------- ---------------------------
President or Vice President Title: Vice President
5.
<PAGE>
SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (EQUIPMENT ADVANCES)
BORROWER: Teleworld Inc.
DATE: December 15, 1997
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Credit Limit (Equipment)
(Section 1): $750,000.00 (such amount to be funded under the
aggregate Credit Limit). Equipment Advances will
be made only on or prior to June 15, 1998 (the
"Last Advance Date") and only for the purpose of
purchasing equipment reasonably acceptable to
Silicon. Borrower must provide invoices for the
equipment to Silicon on or before the Last Advance
Date. Software may, however, comprise up to fifty
(50%) of each Equipment Advance.
Interest Rate (Section 1): A rate equal to the "Prime Rate" in effect from
time to time, plus 0.75% per annum. Interest shall
be calculated on the basis of a 360-day year for
the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate
upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable
to the Obligations shall change on each date there
is a change in the Prime Rate.
Maturity Date (Section 4): After the Last Advance Date, the unpaid principal
balance of the Equipment Advances shall be repaid
in 36 equal monthly installments of principal,
plus interest, commencing on July 15, 1998 and
continuing on the same day of each month
thereafter until the entire unpaid principal
balance of the Equipment Advances and all accrued
unpaid interest have been paid (subject to
Silicon's right to accelerate the Equipment
Advances on an Event of Default).
Borrower: Silicon:
Teleworld Inc. Silicon Valley Bank
By: /s/ Michael Ramsay By: /s/ John M. Swift
------------------------------ -----------------------------
President or Vice President Vice President
6.
<PAGE>
SILICON VALLEY BANK
CERTIFIED RESOLUTION
Borrower: TELEWORLD, INC., a corporation organized under the laws
of the State of Delaware
Date: December 15, 1997
I, the undersigned, corporate officer of the above-named borrower, a
corporation organized under the laws of the state set forth above, do hereby
certify that the following is a full, true and correct copy of resolutions duly
and regularly adopted by the Board of Directors of said corporation as required
by law, and by the by-laws of said corporation, and that said resolutions are
still in full force and effect and have not been in any way modified, repealed,
rescinded, amended or revoked.
Resolved, that this corporation borrow from Silicon Valley Bank
("Silicon"), from time to time, such sum or sums of money as, in the judgment of
the officer or officers authorized hereby, this corporation may require.
Resolved Further, that any officer of this corporation be, and he or she is
hereby authorized, in the name of this corporation, to execute and deliver to
Silicon the loan agreements, security agreements, notes, financing statements,
and other documents and instruments providing for such loans and evidencing or
securing such loans, and said authorized officers are authorized from time to
time to execute renewals, extensions and/or amendments of said loan agreements,
security agreements and other documents and instruments.
Resolved Further, that said authorized officers be and they are hereby
authorized, as security for any and all indebtedness of this corporation to
Silicon, whether arising pursuant to this resolution or otherwise, to grant, to
Silicon, or deed in trust for its benefit, any property of any and every kind,
belonging to this corporation, including, but not limited to, any and all real
property, accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture, fixtures,
goods, and other property of every kind, and to execute and deliver to Silicon
any and all pledge agreements, mortgages, deeds of trust, financing statements,
security agreements and other agreements, which said instruments and the note or
notes and other instruments referred to in the preceding paragraph may contain
such provisions, covenants, recitals and agreements as Silicon may require, and
said authorized officers may approve, and the execution thereof by said
authorized officers shall be conclusive evidence of such approval.
Resolved Further, that said authorized officers be and they are hereby
authorized to issue warrants to purchase this corporation's capital stock, for
such class, series and number, and on such terms, as said officers shall deem
appropriate.
Resolved Further, that Silicon may conclusively rely on a certified copy of
these resolutions and a certificate of the corporate officer of this corporation
as to the officers of this corporation and their offices and signatures, and
continue to conclusively rely on such certified copy of these resolutions and
said certificate for all past, present and future transactions until
7.
<PAGE>
written notice of any change hereto or thereto is given to Silicon by this
corporation by certified mail, return receipt requested.
The undersigned further hereby certifies that the following persons are the duly
elected and acting officer of corporation named above as borrower and that the
following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
- ----- --------- -----------------
<S> <C> <C>
James Barton CTO /s/ James Barton
- ------------------------------ ------------------------------- -------------------------------
Mike Ramsay CEO /s/ Michael Ramsay
- ------------------------------ ------------------------------- -------------------------------
______________________________ _______________________________ _______________________________
</TABLE>
In Witness Whereof, I have hereunto set my hand as such corporate officer on the
date set forth above.
By: /s/ Sally Ann Reiss
--------------------------------------
Its: om/Finance
--------------------------------------
8.
<PAGE>
FINANCING STATEMENT - FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform
Commercial Code and will remain effective, with certain exceptions, for 5 years
from date of filing.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
A. NAME & TEL # OF CONTRACT AT FILER B. FILING OFFICE ACCT # (optional)
(optional)
- ------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
Data File Services, Inc.
P.O. Box 275
Van Nuys, CA 91408-2750
- ------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (if applicable): [_] LESSOR/LESSEE [_] CONSIGNOR/CONSIGNEE [_] NON-UCC FILING
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
1 DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) FILED WITH:
------------------------------------------------------------------------------------------------------
1a. ENTITY'S NAME
TELEWORLD INC.
OR
------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME
- ------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY
2500 AUGUSTINE DRIVE SANTA CLARA
- ------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D.# OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION
- ------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (2a or 2b) JMS/RC116
------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR
------------------------------------------------------------------------------------------------------
2b. INDIVIDUAL'S LAST NAME FIRST NAME
- ------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY
- ------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D.# OPTIONAL 2e. TYPE OF ENTITY 2f. ENTITY'S STATE
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION
- ------------------------------------------------------------------------------------------------------------
3. SECURED PARTY'S (ORIGINAL S/P OR ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME -
insert only one secured party name (3a or 3b)
------------------------------------------------------------------------------------------------------
3a. ENTITY'S LAST NAME
SILICON VALLEY BANK
OR
------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME
- ------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY
3003 Tasman Drive Santa Clara
- ------------------------------------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF.
- -------------------------------------------------------------------------------------------------
5. CHECK This FINANCING STATEMENT is signed by the Secured Party
BOX [_] instead of the Debtor to perfect a security interest (a)
(if applicable) in collateral already subject to a security interest in
another jurisdiction when it was brought into this state,
or when the debtor's location was changed to this state,
or (b) in accordance with other statutory provisions
(additional date may be required)
- ------------------------------------------------------------------------------------------------
6. REQUIRED SIGNATURE(S)
/s/ Michael Ramsay
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
CALIFORNIA
------------------------------------------------------------
MIDDLE NAME SUFFIX
------------------------------------------------------------
STATE COUNTRY POSTAL CODE
CA 95054
1g. ENTITY'S ORGANIZATIONAL I.D.#, if any
[_] NONE
------------------------------------------------------------
TRANS 1595
------------------------------------------------------------
MIDDLE NAME SUFFIX
------------------------------------------------------------
STATE COUNTRY POSTAL CODE
------------------------------------------------------------
2g. ENTITY'S ORGANIZATIONAL I.D.#, if any
[_] NONE
------------------------------------------------------------
------------------------------------------------------------
MIDDLE NAME SUFFIX
------------------------------------------------------------
STATE COUNTRY POSTAL CODE
CA 95054
------------------------------------------------------------
------------------------------------------------------------
7. If filed in Florida (check one)
[_] Documentary [_] Documentary stamp tax
Stamp tax paid not applicable
- ------------------------------------------------------------
8. [_] This FINANCING STATEMENT is to filed (for record)
(or recorded) in the REAL ESTATE RECORDS
Attach Addendum (if applicable)
- -----------------------------------------------------------
9. [_] CHECK TO REQUEST SEARCH CERTIFICATE(S) on Debtor(s)
(ADDITIONAL FEE)
(optional) [_] All debtors [_] Debtor 1 [_] Debtor 2
- -----------------------------------------------------------
</TABLE>
(1) FILING OFFICER COPY - NATIONAL FINANCING STATEMENT (FORM UCC 1) (TRANS)
(REV. 12/1/95) Prepared by ______ File _________, Inc., P.O. Box 275
Van Nuys, CA 91408-0275 Tel (518) 808-2200
<PAGE>
EXHIBIT "A" TO UCC-1 FINANCING STATEMENT
DEBTOR: TELEWORLD INC.
SECURED PARTY: SILICON VALLEY BANK
Debtor hereby grants Secured Party a security interest in all of the
following, whether now owned or hereafter acquired, and wherever located, as
collateral for the payment and performance of all present and future
indebtedness, liabilities, guarantees and obligations of Debtor to Secured
Party: All "accounts," "general intangibles," "contract rights," "chattel
paper," "documents," "letters of credit," "instruments," "deposit accounts,"
"inventory," "farm products," "fixtures," "investment property," and
"equipment," as such terms are defined in Division 9 of the California Uniform
Commercial Code in effect on the date hereof, and all products, proceeds and
insurance proceeds of any or all of the foregoing. Notwithstanding the
forgoing, "general intangibles" shall specifically exclude "intellectual
property".
Debtor Initial here: _________
<PAGE>
SILICON VALLEY BANK
INDEMNIFICATION AND PLEDGE AGREEMENT
Merchant Services/Business Credit Card Program
Client Name: TELEWORLD, INC.
---------------
Service Type:
. Merchant Services (through N/A
----------)
Merchant #: N/A
----------
. Business Credit Card (Processor: ______________________)
Cardholders: (attach list if more than three names)
1) Michael Ramsay Credit Limit:_________________
-------------------
2) James Barton Credit Limit:_________________
-------------------
3) SallyAnn Reiss Credit Limit:_________________
-------------------
Type of Coverage:
. Sublimit under existing line of credit
Line Amount: $750,000.00 Maturity Date: June 15/99
---------- ----------
Reserve Amount: $20,000.00
---------
. Certificate of Deposit
Amount: $ ______ Certificate #:______ Term:__________
The undersigned hereby indemnifies and holds Silicon Valley Bank ("Silicon")
harmless from any and all claims, demands, liabilities, charges, claims, costs
losses, damages, and expenses (including attorney's fees) (collectively, the
"Liabilities"), if any, that Silicon incurs or may incur in connection with the
Merchant Services and/or Business Credit Card program referenced above. To
secure its obligations to Silicon, the undersigned pledges and assigns to
Silicon, and grants to Silicon a security interest in, the above referenced
certificate of deposit(s) (the "Collateral"); and agrees that Silicon, to
satisfy all or any portion of the Liabilities, may at any time or from time to
time, exercise any and all rights and remedies against said Collateral, all
without notice to or demand upon the undersigned. The undersigned further agrees
that Silicon may at Silicon's option, without notice or demand, pay any
outstanding Liabilities by charging such amount and/or making reserves against
any line-of-credit the undersigned may have with Silicon. The foregoing
agreements, indemnification obligations, and pledge, assignment, and security
interest grant shall survive termination of the underlying programs.
Client Name:
Teleworld, Inc.
By: /s/ Michael Ramsay By: /s/ James Barton
----------------------------- -----------------------------
Name: Michael Ramsay Name: James Barton
---------------------------- ---------------------------
Title: CEO Title: CFO
--------------------------- --------------------------
<PAGE>
SILICON VALLEY BANK
SCHEDULE TO QUICKSTART LOAN AND SECURITY AGREEMENT
(MERCHANT SERVICES/BUSINESS CREDIT CARD SUBLIMIT)
BORROWER: TELEWORLD, INC.
---------------
DATE: 1/13/98
---------------
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
Merchant The Credit Limit shall be reduced by an amount equal to
Services/Business the sum of (a) $N/A (the "Merchant Service Reserve") and
Credit Card (b) $20,000.00 (the "Business Credit Card Reserve").
Sublimit Silicon may, in its sole discretion, charge as Loans, any
(Section 1): amounts that may become due or owing to Silicon in
connection with merchant credit card processing services
and/or Business Credit Card services furnished to Borrower
by or through Silicon, collectively, the "Credit Card
Services." Borrower shall execute all standard form
applications and agreements, including without limitation,
the Indemnification and Pledge Agreement, of Silicon in
connection with the Credit Card Services and, without
limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and
charges of Silicon in connection with the Credit Card
Services and, without limiting any of the terms of such
applications and agreements, Borrower will pay all
standard fees and charges of Silicon in connection with
the Credit Card Services.
Maturity Date June 15, 1999
(Section 4): ----------------
Borrower: Silicon:
Teleworld, Inc. Silicon Valley Bank
By: /s/ Michael Ramsay By: /s/ John M. Swift
--------------------------------- ------------------------
President or Vice President Title: Vice President
<PAGE>
EXHIBIT 10.15
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated February 12, 1999 by and
between COMDISCO, INC. ("Lessor") and TIVO, INC. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights,
but will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
-1-
<PAGE>
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is
a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) business days
after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
the present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED
-2-
<PAGE>
HEREIN. Lessor may sell, lease or otherwise dispose of all or any part of the
Equipment at a public or private sale for cash or credit with the privilege of
purchasing the Equipment. The proceeds from any sale, lease or other disposition
of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit
of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
-3-
<PAGE>
Commencement Date - is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
TIVO, INC. COMDISCO, INC.,
as Lessee as Lessor
By: /s/ Michael Ramsay By: /s/ James Labe'
------------------------- -----------------------------------------
Title: CEO Title: President, Comdisco Ventures Division
---------------------- --------------------------------------
-4-
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF FEBRUARY 12, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 12, 1999 (THE "MASTER LEASE")
LESSEE: TIVO, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
------------------------ -----------------------
___________________________ 6111 North River Road
Phone: (408) 747-5080 Rosemont, Illinois 60018
Fax: (408) 747-5096 Attn.: Venture Group
Address for Notices:
-------------------
894 Ross Drive
Sunnyvale, CA 94089
Central Billing Location: Rent Interval: Monthly
------------------------ -------------
same as above
Attn.:
Lessee Reference No.: ________________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
--------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 3.081%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: None
-------
Interim Rent: None
------------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period February 12, 1999 through February 12,
2000 ("Equipment Delivery Period"), for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of
$1,750,000.00 ("Commitment Amount"); excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, "stand-alone" software, application software
bundled into computer hardware, hand held items, molds and fungible items.
Equipment Schedule VL-1
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by any combination of the four categories listed below, in an
aggregate value up to the Commitment Amount referred to on the face of this
Schedule. If the Equipment acquired is of category (i), (ii), (iii) below, the
effectiveness of this Schedule as it relates to those items of Equipment is
contingent upon Lessee's acknowledgment at the time Lessor acquires the
Equipment that Lessee has either received or approved the relevant purchase
documentation between vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than March 12,
1999*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any sale-
leaseback Equipment will be placed on lease subject to: (1) Lessor
prior approval of the Equipment, which approval shall not be
unreasonably withheld; and (2) if approved, at Lessor's actual net
appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
--------------- ---------------------------------
Between 11/14/98 and 2/12/99 100%
Between 9/14/98 and 11/13/98 80%
Between 6/15/98 and 9/13/98 70%
Between 3/16/98 and 6/14/98 65%
Between 12/15/97 and 3/15/98 60%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its
inventory for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed, approved and accepted in
writing by Lessee as set forth on the vendor invoice of which a facsimile
transmission will constitute an original document. The Commencement Date for
sale-leaseback Equipment shall be the date Lessor tenders the purchase price.
The Commencement Date for 800 Number Equipment shall be fifteen (15) days from
the ship date (unless Lessee shall have notified Lessor in writing that the 800
Number Equipment has not been received), such ship date to be set forth on the
vendor invoice or if unavailable on the vendor invoice the ship date will be
determined by Lessor upon other supporting shipping documentation. Lessor will
summarize all approved invoices, purchase documentation and evidence of
delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
Equipment Schedule VL-1
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of the Equipment cost and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price shall
be paid to Lessor at least thirty (30) days before the expiration date of the
Initial Term or extended term. Title to the Equipment shall automatically pass
to Lessee upon payment in full of the purchase price but, in no event, earlier
than the expiration of the fixed Initial Term or extended term, if applicable.
If the parties are unable to agree on the purchase price or the terms and
conditions with respect to said purchase, then the Summary Equipment Schedule
with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. Technology Exchange Option
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software or any soft costs financed hereunder including but not limited
to tenant improvements and custom equipment.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
6. Option Amount
So long as no Event of Default shall have occurred and is continuing and
upon Lessee's request, subject to final review by Lessor, Lessor agrees to
provide to Lessee an additional $1,000,000.00 of Equipment upon rates and terms
to be negotiated, for which up to thirty percent (30%) may be used to finance
software and tenant improvements, at Lessor's discretion.
Equipment Schedule VL-1
<PAGE>
7. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
TIVO, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Michael Ramsay By: /s/ James Labe'
------------------------- -----------------------------------------
Title: CEO Title: President, Comdisco Ventures Division
---------------------- --------------------------------------
Date: 3-5-99 Date: 3-15-99
----------------------- ---------------------------------------
Equipment Schedule VL-1
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
Equipment Schedule VL-1
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF FEBRUARY 12, 1999
TO MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 12, 1999 (THE "MASTER LEASE")
LESSEE: TIVO, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
____________________________ 6111 North River Road
Phone: (408) 747-5080 Rosemont, Illinois 60018
Fax: (408) 747-5096 Attn.: Venture Group
Address for Notices:
- -------------------
894 Ross Drive
Sunnyvale, CA 94089
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: ______________
(24 digits maximum)
Location of Equipment: Initial Term: 36 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 3.081%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: None
-------
Interim Rent: None
------------
Software and tenant improvements specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period February 12, 1999 through
February 12, 2000 ("Equipment Delivery Period") for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of $750,000.00
("Commitment Amount"); excluding custom use equipment, installation costs and
delivery costs, rolling stock, special tooling, hand held items, molds and
fungible items.
-1-
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by any combination of the four categories listed below, in an
aggregate value up to the Commitment Amount referred to on the face of this
Schedule. If the Equipment acquired is of category (i), (ii), (iii) below, the
effectiveness of this Schedule as it relates to those items of Equipment is
contingent upon Lessee's acknowledgment at the time Lessor acquires the
Equipment that Lessee has either received or approved the relevant purchase
documentation between vendor and Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than March 12, 1999*. Lessor will
not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment, which consent shall not be unreasonably
withheld; and (2) if approved, at Lessor's actual net appraised
Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
-------------------------- ----------------------------------
Between 11/14/98 and 2/12/99 100%
Between 9/14/98 and 11/13/98 80%
Between 6/15/98 and 9/13/98 70%
Between 3/16/98 and 6/14/98 65%
Between 12/15/97 and 3/15/98 60%
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is
obtained from a third party by Lessee for its use subject to Lessor's
prior approval of the Equipment and at Lessor's appraised value for
such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed, accept and approved in writing
by Lessee as set forth on the vendor invoice of which a facsimile transmission
will constitute an original document. The Commencement Date for sale-leaseback
Equipment shall be the date Lessor tenders the purchase price. The Commencement
Date for 800 Number Equipment shall be fifteen (15) days from the ship date
(unless Lessee shall have notified Lessor in writing that the 800 Number
Equipment has not been received), such ship date to be set forth on the vendor
invoice or if unavailable on the vendor invoice the ship date will be determined
by Lessor upon other supporting shipping documentation. Lessor will summarize
all approved invoices, purchase documentation and evidence of delivery, as
applicable, received in the same calendar month into a Summary Equipment
Schedule in the form attached to this Schedule as Exhibit 1, and the Initial
Term will begin the first day of the calendar month thereafter. Each Summary
Equipment Schedule will contain the Equipment location, description, serial
number(s) and cost and will incorporate the terms and conditions of the Master
Lease and this Schedule and will constitute a separate lease.
3. Miscellaneous
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor, on the date the last monthly Rent Payment is due, an amount equal to
fifteen percent
-2-
<PAGE>
(15%) of Lessor's aggregate cost of software and tenant improvements provided
hereunder. Upon Lessee making such payment, Lessor shall promptly take any steps
necessary to transfer any rights it has thereunder.
4. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 8, Representations and Warranties of Lessee
----------------------------------------------------
Delete subparagraph (d) in its entirety.
(b) Section 9, Delivery and Return of Equipment
-------------------------------------------
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
TIVO, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Michael Ramsay By: /s/ James Labe'
------------------------- -----------------------------------------
Title: CEO Title: President, Comdisco Ventures Division
---------------------- --------------------------------------
Date: 3-5-99 Date: 3-15-99
---------------------- --------------------------------------
-3-
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
-4-
<PAGE>
ADDENDUM TO THE MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 12, 1999
BETWEEN COMDISCO, INC., AS LESSOR AND
TIVO, INC., AS LESSEE
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease Agreement are amended and modified as follows:
1) Section 3., "Rent and Payment"
----------------
In the third line after the word "amount" insert "; provided, however, that
so long as payment is made within three (3) days after the date such
payment is due, no Late Charge will be assessed for up to two (2) late
payments under a particular Summary Equipment Schedule".
2) Section 5., "Title; Relocation or Sublease; and Assignment"
---------------------------------------------
Subsection 5.2, second paragraph, line 8, add the word "reasonably" after
the word "documents".
Subsection 5.3, paragraph (b), first sentence, line 1 add the phrase "After
receipt of written notice of assignment from Lessor" before the word
"Lessee".
3) Section 6., "Net Lease; Taxes and Fees"
-------------------------
Subsections 6.2 add the following paragraph at the end of this subsection:
"Lessee shall not be liable for any taxes, fees or charges to the extent
the same result from any sale or assignment or grant of security interest
by Lessor, or to the extent any such action increases the taxes, fees or
charges that would other wise be payable. Lessee shall have the right to
contest by proper legal proceedings any taxes levied, as agent for or in
the name of Lessor. Lessor will cooperate in any legal proceedings being
prosecuted by Lessee with regard to any taxes, but Lessee will pay the
expenses is such litigation. Lessee shall have the right to contest in
good faith and by appropriate proceeding the validity or the amount of
taxes unless such contest would adversely affect the title of the Lessor to
the Equipment or would subject it to forfeiture or sale. Lessee shall have
the rights to any refund received as a result of any such contest or
proceeding to the extent Lessee has previously reimbursed Lessor for suck
taxes.
4) Section 7., "Care, Use and Maintenance; Inspection by Lessor"
-----------------------------------------------
Subsection 7.1, second sentence, line 4, insert "at commercially
reasonable prices" after " commercially available"; line 7, after the words
"acceptable to
<PAGE>
Lessor" add the words "including self-maintenance by lessee"; last
sentence, insert the following at the end thereof: "or Lessee has exercised
its option to purchase such Equipment".
5) Section 8., "Representations and Warranties of Lessee"
----------------------------------------
Paragraph (c), line 3, delete "if adversely determined, will" and insert
are reasonably likely to".
6) Section 9., "Delivery and Return of Equipment"
--------------------------------
Second sentence, insert "and provided that the Equipment is not purchased
of the term extended as permitted by the applicable Schedule, after
"Schedule".
7) Section 11, "Indemnity"
---------
First sentence, line 6, after the word "Equipment", delete the words
"during the terms of this Master Lease or until Lessee's obligations under
the Master Lease terminate" and insert "arising from acts of events during
the period from the Commencement Date of each Summary Equipment Schedule
until re-delivery of the Equipment to Lessor in accordance with the terms
of this Master Lease". Second Sentence, insert "or willful misconduct" at
the end of the sentence.
8) Section 13, "Default, Remedies and Mitigation"
--------------------------------
Subsection 13.1:
Paragraph (b), line 1, insert "the applicable" before the word
"Schedule".
Paragraph (c), line 4, insert the following after "powers": "which
petition or appointment is not dismissed or vacated within sixty (60) days.
Subsection 13.2, introduction, insert "and during the continuance" after
the word "occurrence".
Subsection 13.2, paragraph (d), line 5, insert "or willful misconduct"
after "negligence".
Subsection 13.3, second sentence, insert "AND TO THE EXTENT PERMITTED BY
LAW" after the words "IN THE SECTION".
9) Section 14, "Additional Provisions"
---------------------
Subsection 14.1 is deleted in its entirety and subsections 14.2 through
14.18 are renumbered accordingly.
<PAGE>
Subsection 14.1, "Financial Statements". (14.2 before renumbering) Delete
the first sentence in its entirety and replace it with the following:
"As soon as practicable at the end of each month (and in any event
within thirty (30) days), Lessee will provide to lessor a monthly income
statement and balance sheet prepared in accordance with generally accepted
accounting principles, consistently applied (except that such financial
will not include footnotes repaired by generally accepted accounting
principles) (the "Financial Statements")".
Subsection 14.2 (14.3 before renumbering), clause (iii) is deleted, and
(iv) is renumbered accordingly.
Subsection 14.3 (14.4 before renumbering), Merger and sale provisions". In
line 2, delete "sixty (60)" and replace with "thirty (30)". In line 8,
delete "6%" and replace with "7%". In line 10 after the words "with
Section 9" add "or purchase the Equipment for a mutually agreeable price,
at lessee's potion". To the end of the Section, add the following:
"Notwithstanding the foregoing, Lessor hereby consents to any Merger
in which the surviving entity has cash and marketable securities of at
least five (5) times the remaining Rent."
Subsection 14.6 (14.7 before renumbering), second sentence, add the
following at the end there of: "except any permitted assignment in
accordance with the terms of this Master Lease".
Subsection 14.8 (14.9 before renumbering), line 5, insert "applicable"
before "Schedule".
Subsection 14.9 (14.10 before renumbering), Second sentence, delete
"Article 2A of the Uniform Commercial Code" and insert "California
Commercial Code Sections 10508-10522".
Subsection 14.13 (14.14 before renumbering), line 4, insert "reasonably"
before "acceptable" and in line 5, insert "(a), (b) and (c)" after "8".
Subsection 14.17 (14.18 before renumbering, "Definitions":
"Casualty Value", line 1, insert "present value of the" after the words
--------------
"greater of the " and line 2, insert "discounted at a rate of 7% per annum"
after the word "term".
"Merger", line 4, following the word "entity", add the words ", provided
------
that no such transactions shall constitute a merger unless the lessee's
stockholders, as constituted, immediately before any such transaction, hold
less than fifty percent
<PAGE>
(50%) of the outstanding voting securities of the Lessee immediately
following such transaction".
Add the following definition: "Lease" means a Summary Equipment Schedule
-----
which incorporates all the terms and conditions of the related schedule and
Master Lease".
"Summary Equipment Schedule", line 4, delete the word "quarter" and replace
--------------------------
it with "month".
TIVO, INC. COMDISCO, INC.
as Lessor as Lessee
By: /s/ Michael Ramsay By: /s/ James Labe'
------------------------- -----------------------------------------
Title: CEO Title: President, Comdisco Ventures Division
---------------------- --------------------------------------
Date: 3-5-99 Date: 3-15-99
---------------------- --------------------------------------
<PAGE>
EXHIBIT 10.16
WARRANT PURCHASE AND EQUITY RIGHTS AGREEMENT
This Warrant Purchase and Equity Rights Agreement (the "Agreement") is made
and entered into as of November 6, 1998, by and between TIVO, INC., a Delaware
corporation (the "Company"), and QUANTUM CORPORATION, a Delaware corporation
("Quantum").
WHEREAS, the Company wishes to sell to Quantum, and Quantum wishes to
acquire from the Company, a Series C Preferred Stock Warrant, in the form of
Exhibit A (the "Series C Warrant"), and a Series D Preferred Stock Warrant, in
- ---------
the form of Exhibit B (the "Series D Warrant"), upon the terms and conditions
---------
hereinafter set forth (the Series C Warrant and the Series D Warrant being
sometimes referred to collectively as the "Warrants").
WHEREAS, the Warrants are being issued to Quantum in connection with the
Hard Disk Drive Supply Agreement, dated of even date herewith, between the
Company and Quantum (the "Supply Agreement"). All capitalized terms not defined
herein shall have the meanings set forth in the Supply Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereby agree as follows:
ARTICLE I
ISSUANCE OF WARRANTS
Simultaneously herewith, the Company is issuing and delivering the Warrants
to Quantum as an inducement to and in consideration for Quantum entering into
the Supply Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Quantum and agrees that:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties. The rights, preferences, privileges and restrictions granted to or
imposed upon the shares issuable upon exercise of the Warrants (the "Shares"),
and the holders thereof are as set forth in the Company's Articles of
Incorporation, as amended (the "Charter"), a true and complete copy of which has
been delivered to Quantum.
2.2 Authorization; Binding Obligation. All corporate action on the part
---------------------------------
of the Company, its officers, directors and stockholders necessary for the
authorization, execution and
1.
<PAGE>
delivery of this Agreement and the Warrants, the performance of all obligations
of the Company hereunder and thereunder and the authorization, issuance and
delivery of the Warrants has been taken, and this Agreement and the Warrants
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms. The shares of
Series C Preferred Stock to be issued upon exercise of the Series C Warrant have
been duly authorized and reserved for issuance by the Company, and the Shares,
when issued in accordance with the terms of the Warrants, will be validly
issued, fully paid and nonassessable.
2.3 Capitalization. The authorized capital of the Company consists of (i)
--------------
13,000,000 shares of Preferred Stock, of which 5,200,000 shares have been
designated Series A Preferred and 5,000,000 shares of which are issued and
outstanding, of which 4,400,000 shares have been designated Series B Preferred
Stock and 3,660,914 shares of which are issued and outstanding, and of which
3,400,000 shares have been designated Series C Preferred Stock and 2,500,000
shares of which are issued and outstanding and (ii) 25,500,000 shares of Common
Stock, 5,017,604 shares of which are issued and outstanding. All of the
outstanding shares of capital stock have been duly and validly authorized and
issued, are fully paid and nonassessable, and were issued in compliance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act"), any applicable state securities laws, or in each
case pursuant to valid exemptions therefrom. Except for: (a) rights of first
refusal, anti-dilution rights and conversion privileges of the Preferred Stock,
(b) outstanding options to purchase 762,500 shares of the Company's Common Stock
granted pursuant to the Company's 1997 Equity Incentive Plan, (c) outstanding
warrants to purchase 52,083 shares of the Company's Series A Preferred Stock,
and (d) the Warrants and other transactions contemplated hereby, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements, orally or in writing, for the purchase or acquisition
from the Company of any securities of the Company.
2.4 No Consents. The execution and delivery of this Agreement and the
-----------
Warrants, the issuance of the Shares upon exercise of the Warrants in accordance
with the terms thereof and the compliance by the Company with the provisions
hereof or thereof (i) are not and will not be inconsistent with the Company's
Charter or Bylaws except that the Company's Board of Directors and stockholders
must approve an amendment to the Company's Charter to authorize the Series D
Preferred Stock, (ii) do not and will not contravene any law, governmental rule
or regulation, judgment or order applicable to the Company, and (iii) do not and
will not contravene any material provision of, or constitute a default under,
any indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal, state or local government authority or agency or other person,
except for such actions as may be required to comply with applicable federal and
state securities laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1 Representation of Quantum. Quantum is purchasing the Warrants and
-------------------------
Shares issued upon exercise thereof for investment for its own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act,
2.
<PAGE>
or applicable state securities laws. Quantum further represents, warrants and
agrees that the Warrants and Shares have not been registered under the
Securities Act or applicable state securities laws by reason of specific
exemptions therefrom, which exemptions depend upon, among other things, the bona
fide nature of Quantum's investment intent as expressed herein. Quantum
represents, warrants and agrees that the Warrants and any Shares purchased upon
exercise thereof must be held indefinitely unless such securities are
subsequently registered under the Securities Act and all applicable state
securities laws and regulations or an exemption from such registration or
qualification is available, and that the Company is under no obligation to
register or qualify such securities except as set forth in the Warrants between
the Company and Quantum.
3.2 Accredited Investor. Quantum is an "accredited investor" (as such
-------------------
term is defined in Rule 501(a) promulgated under the Securities Act).
3.3 Legends. Quantum acknowledges, understands and agrees that the
-------
instruments evidencing the Warrants and any certificates evidencing the Shares
(and Common Stock issuable upon conversion thereof) shall bear the legends as
specified in the Warrants, other agreements entered into in the connection with
the issuance of the Shares and any other legends required under state or federal
securities laws in the opinion of legal counsel for the Company. Quantum
understands, acknowledges and agrees that additional restrictions, including the
imposition of stop transfer orders and certain market stand off provisions,
shall be and are imposed on the Shares in accordance with the Second Amended and
Restated Investors Rights Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Survival of Warranties. All representations and warranties of the
----------------------
parties contained herein shall survive the grant and exercise of the Warrants or
the termination or expiration of rights hereunder or under the Supply Agreement
or the Warrants. All agreements of the Company contained herein shall survive
indefinitely until, by their respective terms, they are no longer operative.
4.2 Entire Agreement. This Agreement, the Exhibits attached hereto and
----------------
the Supply Agreement represent the entire agreement between the Company and
Quantum regarding the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect thereto.
4.3 Amendment, Modification or Waiver. This Agreement shall not be
---------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by each of the parties hereto.
4.4 Successors; Assigns. All the terms of this Agreement shall be binding
-------------------
upon and shall inure to the benefit of the successors, assigns, heirs, executors
and administrators of the respective parties hereto. Anything contained herein
to the contrary notwithstanding, this Agreement shall not be assignable by any
party hereto without the written consent of the other party hereto.
3.
<PAGE>
4.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, without regard to its
conflicts of laws principles.
4.6 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
4.7 Notices. All notices, requests, demands and other communications
-------
under this Agreement or in connection herewith shall be given to or made upon
(i) Quantum at Quantum Corporation, 500 McCarthy Boulevard, Milpitas, CA 95035,
attention: General Counsel; with copies to Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, CA 94304, attention: Jeffrey A. Herbst and (ii) the
Company at TiVo, Inc., 894 Ross Drive, Sunnyvale, CA 94089, attention:
President; with copies to Cooley Godward LLP, Five Palo Alto Square, 3000 El
Camino Real, Palo Alto, CA 94304, attention: Alan Mendelson. All notices,
requests, demands and other communications given or made in accordance with the
provisions of this Agreement shall be in writing and shall be deemed received by
the holder upon the earlier of actual receipt or, if sent by certified mail
(postage pre-paid), five (5) days after deposit in the U.S. mail. Any party
may, by written notice to the other, alter its address or respondent.
4.8 Severability. If one or more provisions of this Agreement are held to
------------
be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
4.9 Counterparts. The Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
agreement.
[Remainder of Page Intentionally Left Blank]
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
TIVO, INC. QUANTUM CORPORATION,
a Delaware corporation a Delaware corporation
By: /s/ Michael Ramsay By: /s/ Richard L. Clemmer
----------------------- --------------------------
Name: Michael Ramsay Name: Richard l. Clemmer
----------------------- --------------------------
Title: CEO, President Title: CFO, EVP
----------------------- --------------------------
5.
<PAGE>
EXHIBIT A
FORM OF SERIES C WARRANT
------------------------
6.
<PAGE>
EXHIBIT B
FORM OF SERIES D WARRANT
------------------------
7.
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER SECURITIES ACT
OF 1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION
OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL IN FORM REASONABLY SATISFACTORY TO
COUNSEL TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED AND THAT AN APPLICABLE EXEMPTION IS AVAILABLE OR
(iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO EFFECT THAT REGISTRATION UNDER THE
ACT IS NOT REQUIRED.
TIVO, INC.
WARRANT TO PURCHASE
SHARES OF SERIES C PREFERRED STOCK
THIS CERTIFIES THAT, for value received, QUANTUM CORPORATION, a
Delaware corporation ("Quantum"), is entitled to subscribe for and purchase
324,325 shares (as adjusted pursuant to the provisions hereof, the "Shares") of
the Series C Preferred Stock of TiVo, Inc., a Delaware corporation (the
"Company"), at an exercise price of $0.01 per share (as adjusted pursuant to the
provisions hereof, the "Exercise Price"), upon such terms and conditions as
hereinafter set forth. As used herein, the term "Series C Preferred Stock"
shall mean the Company's Series C Preferred Stock, and any stock into or for
which such Series C Preferred Stock may hereafter be converted or exchanged, and
the term "Grant Date" shall mean November 6, 1998. The Series C Preferred Stock
shall initially be convertible into one share of Common Stock of the Company.
Capitalized terms not defined herein shall have the meanings set forth in the
Hard Disk Drive Supply Agreement dated of even date herewith between Quantum and
the Company (the "Supply Agreement").
1. Term and Vesting.
----------------
1.1 Term. Subject to vesting requirements set forth in Section
----
1.2 below, this Warrant is exercisable, in whole and not in part, at any time
from and after the Grant Date and prior to the earlier of (a) the fourth
anniversary of the Grant Date; (b) the consummation of the Company's initial
public offering of its capital stock pursuant to a registration statement filed
under the Securities Act of 1933, as amended (the "Securities Act"); and (c) the
consummation of a liquidation, dissolution or winding up of the Company as set
forth in the Company's Charter. The Company shall be obligated to provide
Quantum with written notice of termination of this Warrant at least 30 days
prior thereto.
1.2 Vesting. The right to purchase the Shares hereunder shall
-------
vest and become exercisable only as follows: (i) in the event that the Company
or its licensees become eligible to receive the Milestone 1 Discount set forth
in Section 4.2 of the Supply Agreement for the purchase of Hard Disk Drives or
Drive Equivalents; (ii) in the event that Quantum waives the eligibility
requirements for such Milestone 1 Discount; (iii) immediately prior to the
consummation of the Company's initial public offering of its capital stock; or
(iv) immediately
1.
<PAGE>
prior to the consummation of a liquidation, dissolution or winding up of the
Company as set forth in the Company's Charter.
2. Method of Exercise; Net Issue Exercise.
--------------------------------------
2.1 Method of Exercise; Payment; Issuance of New Warrant. This
----------------------------------------------------
Warrant may be exercised by Quantum, in whole and not in part, by the surrender
of this Warrant (with the Notice of Exercise form attached hereto as Exhibit A-1
duly executed) at the principal office of the Company and by the payment to the
Company, by cash, check, wire transfer in immediately available funds or
cancellation of indebtedness, of an amount equal to the Exercise Price per share
multiplied by the number of Shares then being purchased hereunder. The person or
persons in whose name(s) any certificate(s) representing Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of this
Warrant, certificates for the Shares so purchased shall be delivered to Quantum
as soon as possible and in any event within fifteen (15) days of receipt of such
notice (or, following the Company's initial public offering, within five (5)
days of receipt of such notice) and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to Quantum as soon as possible thereafter.
2.2 Automatic Exercise. To the extent this Warrant is not
------------------
previously exercised, and if the fair market value of one share of the Company's
Series C Preferred Stock is greater than the Exercise Price then in effect, this
Warrant shall be deemed automatically exercised pursuant to Section 2.3 below
(even if not surrendered) at such time that is immediately prior to the
expiration of this Warrant. For purposes of such automatic exercise, the fair
market value of one share of the Company's Series C Preferred Stock upon such
expiration shall be determined pursuant to Section 2.3(b) below. To the extent
this Warrant or any portion thereof is deemed automatically exercised pursuant
to this Section 2.2, the Company agrees to promptly notify Quantum of the number
of Shares, if any, Quantum is to receive by reason of such automatic exercise.
2.3 Right to Convert Warrant into Stock; Net Issuance.
-------------------------------------------------
(a) In addition to and without limiting the rights of
Quantum under the terms of this Warrant and in lieu of exercising this Warrant
under Section 2.1(a) above, Quantum may elect to convert this Warrant (the
"Conversion Right") into shares of Series C Preferred Stock, the aggregate value
of which shares shall be equal to the value of this Warrant. The Conversion
Right may be exercised by Quantum by surrender of this Warrant at the principal
office of the Company (with the Notice of Exercise form attached hereto as
Exhibit A-1 duly executed), in which event the Company shall issue to Quantum a
number of shares of the Company's Series C Preferred Stock computed using the
following formula:
X = Y (A-B)
------
A
2.
<PAGE>
Where: X = The number of shares of Series C Preferred Stock to be issued to
Quantum.
Y = The number of shares of Series C Preferred Stock purchasable
under this Warrant at the date of such calculation.
A = The fair market value of one share of the Company's Series C
Preferred Stock.
B = Exercise Price (as adjusted to the date of such calculations).
(b) For purposes of this Section 2.3, the "fair market value"
per share of the Company's Series C Preferred Stock shall mean:
(i) If the Conversion Right is exercised in connection with
and contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(ii) If the Conversion Right is not exercised in connection
with and contingent upon the Company's initial public offering, then the highest
of the following:
(A) The price per share in the Company's most recent
Preferred Stock financing;
(B) The price per share of the Company's Series C
Preferred Stock as determined by an independent valuation firm chosen by the
Company's Board of Directors and acceptable to Quantum; and
(C) The price per share of the Company's Series C
Preferred Stock as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid; Reservation of Shares. All Shares to be issued upon
---------------------------------------
the exercise of this Warrant, and all Common Stock issuable upon conversion of
the Shares shall, upon issuance, be validly issued, fully paid and
nonassessable, and free from all liens and charges with respect to the issuance
thereof. During the period within which this Warrant may be exercised, the
Company will at all times have duly authorized and reserved, for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Series
C Preferred Stock (and Common Stock issuable upon conversion thereof).
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
---------------------------
Series C Preferred Stock upon the exercise of this Warrant shall be made without
charge to Quantum for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the registered holder of this Warrant or in such name or names as may be
directed by the registered holder of this Warrant; provided, however, that upon
-------- -------
any transfer involved in the issuance or delivery of any certificates for shares
of Series C Preferred Stock, the
3.
<PAGE>
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
5. Adjustments to Exercise Price and Number of Shares. The number and
--------------------------------------------------
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification; Consolidation or Merger. In case of any
-----------------------------------------
reclassification of the Series C Preferred Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger with another corporation in which the Company is
a continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Company following such consolidation or merger and which does not result
in any reclassification of the shares issuable upon exercise of this Warrant),
or in the case of any sale of all or substantially all of the assets of the
Company, the Company, or such successor or purchasing corporation as the case
may be, shall execute a new Warrant, providing that Quantum shall have the right
to exercise such new Warrant, and procure upon such exercise and payment of the
same aggregate Exercise Price, in lieu of the shares of Series C Preferred Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of the
Company's assets or merger by a holder of an equivalent number of shares of
Series C Preferred Stock. Such new Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5. The provisions of this subsection (a) shall similarly
apply to successive reclassifications, consolidations, mergers, and the sale of
all or substantially all of the Company's assets.
(b) Subdivision or Combination of Shares. If the Company at any
------------------------------------
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Series C Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination.
(c) Stock Dividends and other Distributions. If the Company at
---------------------------------------
any time while this Warrant is outstanding and unexpired shall pay a dividend
with respect to Series C Preferred Stock payable in, or make any other
distribution with respect to, Series C Preferred Stock (except any distribution
specifically provided for in the foregoing subsections 5(a) or 5(b)), then the
Exercise Price shall be adjusted, from and after the date of determination of
stockholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Exercise Price in effect immediately prior to such
date of determination by a fraction (1) the numerator of which shall be the
total number of shares of Series C Preferred Stock outstanding immediately prior
to such dividend or distribution, and (2) the denominator of which shall be the
total number of shares of Series C Preferred Stock outstanding immediately after
such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Exercise Price pursuant to subsections 5(a)-(c) hereof, the number of shares of
Series C Preferred Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product
4.
<PAGE>
obtained by multiplying the number of shares of Series C Preferred Stock
purchasable immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment and the denominator of which shall be the Exercise Price
immediately thereafter.
(e) Conversion of Series C Preferred Stock. In the event that
--------------------------------------
all of the authorized and outstanding shares of Series C Preferred Stock of the
Company are redeemed or converted or reclassified into other securities or
property pursuant to the Company's Charter or otherwise, or the Series C
Preferred Stock otherwise ceases to exist, then, in such case, Quantum, upon
exercise hereof at any time alter the date on which the Series C Preferred Stock
is so redeemed or converted, reclassified or ceases to exist (the "Termination
Date"), shall receive, in lieu of the number of shares of Series C Preferred
Stock that would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been received if
this Warrant had been exercised in full and the Series C Preferred Stock
received thereupon had been simultaneously converted immediately prior to the
Termination Date, all subject to further adjustment as provided in this Warrant.
Additionally, the Exercise Price shall be immediately adjusted to equal the
quotient obtained by dividing (x) the aggregate Exercise Price of the maximum
number of shares of Series C Preferred Stock for which this Warrant was
exercisable immediately prior to the Termination Date by (y) the number of
shares of the Company for which this Warrant is exercisable immediately after
the Termination Date, all subject to further adjustment as provided herein.
(f) Certificate as to Adjustment. In each case of any
----------------------------
adjustment in either the Exercise Price or in the number of shares of Series C
Preferred Stock, or other stock, securities or property receivable on the
exercise of this Warrant, the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate signed by
its Chief Financial Officer, President or other designated officer setting forth
such adjustment and showing in reasonable detail the facts upon which such
adjustment is based, including a statement of the adjusted Exercise Price. The
Company will cause copies of such certificate to be mailed to the registered
holder.
6. Notices of Record Date. In the event of any taking by the Company of a
----------------------
record of its stockholders for the purpose of determining stockholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any
proposed merger or consolidation of the Company with or into any other
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, then, in connection with each such event, the Company
shall mail to Quantum at least twenty (20) days prior written notice of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right(s) or vote of the stockholders. Each such written notice
shall specify the amount and character of any such dividend, distribution or
right(s), and shall set forth, in reasonable detail, the matter requiting any
such vote of the stockholders.
7. Fractional Shares. No fractional shares of Series C Preferred Stock
-----------------
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall
5.
<PAGE>
make a cash payment therefor based upon the per share fair market value of the
Series C Preferred Stock on the date of exercise.
8. Compliance with Securities Act; Disposition of Warrant or Shares of
-------------------------------------------------------------------
Series C Preferred Stock.
- ------------------------
(a) Compliance with Securities Act. Quantum, by acceptance
------------------------------
hereof, agrees that this Warrant, the Shares to be issued upon exercise hereof
and the Common Stock to be issued upon conversion of such Shares are being
acquired for investment and that Quantum will not offer, sell or otherwise
dispose of this Warrant or any Shares to be issued upon exercise hereof (or
Common Stock issued upon conversion of such Shares) except under circumstances
which will not result in a violation of the Securities Act. This Warrant and all
Shares issued upon exercise of this Warrant (unless registered under the
Securities Act) shall be stamped or imprinted with a legend in substantially the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1935, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT
(i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL IN FORM REASONABLY SATISFACTORY TO COUNSEL TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT AN
APPLICABLE EXEMPTION IS AVAILABLE, OR (iii) RECEIPT OF A NO-
ACTION LETTER FROM SECURITIES AND EXCHANGE COMMISSION TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any
---------------------------------
offer, sale or other disposition of this Warrant or any Shares acquired pursuant
to the exercise of this Warrant (or Common Stock issued upon conversion of such
Shares) prior to registration thereof, Quantum and each subsequent holder of
this Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Securities Act as then in effect or any federal or
state law then in effect) of this Warrant or such Shares or Common Stock and
indicating whether or not under the Securities Act certificates for this Warrant
or such Shares or Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act. Each certificate representing this
Warrant or the Shares or Common Stock thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act unless, in
the aforesaid opinion of counsel for Quantum, such legend is not required in
order to insure compliance with the Securities Act. Nothing herein shall
restrict the transfer of this Warrant or any portion hereof by the initial
holder hereof to any subsidiary of the initial holder provided such transfer may
be made in compliance with applicable federal and state securities laws. The
Company may issue stop transfer instructions to its transfer agent in connection
with the foregoing restrictions.
6.
<PAGE>
9. No Rights as Stockholders. No holder of this Warrant, as such, shall
-------------------------
be entitled to the rights of a stockholder or to vote upon any matter submitted
to stockholders at any meeting thereof, or to receive notice of meetings, or be
deemed the holder of Series C Preferred Stock or entitled to the rights of a
holder of Series C Preferred Stock under the Second Amended and Restated
Investors Rights Agreement by and among the Company and the holders of Preferred
Stock of the Company (the "Investors Rights Agreement"), unless and until this
Warrant shall have been exercised and the Shares purchasable upon such exercise
shall have become deliverable, as provided herein.
10. Additional Rights.
-----------------
10.1 Registration and Investor Rights. The rights of Quantum
--------------------------------
and the obligations of the Company with respect to registration of the shares of
Common Stock issuable upon conversion of the Shares under the Securities Act and
the applicable rules and regulations thereunder are as set forth in the
Investors Rights Agreement, the provisions of which are incorporated by
reference herein with the same effect as if set forth in full herein. The
Company covenants that it will use its best efforts to ensure that Quantum
becomes a party to the Investors Rights Agreement with the same rights as the
holders of Series C Preferred Stock thereunder upon the exercise of this
Warrant. Except as set forth in the Investors Rights Agreement, the Company is
not, pursuant to the terms of any other agreement currently in existence, under
any obligation to register under the Securities Act any of its presently
outstanding securities or any of its securities which may hereafter be issued.
10.4 Mergers. The Company agrees to provide Quantum with at
-------
least thirty (30) days' prior written notice of the consummation of any proposed
transaction, in which the Company would (i) sell, lease, exchange, convey or
otherwise dispose of all or substantially all of its assets or business, or (ii)
merge into or consolidate with any other corporation (other than a wholly-owned
subsidiary of the Company), or effect any transaction (including a merger or
other reorganization) or series of related transactions, in which more than
fifty percent (50%) of the voting power of the Company is transferred.
11. Amendment of Conversion Rights. During the term of this Warrant, the
------------------------------
Company agrees that it shall not amend its Charter, as amended through the Grant
Date, without the prior written consent of Quantum if, as a result of such
amendment, any of the conversion rights, including without limitation the
conversion price or antidilution protection privileges, of the Series C
Preferred Stock would be adversely affected; provided, however, that no such
-----------------
consent shall be required if such amendment is approved by the stockholders of
the Company in accordance with the Charter and such amendment affects the shares
of Series C Preferred Stock issued to Quantum upon exercise of this Warrant and
the shares of Series C Preferred Stock held by other holders equally. The
Company shall promptly provide Quantum with any restatement, amendment,
modification or waiver of the Charter promptly after the same has been made.
12. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
--------------------------------
the surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange. The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder. This Warrant may
be surrendered for exchange, transfer or exercise, in
7.
<PAGE>
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
13. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
14. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
15. Notices. All notices, requests, demands and other communications
-------
under this Warrant or in connection herewith shall be given to or made upon (i)
Quantum at Quantum Corporation, 500 McCarthy Boulevard, Milpitas, CA 95035,
attention: General Counsel; with copies to Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road, Palo Alto, CA 94304, attention: Jeffrey A. Herbst and (ii)
the Company at TiVo, Inc., 894 Ross Drive, Sunnyvale, CA 94089, attention:
President; with copies to Cooley Godward LLP, Five Palo Alto Square, 3000 E1
Camino Real, Palo Alto, CA 94304, attention: Alan Mendelson. All notices,
requests, demands and other communications given or made in accordance with the
provisions of this Warrant shall be in writing and shall be deemed received by a
party upon the earlier of actual receipt or, if sent by certified mail (postage
pre-paid), five (5) days after deposit in the U.S. mail. Any party may, by
written notice to the other, alter its address or respondent.
16. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Shares, or the Company's Common Stock issuable upon
conversion thereof, shall survive the exercise and termination of this Warrant.
All of the covenants and agreements of between the parties shall inure to the
benefit of the successors and assigns of each party. The Company will, at the
time of the exercise of this Warrant, upon request of Quantum but at the
Company's expense, acknowledge in writing its continuing obligation to Quantum
in respect of any rights (including, without limitation, any right to
registration of the Shares) to which Quantum shall continue to be entitled after
such exercise in accordance with this Warrant; provided, that the failure of
Quantum to make any such request shall not affect the continuing obligation of
the Company to Quantum in respect of such rights.
17. Lost Warrants or Stock Certificates. The Company covenants to Quantum
-----------------------------------
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft destruction, or mutilation of this Warrant or any stock certificate
issued upon exercise thereof and, in the ease of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the ease of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company shall make and deliver a new
Warrant or stock certificate of like tenor in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
18. No Impairment. The Company will not, by amendment of its Charter or
-------------
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or
8.
<PAGE>
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
Quantum against impairment.
19. Descriptive Heading. The descriptive headings of the several
-------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
20. Recovery of Litigation Costs. If any legal action or other
----------------------------
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
21. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding the body of law applicable to conflicts of laws.
22. Assignment. This Warrant may be assigned by Quantum in whole and not
----------
in part. Upon delivery of a duly executed Assignment Form in the form attached
hereto as Exhibit A-2, the Company shall record such assignment on its books and
-----------
all references to Quantum hereunder shall be references to such registered
holder.
TIVO, INC.,
a Delaware corporation
By: /s/ Michael Ramsay
---------------------------------
Name: Michael Ramsay
-------------------------------
Title: CEO/President
----------------------------
9.
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
------------------
To:________________________
(Company Name)
1. The undersigned hereby:
[_] elects to purchase shares of Series C Preferred Stock of the
Company pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in
full; or
[_] elects to exercise its net issuance rights pursuant to Section
2.3 of the attached Warrant with respect to shares of Series C
Preferred Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
(Address)
____________________________
(Address)
3. The undersigned represents that the aforesaid shares 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.
________________
(Date)
______________________________
(Signature)
<PAGE>
EXHIBIT A-2
ASSIGNMENT FORM
---------------
(To assign the foregoing Warrant, execute this form and supply the required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
____________________________________________________
(Please Print)
whose address is_____________________________________
(Please Print)
Dated:________________________________________
Holder's Signature:___________________________
Holder's Address:_____________________________
______________________________________________
Guaranteed Signature:_________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by an eligible guarantor institution
such as a bank, stockbroker, savings and loan association or credit union with
membership in an approved medallion signature guarantee program. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
The undersigned transferee agrees to hold the Warrant and any stock issuable
upon exercise or conversion of the Warrant subject to the restrictions on
transfer set forth in the Warrant.
By:________________________
Date:______________________
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER SECURITIES ACT OF 1933, AS
AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION OF
THIS WARRANT OR SAID SHARES MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO, (ii) AN OPINION OF COUNSEL IN FORM
REASONABLY SATISFACTORY TO COUNSEL TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
AND THAT AN APPLICABLE EXEXEMPTION IS AVAILABLE
OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION TO EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
TIVO, INC.
WARRANT TO PURCHASE
SHARES OF SERIES D PREFERRED STOCK
THIS CERTIFIES THAT, for value received, QUANTUM CORPORATION, a Delaware
corporation ("Quantum"), is entitled to subscribe for and purchase up to that
number of shares (as adjusted pursuant to the provisions hereof, the "Shares")
of the Series D Preferred Stock of TiVo, Inc., a Delaware corporation (the
"Company"), at an exercise price of $0.01 per share (as adjusted pursuant to the
provisions hereof, the "Exercise Price"), as shall be determined by reference to
Section 2.4 hereof and upon such terms and conditions hereinafter set forth.
As used herein, the term "Series D Preferred Stock" shall mean the
Company's Series D Preferred Stock (or Series E Preferred Stock in the event the
Company sells Series D Preferred Stock prior to January 1, 1999 in an offering
that is not a Qualified Financing (as defined in Section 2.4 hereof), in which
case all references herein to Series D Preferred Stock shall be deemed to be
Series E Preferred Stock), and any stock into or for which such Series D
Preferred Stock may hereafter be convened or exchanged, and the term "Grant
Date" shall mean November 6, 1998. Quantum acknowledges that the Company intends
to conduct an offering of Series D Preferred Stock which is expected to close on
or prior to March 31, 1999. In the event (i) the right to purchase Shares under
this Warrant has vested in part or in whole and (ii) (A) that the Company does
not complete a Qualified Financing prior to May 30, 1999, or (B) of an
assignment for the benefit of creditors, the filing of a voluntary or
involuntary petition for bankruptcy relating to the Company or the insolvency or
liquidation of the Company, or (C) of a merger or consolidation of the Company
with or into any other corporation or corporations as a result of which
consolidation or merger the shareholders of the Company immediately prior to
such consolidation or merger hold securities representing less than fifty
percent (50%) of the voting securities of the surviving corporation, or a sale
of all or substantially all of the assets of the Company, or (D) thirty days
prior to the date of expiration of this Warrant, then the Company covenants and
agrees to effect a designation of Series D Preferred Stock with rights and
preferences equal to and substantially similar to the Company's Series C
Preferred Stock in all respects. In the event that the Company fails to so
designate the Series D Preferred Stock, this
1.
<PAGE>
Warrant shall be exercisable for shares of Series C Preferred Stock of the
Company, in which case all references herein to Series D Preferred Stock shall
be deemed to be Series C Preferred Stock. The Series D Preferred Stock shall
initially be convertible into one share of Common Stock of the Company.
Capitalized terms not defined herein shall have the meanings set forth in
the Hard Disk Drive Supply Agreement dated of even date herewith between Quantum
and the Company (the "Supply Agreement").
1. Term and Vesting.
----------------
1.1 Term. Subject to vesting requirements set forth in Section 1.2
----
below, this Warrant is exercisable, in whole or in part, at any time from and
after the Grant Date and prior to the earlier of (a) the fourth anniversary of
the Grant Date; (b) the consummation of the Company's initial public offering of
its capital stock pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Securities Act"); and (c) the
consummation of a liquidation, dissolution or winding up of the Company as set
forth in the Company's Charter. The Company shall be obligated to provide
Quantum with written notice of termination of this Warrant at least 30 days
prior thereto.
1.2. Vesting.
-------
(a) The right to purchase the Shares hereunder shall vest and
become exercisable only as follows: (a) the right to purchase 25% of the Shares
subject to this Warrant shall be vested in the event that (i) the Company or its
licensees become eligible to receive the Milestone 2 Discount set forth in
Section 4.3 of the Supply Agreement for the purchase of Hard Disk Drives or
Drive Equivalents or (ii) Quantum waives the eligibility requirements for such
Milestone 1 Discount; (b) the right to purchase an additional 25% of the Shares
subject to this Warrant shall be vested upon the cumulative shipment of [*] Hard
Disk Drives or Drive Equivalents by Quantum to the Company or its licensees; (c)
the right to purchase an additional 25% of the Shares subject to this Warrant
shall be vested upon the cumulative shipment of [*] Disk Drives or Drive
Equivalents by Quantum to the Company or its licensees; and (d) the right to
purchase an additional 25% of the Shares subject to this Warrant shall be vested
upon the cumulative shipment of [*] Disk Drives or Drive Equivalents by Quantum
to the Company or its licensees; provided, however, that the right to purchase
-------- -------
100 % of the Shares subject to this Warrant shall be vested in full immediately
prior to the consummation of the Company's initial public offering of its
capital stock or the consummation of a liquidation, dissolution or winding up of
the Company as set forth in the Company's Charter.
(b) Notwithstanding anything to the contrary in subsection (a)
above, if the Company defaults in the payment of any amounts owed by the Company
to Quantum under the Supply Agreement (including without limitation, the
Company's obligations for periodic payments under Section 4.4 thereof), and
fails to cure or correct such default within thirty (30) days after written
notice thereof from Quantum, then, in addition to any other remedies Quantum may
have, Quantum's right to purchase Shares hereunder shall vest as to an
additional 5% of the Shares subject to this Warrant for every $100,000 on which
the Company remains in default upon the expiration of such thirty-day notice
period.
[*]Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
2. Method of Exercise; Net Issue Exercise; Determination of Number of
------------------------------------------------------------------
Shares.
- ------
2.1 Method of Exercise; Payment; Issuance of New Warrant. This
----------------------------------------------------
Warrant may be exercised by Quantum, in whole or in part and from time to time,
by the surrender of this Warrant (with the Notice of Exercise form attached
hereto as Exhibit A-1 duly executed) at the principal office of the Company and
by the payment to the Company, by cash, check, wire transfer in immediately
available funds or cancellation of indebtedness, of an amount equal to the
Exercise Price per share multiplied by the number of Shares then being purchased
hereunder. The person or persons in whose name(s) any certificate(s)
representing Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of this Warrant, certificates for the Shares so purchased shall
be delivered to Quantum as soon as possible and in any event within fifteen (15)
days of receipt of such notice (or, following the Company's initial public
offering, within five (5) days of receipt of such notice) and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to Quantum as soon as possible
thereafter.
2.2 Automatic Exercise. To the extent this Warrant is not previously
------------------
exercised, and if the fair market value of one share of the Company's Series D
Preferred Stock is greater than the Exercise Price then in effect, this Warrant
shall be deemed automatically exercised pursuant to Section 2.3 below (even if
not surrendered) at such time that is immediately prior to the expiration of
this Warrant. For purposes of such automatic exercise, the fair market value of
one share of the Company's Series D Preferred Stock upon such expiration shall
be determined pursuant to Section 2.3(b) below. To the extent this Warrant or
any portion thereof is deemed automatically exercised pursuant to this
Section 2.2, the Company agrees to promptly notify Quantum of the number of
Shares, if any, Quantum is to receive by reason of such automatic exercise.
2.3 Right to Convert Warrant into Stock; Net Issuance.
-------------------------------------------------
(a) In addition to and without limiting the rights of
Quantum under the terms of this Warrant and in lieu of exercising this Warrant
under Section 2.1(a) above, Quantum may elect to convert this Warrant or any
portion thereof (the "Conversion Right") into shares of Series D Preferred
Stock, the aggregate value of which shares shall be equal to the value of this
Warrant or the portion thereof being converted. The Conversion Right may be
exercised by Quantum by surrender of this Warrant at the principal office of the
Company (with the Notice of Exercise form attached hereto as Exhibit A-1 duly
executed), in which event the Company shall issue to Quantum a number of shares
of the Company's Series D Preferred Stock computed using the following formula:
Y(A - B)
X = --------
A
3.
<PAGE>
Where: X = The number of shares of Series D Preferred Stock to be issued to
Quantum.
Y = The number of shares of Series D Preferred Stock purchasable under
this Warrant subject to the exercise election.
A = The fair market value of one share of the Company's Series D
Preferred Stock.
B = Exercise Price (as adjusted to the date of such calculations).
(b) For purposes of this Section 2.3, the "fair market value"
per share of the Company's Series D Preferred Stock shall mean:
(i) If the Conversion Right is exercised in connection with
and contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(ii) If the Conversion Right is not exercised in connection
with and contingent upon the Company's initial public offering, then the highest
of the following:
(A) The price per share in the Company's most recent Preferred
Stock financing;
(B) The price per share of the Company's Series D Preferred
Stock as determined by an independent valuation firm chosen by the Company's
Board of Directors and acceptable to Quantum; and
(C) The price per share of the Company's Series D Preferred
Stock as determined by the Company's Board of Directors in good faith.
2.4 Determination of Number of Shares. The number of Shares granted
---------------------------------
pursuant to this Warrant shall be the number obtained by dividing $2,000,000 by
the Preferred Price. For purposes of this Section 2.4, the "Preferred Price"
shall be determined as follows:
(A) If, prior to May 30, 1999, the Company completes a private
offering of equity securities (a "Qualified Financing"), then the Preferred
Price shall be the price per share on a common stock equivalent basis of equity
securities sold in the Qualified Financing; provided, however, that for purposes
-------- -------
of this Warrant, a Qualified Financing shall not include one private offering of
equity securities prior to January 1, 1999 with aggregate gross proceeds less
than $2,000,000.
(B) If the Company does not complete a Qualified Financing prior
to May 30, 1999 or if this Warrant is exercised prior to completion of a
Qualified Financing and prior to May 30, 1999, then the Preferred Price shall
be equal to the quotient determined by dividing (a) the lesser of (i)
$100,000,000 and (ii) the valuation of the Company on May 30,
4.
<PAGE>
1999, as determined by a third-party valuation firm mutually agreeable to
Quantum and the Company, by (b) the fully diluted capitalization of the Company
(which shall include, without limitation, shares subject to outstanding options
or warrants or reserved for issuance pursuant to the Company's stock plans).
3. Stock Fully Paid; Reservation of Shares. All Shares to be issued upon
---------------------------------------
the exercise of this Warrant, and all Common Stock issuable upon conversion of
the Shares shall, upon issuance, be validly issued, fully paid and
nonassessable, and free from all liens and charges with respect to the issuance
thereof. During the period within which this Warrant may be exercised, the
Company will at all times have duly authorized and reserved, for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Series
D Preferred Stock (and Common Stock issuable upon conversion thereof).
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
---------------------------
Series D Preferred Stock upon the exercise of this Warrant shall be made without
charge to Quantum for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the registered holder of this Warrant or in such name or names as may be
directed by the registered holder of this Warrant; provided, however, that upon
any transfer involved in the issuance or delivery of any certificates for shares
of Series D Preferred Stock, the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto.
5. Adjustments to Exercise Price and Number of Shares. The number and
--------------------------------------------------
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification; Consolidation or Merger. In case of any
-----------------------------------------
reclassification of the Series D Preferred Stock (other than a change in par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger with another corporation in which the Company is
a continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Company following such consolidation or merger and which does not result
in any reclassification of the shares issuable upon exercise of this Warrant),
or in the case of any sale of all or substantially all of the assets of the
Company, the Company, or such successor or purchasing corporation as the case
may be, shall execute a new Warrant, providing that Quantum shall have the right
to exercise such new Warrant, and procure upon such exercise and payment of the
same aggregate Exercise Price, in lieu of the shares of Series D Preferred Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, consolidation, sale of all or substantially all of the
Company's assets or merger by a holder of an equivalent number of shares of
Series D Preferred Stock. Such new Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5. The provisions of this subsection (a) shall similarly
apply to successive reclassifications, consolidations, mergers, and the sale of
all or substantially all of the Company's assets.
5.
<PAGE>
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Series D Preferred Stock, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall pay a dividend with
respect to Series D Preferred Stock payable in, or make any other distribution
with respect to, Series D Preferred Stock (except any distribution specifically
provided for in the foregoing subsections 5(a) or 5(b)), then the Exercise Price
shall be adjusted, from and after the date of determination of stockholders
entitled to receive such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such date of
determination by a fraction (1) the numerator of which shall be the total number
of shares of Series D Preferred Stock outstanding immediately prior to such
dividend or distribution, and (2) the denominator of which shall be the total
number of shares of Series D Preferred Stock outstanding immediately after such
dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Exercise Price pursuant to subsections 5(a)-(c) hereof, the number of shares of
Series D Preferred Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of shares of
Series D Preferred Stock purchasable immediately prior to such adjustment in the
Exercise Price by a fraction, the numerator of which shall be the Exercise Price
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter.
(e) Conversion of Series D Preferred Stock. In the event that all of
--------------------------------------
the authorized and outstanding shares of Series D Preferred Stock of the Company
are redeemed or converted or reclassified into other securities or property
pursuant to the Company's Charter or otherwise, or the Series D Preferred stock
otherwise ceases to exist, then, in such case, Quantum, upon exercise hereof at
any time after the date on which the Series D Preferred Stock is so redeemed or
converted, reclassified or ceases to exist (the "Termination Date"), shall
receive, in lieu of the number of shares of Series D Preferred Stock that would
have been issuable upon such exercise immediately prior to the Termination Date,
the securities or property that would have been received if this Warrant had
been exercised in full and the Series D Preferred Stock received thereupon had
been simultaneously converted immediately prior to the Termination Date, all
subject to further adjustment as provided in this Warrant. Additionally, the
Exercise Price shall be immediately adjusted to equal the quotient obtained by
dividing (x) the aggregate Exercise Price of the maximum number of shares of
Series D Preferred Stock for which this Warrant was exercisable immediately
prior to the Termination Date by (y) the number of shares of the Company for
which this Warrant is exercisable immediately after the Termination Date, all
subject to further adjustment as provided herein.
(f) Certificate as to Adjustment. In each case of any adjustment in
----------------------------
either the Exercise Price or in the number of shares of Series D Preferred
Stock, or other stock, securities or property receivable on the exercise of this
Warrant, the Company shall compute such adjustment in accordance with the terms
of this Warrant and prepare a certificate signed by its Chief Financial Officer,
President or other designated officer setting forth such adjustment and
6.
<PAGE>
showing in reasonable detail the facts upon which such adjustment is based,
including a statement of the adjusted Exercise Price. The Company will cause
copies of such certificate to be mailed to the registered holder.
6. Notices of Record Date. In the event of any taking by the Company of a
----------------------
record of its stockholders for the purpose of determining stockholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any
proposed merger or consolidation of the Company with or into any other
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, then, in connection with each such event, the Company
shall mail to Quantum at least twenty (20) days prior written notice of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right(s) or vote of the stockholders. Each such written notice
shall specify the amount and character of any such dividend, distribution or
right(s), and shall set forth, in reasonable detail, the matter requiring any
such vote of the stockholders.
7. Fractional Shares. No fractional shares of Series D Preferred Stock
-----------------
will be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based upon the
per share fair market value of the Series D Preferred Stock on the date of
exercise.
8. Compliance with Securities Act: Disposition of Warrant or Shares of
-------------------------------------------------------------------
Series D Preferred Stock.
------------------------
(a) Compliance with Securities Act. Quantum, by acceptance hereof,
------------------------------
agrees that this Warrant, the Shares to be issued upon exercise hereof and the
Common Stock to be issued upon conversion of such Shares are being acquired for
investment and that Quantum will not offer, sell or otherwise dispose of this
Warrant or any Shares to be issued upon exercise hereof (or Common Stock issued
upon conversion of such Shares) except under circumstances which will not result
in a violation of the Securities Act. This Warrant and all Shares issued upon
exercise of this Warrant (unless registered under the Securities Act) shall be
stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO, (ii) AN OPINION OF COUNSEL IN FORM REASONABLY
SATISFACTORY TO COUNSEL TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED AND THAT AN APPLICABLE EXEMPTION IS AVAILABLE,
OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER
THE ACT IS NOT REQUIRED.
7.
<PAGE>
(b) Disposition of Warrant and Shares. With respect to any offer,
---------------------------------
sale or other disposition of this Warrant or any Shares acquired pursuant to
the exercise of this Warrant (or Common Stock issued upon conversion of such
Shares) prior to registration thereof, Quantum and each subsequent holder of
this Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Securities Act as then in effect or any federal or
state law then in effect) of this Warrant or such Shares or Common Stock and
indicating whether or not under the Securities Act certificates for this Warrant
or such Shares or Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Securities Act. Each certificate representing this
Warrant or the Shares or Common Stock thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act unless, in
the aforesaid opinion of counsel for Quantum, such legend is not required in
order to insure compliance with the Securities Act. Nothing herein shall
restrict the transfer of this Warrant or any portion hereof by the initial
holder hereof to any subsidiary of the initial holder provided such transfer may
be made in compliance with applicable federal and state securities laws. The
Company may issue stop transfer instructions to its transfer agent in connection
with the foregoing restrictions.
9. No Rights as Stockholders. No holder of this Warrant, as such,
-------------------------
shall be entitled to the rights of a stockholder or to vote upon any matter
submitted to stockholders at any meeting thereof, or to receive notice of
meetings, or be deemed the holder of Series D Preferred Stock or entitled to the
rights of a holder of Preferred Stock under the Second Amended and Restated
Investors Rights Agreement by and among the Company and the holders of Preferred
Stock of the Company (the "Investors Rights Agreement"), unless and until this
Warrant shall have been exercised and the Shares purchasable upon such exercise
shall have become deliverable, as provided herein.
10. Additional Rights.
-----------------
10.1 Registration and Investor Rights. The rights of Quantum and the
--------------------------------
obligations of the Company with respect to registration of the shares of Common
Stock issuable upon conversion of the Shares under the Securities Act and the
applicable rules and regulations thereunder are as set forth in the Investors
Rights Agreement, the provisions of which are incorporated by reference herein
with the same effect as if set forth in full herein. The Company covenants that
it will use its best efforts to ensure that Quantum becomes a party to the
Investors Rights Agreement with the same rights as the holders of Series C
Preferred Stock thereunder upon the exercise of this Warrant. Except as set
forth in the Investors Rights Agreement, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the Securities Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
10.4 Mergers. The Company agrees to provide Quantum with at least
-------
thirty (30) days' prior written notice of the consummation of any proposed
transaction, in which the Company would (i) sell, lease, exchange, convey or
otherwise dispose of all or substantially all
8
<PAGE>
of its assets or business, or (ii) merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary of the Company), or effect any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than fifty percent (50%) of the voting power of the
Company is transferred.
11. Amendment of Conversion Rights. During the term of this Warrant, the
------------------------------
Company agrees that it shall not amend its Charter, as amended through the Grant
Date, without the prior written consent of Quantum if, as a result of such
amendment, any of the conversion rights, including without limitation the
conversion price or antidilution protection privileges, of the Series D
Preferred Stock would be adversely affected; provided, however, that no such
--------- -------
consent shall be required if such amendment is approved by the stockholders of
the Company in accordance with the Charter and such amendment affects the shares
of Series D Preferred Stock issued to Quantum upon exercise of this Warrant and
the shares of Series D Preferred Stock held by other holders equally. The
Company shall promptly provide Quantum with any restatement, amendment,
modification or waiver of the Charter promptly after the same has been made.
12. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
--------------------------------
the surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange. The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder. This Warrant may
be surrendered for exchange, transfer or exercise, in accordance with its terms,
at such office or agency of the Company, and the Company shall be entitled to
rely in all respects, prior to written notice to the contrary, upon such
registry.
13. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
14. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
15. Notices. All notices, requests, demands and other communications under
-------
this Warrant or in connection herewith shall be given to or made upon (i)
Quantum at Quantum Corporation, 500 McCarthy Boulevard, Milpitas, CA 95035,
attention: General Counsel; with copies to Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, CA 94304, attention: Jeffrey A. Herbst and (ii) the
Company at TiVo, Inc., 894 Ross Drive, Sunnyvale, CA 94089, attention:
President; with copies to Cooley Godward LLP, Five Palo Alto Square, 3000 El
Camino Real, Palo Alto, CA 94304, attention: Alan Mendelson. All notices,
requests, demands and other communications given or made in accordance with the
provisions of this Warrant shall be in writing and shall be deemed received by a
party upon the earlier of actual receipt or, if sent by certified mail (postage
pre-paid), five (5) days after deposit in the U.S. mail. Any party may, by
written notice to the other, alter its address or respondent.
16. Binding Effect on Success. This Warrant shall be binding upon any
-------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or
9.
<PAGE>
substantially all of the Company's assets. All of the obligations of the Company
relating to the Shares, or the Company's Common Stock issuable upon conversion
thereof, shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of between the parties shall inure to the benefit of
the successors and assigns of each party. The Company will, at the time of the
exercise of this Warrant, in whole or in part, upon request of Quantum but at
the Company's expense, acknowledge in writing its continuing obligation to
Quantum in respect of any rights (including, without limitation, any right to
registration of the Shares) to which Quantum shall continue to be entitled after
such exercise in accordance with this Warrant; provided, that the failure of
Quantum to make any such request shall not affect the continuing obligation of
the Company to Quantum in respect of such rights.
17. Lost Warrants or Stock Certificates. The Company covenants to Quantum
-----------------------------------
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant or any stock certificate
issued upon exercise thereof and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company shall make and deliver a new
Warrant or stock certificate of like tenor in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
18. No Impairment. The Company will not, by amendment of its Charter or
-------------
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of Quantum against impairment.
19. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
20. Recovery of Litigation Costs. If any legal action or other proceeding
----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
21. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and governed by, the internal laws of the State of California,
excluding the body of law applicable to conflicts of laws.
22. Assignment. This Warrant may be assigned by Quantum in whole and not
----------
in part. Upon delivery of a duly executed Assignment Form in the form attached
hereto as Exhibit A-2 the Company shall record such assignment on its books and
all references to Quantum hereunder shall be references to such registered
holder.
10
<PAGE>
TiVo, Inc.
a Delaware corporation
By: /s/ Michael Ramsay
-------------------------------
Name: Michael Ramsay
-----------------------------
Title: CEO, President
----------------------------
11.
<PAGE>
Exhibit 10.17
No. PAW-1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE 52,083 SHARES
OF SERIES A PREFERRED STOCK OF
TELEWORLD INC.
(Void after March 18, 2008)
This certifies that Randall Komisar or his assigns (the "Holder"), for
value received, is entitled to purchase from Teleworld Inc., a Delaware
corporation (the "Company"), having a place of business at 894 Ross Drive, Suite
100, Sunnyvale, California 94089, a maximum of 52,083 fully paid and
nonassessable shares of the Company's Series A Preferred Stock ("Preferred
Stock") for cash at a price of $0.60 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
the earlier of (i) the closing of the initial public offering of the Company's
Common Stock pursuant to a registration statement under the Securities Act of
1933, as amended (the "Initial Public Offering") or (ii) March 18, 2008, such
earlier day being referred to herein as the "Expiration Date", upon surrender to
the Company at its principal office (or at such other location as the Company
may advise the Holder in writing) of this Warrant properly endorsed with the
Form of Subscription attached hereto duly filled in and signed and, if
applicable, upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Company shall deliver
notice of the Initial Public Offering to the Holder at least 30 days prior to
the closing thereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance Of Certificates; Payment For Shares.
1.1 General. This Warrant is exercisable at the option of the holder
of record hereof, at any time or from time to time, up to the Expiration Date
for all or any part of the shares of Preferred Stock (but not for a fraction of
a share) which may be purchased hereunder. The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Preferred Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the
1.
<PAGE>
Holder hereof by the Company at the Company's expense within a reasonable time
after the rights represented by this Warrant have been so exercised. In case of
a purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Preferred Stock as may be requested by the Holder hereof and
shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Preferred Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Preferred Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Preferred Stock to be issued to the
Holder
Y = the number of shares of Preferred Stock purchasable
under the Warrant or, if only a portion of the Warrant
is being exercised, the portion of the Warrant being
canceled (at the date of such calculation)
A = the fair market value of one share of the Company's
Preferred Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued,
2.
<PAGE>
fully paid and nonassessable and free from all preemptive rights of any
shareholder and free of all taxes, liens and charges with respect to the issue
thereof. The Company further covenants and agrees that, during the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved, for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of authorized but unissued Preferred Stock, or other securities
and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Preferred Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Preferred Stock
may be listed; provided, however, that the Company shall not be required to
effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i) if
the total number of shares of Preferred Stock issuable after such action upon
exercise of all outstanding warrants, together with all shares of Preferred
Stock then outstanding and all shares of Preferred Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Preferred Stock
then authorized by the Company's Restated Certificate of Incorporation, or (ii)
if the total number of shares of Common Stock issuable after such action upon
the conversion of all such shares of Preferred Stock, together with all shares
of Common Stock then issuable upon exercise of all options and upon the
conversion of all such shares of Preferred Stock, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Amended and Restated Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.
<PAGE>
3.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Preferred Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
(b) any cash paid or payable otherwise than as a cash dividend,
or
(c) Preferred Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Preferred Stock issued as a stock split or adjustments in respect of which shall
be covered by the terms of Section 3.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Preferred Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (b) above and this clause (c)) which such Holder would hold on the date
of such exercise had he been the holder of record of such Preferred Stock as of
the date on which holders of Preferred Stock received or became entitled to
receive such shares or all other additional stock and other securities and
property.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
If any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Preferred Stock
shall be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Preferred Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Preferred
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby;
provided, however, that in the event the value of the stock, securities or other
assets or property (determined in good faith by the Board of Directors of the
Company) issuable or payable with respect to one share of the Preferred Stock of
the Company immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Organic Change. In the event of any Organic
Change, appropriate provision shall be made by the Company with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the
4.
<PAGE>
Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation, merger or
sale unless, prior to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument reasonably
satisfactory in form and substance to the Holders of a majority of the warrants
to purchase Series A Preferred Stock then outstanding, executed and mailed or
delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
3.4 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
3.5 Notices of Change.
(a) Immediately upon any adjustment in the number or class of
shares subject to this Warrant and of the Stock Purchase Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least
10 business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or distributions.
(c) The Company shall also give written notice to the Holder at
least 30 business days prior to the date on which an Organic Change shall take
place.
4. Issue Tax. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5.
<PAGE>
5. Closing of Books. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. Warrants Transferable. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company, at the Company's option, and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
8. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
9. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
11. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and
6.
<PAGE>
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the holder hereof.
12. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
13. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
<PAGE>
In Witness Whereof, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 18/th/ day of March, 1998.
Teleworld Inc.
a Delaware corporation
By:___________________________________
Name:
Title:
ATTEST:
__________________________
Secretary
8.
<PAGE>
Exhibit A
SUBSCRIPTION FORM
Date:_________________________,19____
Teleworld Inc.
894 Ross Drive
Suite 100
Sunnyvale, CA 94089
Attn: President
Ladies and Gentlemen:
[_] The undersigned hereby elects to exercise the warrant issued to it by
Teleworld Inc. (the "Company") and dated April ___, 1998 Warrant No. PAW-1
(the "Warrant") and to purchase thereunder 52,083 shares of the Series A
Preferred Stock of the Company (the "Shares") at a purchase price of Sixty
Cents ($0.60) per Share or an aggregate purchase price of Thirty-One
Thousand Two hundred Forty-Nine Dollars and Eighty Cents ($31,249.80) (the
"Purchase Price").
[_] The undersigned hereby elects to convert ______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section
1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
___________________________________
Randall Komisar
1.
<PAGE>
Exhibit B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO TELEWORLD INC. ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THE WARRANT DATED MARCH ______, 1998, WILL BE ISSUED.
March _______, 1998
Teleworld Inc.
894 Ross Drive
Suite 100
Sunnyvale, CA 94089
Attn: President
Ladies and Gentlemen:
The undersigned, Randall Komisar ("Purchaser"), intends to acquire up to
52,083 shares of the Series A Preferred Stock (the "Preferred Stock") of
Teleworld Inc. (the "Company") from the Company pursuant to the exercise or
conversion of certain Warrants to purchase Preferred Stock held by Purchaser.
The Preferred Stock will be issued to Purchaser in a transaction not involving a
public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Preferred Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Preferred Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Preferred Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Preferred Stock (except as
permitted
1.
<PAGE>
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares
have been acquired for investment and may not be sold or
otherwise transferred in the absence of an effective registration
statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel
satisfactory to the Company that registration is not required and
that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Preferred Stock
with Purchaser's counsel.
Very truly yours,
_____________________________
Randall Komisar
2.
<PAGE>
EXHIBIT 10.18
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series B Preferred Stock of
TiVo Inc.
Dated as of February 12, 1998 (the "Effective Date")
WHEREAS, TiVo Inc., a Delaware corporation (the "Company") has entered
into a Master Lease Agreement dated as of February 12, 1999, Equipment Schedule
No. VL-1 and VL-2 dated as of February 12, 1999, and related Summary Equipment
Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Series B
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe to and purchase, from the Company, 60,813 fully paid and non-
assessable shares of the Company's Series B Preferred Stock ("Preferred Stock")
at a purchase price of $1.26 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years or (ii) upon the effective date of the Company's Initial Public
Offering (as defined below), whichever is earlier.
The right to purchase Preferred Stock as set forth above shall expire,
if not previously exercised, immediately upon the closing of the issuance and
sale of shares of Common Stock of the Company in the Company's first public
offering of securities for its own account pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Initial Public
Offering"), provided however that the Preferred Stock issued to the
Warrantholder upon exercise of the Warrant Agreement shall have all the
identical rights, preferences and privileges of the Company's other outstanding
Preferred Stock.
The Company shall notify the Warrantholder if the Initial Public
Offering is proposed within a reasonable period of time prior to the filing of a
registration statement and if the Company fails to deliver such written notice
within a reasonable period of time, anything to the contrary in this Warrant
Agreement notwithstanding, the rights to purchase will not expire until ten (10)
business days after the Company delivers such notice to the Warrantholder. Such
notice shall also contain such details of the proposed Initial Public Offering
as are reasonable in the circumstances and notice that this Warrant Agreement is
expected to expire upon closing thereof. If such closing does not take place,
the Company shall promptly notify the Warrantholder that such proposed
transaction has been terminated. Anything to the contrary in this Warrant
Agreement notwithstanding, the Warrantholder may rescind any exercise of its
purchase rights promptly after such notice of termination of the proposed
transaction if the exercise of warrants occurred after the Company notified the
Warrantholder that the Initial Public Offering was proposed or if the exercise
were otherwise precipitated by
-1-
<PAGE>
such proposed Initial Public Offering. In the event of such rescission, the
Warrants will continue to be exercisable on the same terms and conditions.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in Section 2 above, by
tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed. Promptly upon receipt of the Notice of Exercise and the payment of
the purchase price in accordance with the terms set forth below, and in no event
later than twenty-one (21) days thereafter, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased and shall execute the acknowledgment of exercise in the form attached
hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of
shares which remain subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been
declared effective by the SEC, then the fair market value per share
shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number
of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is not exercised in connection with the
initial public offering of Company's Common Stock, then
the highest of the following: (x) the price per share of the
Company's Preferred Stock as determined by an independent valuation
firm chosen by the Company's Board of Directors and acceptable to
Warrantholder and (y) the price per share of the Preferred Stock as
determined by the Company's Board of Directors in good faith, unless
the Company shall become subject to a merger, acquisition or other
consolidation pursuant to which the Company is not the surviving
party, in which case the fair market value of Preferred Stock shall be
deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger
or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company
shall promptly issue an amended Warrant Agreement representing the remaining
number of shares purchasable hereunder. All other terms and conditions of such
amended Warrant Agreement shall be identical to those contained herein,
including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
-2-
<PAGE>
(b) Registration or Listing. If any shares of Preferred Stock
-----------------------
required to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the Securities Act of 1933, as amended ("1933 Act"), as then
in effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer involved in such conversion), or listing
on any domestic securities exchange, before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered, listed or
approved for listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
-------------------------
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation whether or not the Company is the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (hereinafter referred to as a "Merger Event"), then, as a part
of such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior
-3-
<PAGE>
to such dividend or distribution, and (ii) the denominator of which shall be the
total number of all shares of the Company's stock outstanding immediately after
such dividend or distribution. The Warrantholder shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Preferred Stock (calculated to the nearest whole share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Preferred Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's
----------------------------------
total cost of equipment leased pursuant to the Leases exceeds $2,500,000
Warrantholder shall have the right to purchase from the Company, at the Exercise
Price (adjusted as set forth herein), an additional number of shares, which
number shall be determined by (i) multiplying the amount by which the
Warrantholder's total equipment cost exceeds $2,500,000 by 3.065% and (ii)
dividing the product thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable
-------------------
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
--
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any
---------------------
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i)
the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable
------------------------------
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Charter and Bylaws, as amended. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance tax
in respect thereof, or other cost incurred by the Company in connection with
such exercise and the related issuance of shares of Preferred Stock. The Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved and the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
-4-
<PAGE>
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of
----------------------
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the 1933 Act and any filing required by
applicable state securities law, which filings will be effective by the time
required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
-----------------
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A)
28,000,000 shares of Common Stock, of which 5,243,337 shares are
issued and outstanding, and (B) 16,100,000 shares of preferred stock,
of which 12,533,122 shares are issued and outstanding and are
convertible into 12,533,122 shares of Common Stock.
(ii) The Company has reserved (A) 4,000,000 shares of Common
Stock for issuance under its 1997 Equity Incentive Plan, under which
1,451,907 options are outstanding, and (B) 52,803 shares of Series A
Preferred Stock, 324,325 shares of Series C Preferred Stock and
543,478 shares of Series D Preferred Stock for issuance under
outstanding warrants. There are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the Company's
capital stock or other securities of the Company.
(iii) Except as set forth in the Amended and Restated Investor
Rights Agreement dated January 20, 1999 (the "Rights Agreement"), no
shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
----------------------------------------
this Warrant Agreement and the Rights Agreement, the Company is not, pursuant to
the terms of any other agreement currently in existence, under any obligation to
register under the 1933 Act any of its presently outstanding securities or any
of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the
------------------
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the applicable state securities laws.
(h) Compliance with Rule 144. At the written request of the
------------------------
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
-5-
<PAGE>
This Warrant Agreement has been entered into by the Company in
reliance upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
-------------
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and
--------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
-----------------------
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports
pursuant to Section 15(d), of the 1934 Act", or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
-------------------
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION
-------------------------
Warrantholder and Company agree that all shares of Preferred Stock
subject to the Warrant Agreement shall have the same registration rights and be
subject to the same terms and conditions with respect to the registration and
sale of such stock as possessed by the Series B Shareholders as provided for in
the Rights Agreement, by and among the Company and those certain Purchasers
identified therein, attached hereto as Exhibit V.
12. TRANSFERS.
---------
-6-
<PAGE>
Subject to the terms and conditions contained in Section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall
--------------
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
---------------
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
California (without giving effect to principles of conflicts of laws); provided,
however, that to the extent the value of the Warrants is considered in
evaluating compliance with usury laws, the laws of the State of Illinois shall
govern.
(d) Counterparts. This Warrant Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 894
Ross Drive, Sunnyvale, CA 94089, Attention: (and/or if by facsimile, (408) 747-
5096 or at such other address as any such party may subsequently designate by
written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-
--------
defaulting party may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, including but not limited to an action for
damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
-----------------------
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and
--------
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions of
------------
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
----------
amended by a written instrument signed by the Company and by the Warrantholder.
-7-
<PAGE>
(k) Additional Documents. The Company, upon execution of this
--------------------
Warrant Agreement, shall provide the Warrantholder with certified resolutions
with respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel with respect to those same representations,
warranties and covenants. The Company shall also supply such other documents as
the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
Company: TIVO INC.
By: /s/ Michael Ramsay
------------------------
Title: CEO
---------------------
Warrantholder: COMDISCO, INC.
By: /s/ James Labe
------------------------
Title: President, Comdisco Ventures Division
--------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between ____________________________________
and the Warrantholder, and tenders herewith payment of the purchase price
for such shares in full, together with all applicable transfer taxes, if
any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
Company:
By: _________________________
Title: _________________________
Date: _________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated: ____________________________________
Holder's Signature: _______________________
Holder's Address: _______________________
____________________________________________
Signature Guaranteed: __________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 10.19
SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
This Secured Convertible Debenture Purchase Agreement (this "Agreement") is
entered into as of this 8th day of April, 1999, among TiVo Inc., a Delaware
corporation (the "Company"), and the creditors listed on Exhibit A (each a
"Creditor" and collectively, the "Creditors").
1. Purchase and Sale of Debentures.
1.1 Authorization. Pursuant to this Agreement, the Company has
authorized the issuance of (i) four Secured Convertible Debentures (one for each
Creditor) in the form attached hereto as Exhibit B (each individually, a
"Debenture" and collectively, the "Debentures"), and (ii) the warrants more
specifically described in Sections 6.3 and 8 hereof (collectively, the
"Warrants").
1.2 Issuance and Sale of Securities. Subject to the terms and
conditions hereof, the Company hereby agrees to issue and sell to each Creditor,
and each Creditor hereby agrees to accept delivery from the Company, of a
Debenture and the Warrants to be issued to such Creditor pursuant to Section 6.3
and 8 hereof.
1.3 Advance of Funds. The delivery of the Debentures and the Initial
Warrants (as defined in Section 6.3 hereof) shall take place at the offices of
Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real, Palo Alto,
California 94306, on April 8, 1999 (the "Closing"). At the Closing, the Company
shall deliver to each Creditor the Initial Warrant and a Debenture against
delivery to the Company by the Creditors, severally but not jointly, from time
to time on a pro rata basis (except for GC&H Investments who shall be limited to
an amount not to exceed $100,000.00 borrowed and outstanding at any one time) by
wire transfer of immediately available funds, or by check, in the aggregate
amount outstanding at any one time under all of the Debentures not to exceed
Three Million Dollars ($3,000,000), subject to the conditions set forth herein
and in the Debentures; provided, however, that in no event shall any Creditor be
required to advance more than its commitment as set forth in Exhibit A.
1.4 Repayment Terms/Conversion. Outstanding principal and accrued
interest on the Debentures shall be fully due and payable in compliance with the
terms set forth in the Debentures. At each Creditor's option, if the Company
fails to pay it any principal and/or accrued interest on the Maturity Date (as
defined in the Debentures), upon an Equity Event (as defined in the Debentures)
or after acceleration, that Creditor may choose to have all or any part of the
outstanding principal and accrued interest owing to that Creditor repaid in
shares of Common Stock of the Company at a conversion rate equal to the
following (the "Conversion Price"): (1) in the case of interest, the fair market
value of the Common Stock at the time of conversion, as determined by the
Company in good faith, as adjusted pursuant to Section 2, or (2) in the case of
principal, $3.68 per share, as adjusted pursuant to Section 2. In addition, at
each Creditor's option, that Creditor may choose to have all or any part of any
accrued interest owing to that Creditor prior to the Maturity Date repaid in
shares of Common Stock of the Company at the Conversion Price. In the event a
Creditor chooses to convert any outstanding principal and/or accrued interest
into Common Stock of the Company, that Creditor shall give
<PAGE>
written notice to the Company of such conversion no less than fifteen (15)
business days prior to such conversion.
2. Adjustment of Exercise Price and Number of Shares. The Conversion
Price and the number of shares of Common Stock subject to the Debentures (the
"Debenture Stock") shall be subject to adjustment from time to time as follows:
2.1 Subdivision or Combination of Stock. If at any time or from time
to time after the date of the Debentures (the "Issue Date") the Company shall
subdivide its outstanding shares of Debenture Stock, the Conversion Price in
effect immediately prior to such issuance or subdivision shall be
proportionately reduced. If the outstanding shares of Debenture Stock of the
Company shall be combined into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased.
2.2 Adjustment for Stock Dividends. If and whenever at any time the
Company shall declare a dividend or make any other distribution upon any class
or series of stock of the Company payable in shares of Debenture Stock or
securities convertible into shares of Debenture Stock, the Conversion Price and
the number of shares to be obtained upon exercise of the Debentures shall be
proportionately adjusted to reflect the issuance of any shares of Debenture
Stock or convertible securities, as the case may be, issuable in payment of such
dividend or distribution.
2.3 Adjustment for Reclassifications. In case, at any time prior to
the Debentures being paid in full, the Company undertakes any capital
reorganization, reclassification of the Debenture Stock, the consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving corporation), or
of the sale or other disposition of all or substantially all the properties and
assets of the Company in its entirety to any other person, the Debentures shall,
after such reorganization, reclassification, consolidation, merger, sale or
other disposition (a "Reclassification"), be exercisable so that upon conversion
each Creditor shall procure, in lieu of each share of Debenture Stock, the kind
and amount of shares of stock, other securities, money or property receivable
upon such Reclassification by the holder of one share issuable upon exercise of
the Debentures had the Debentures been exercised immediately prior to such
Reclassification at the price that would have been effective prior to such
Reclassification. The provisions of this Section 2.3 shall similarly apply to
successive Reclassifications.
2.4 Minimal Adjustments. No adjustment in the Conversion Price and/or
the number of shares of Debenture Stock subject to the Debentures need be made
if such adjustment would result in a change in the Conversion Price of less than
one cent ($0.01) or a change in the number of subject shares of less than one-
hundredth (1/100th) of a share. Any adjustment less than these amounts 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 at least these amounts.
2.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 2,
the Company at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and
2.
<PAGE>
prepare and furnish to each Creditor a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon written request at any time of a
Creditor, furnish or cause to be furnished to that Creditor a like certificate
setting forth (i) such adjustments and readjustments, (ii) the then effective
Conversion Price and number of shares of Debenture Stock subject to the
Debenture issued to that Creditor, and (iii) the then effective amount of
securities (other than Debenture Stock) and other property, if any, which would
be received upon exercise of the Debenture issued to that Creditor.
3. Security. The Debentures shall be secured by a security interest in
certain assets of the Company in accordance with the terms of the Security
Agreement in the form attached hereto as Exhibit C (the "Security Agreement").
4. Representations and Warranties of the Company. The Company hereby
represents and warrants the following as of the date hereof, as of the date of
Closing, and as of the date of each subsequent borrowing:
4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify is reasonably likely to have a material adverse
effect on its business or its properties.
4.2 Authorization. All corporate action on the part of the Company,
its officers and directors necessary for the authorization, execution and
delivery of this Agreement, the Debentures, the Warrants, the Security Agreement
and performance of all obligations of the Company hereunder and thereunder, has
been or shall be taken prior to the Closing, and this Agreement, the Debentures,
the Warrants, and the Security Agreement, when executed and delivered, shall
constitute the valid and legally binding obligations of the Company, enforceable
in accordance with their terms.
4.3 Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with any third
party or any federal, state or provincial governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated herein, other than consents related to interest rates which may be
deemed to exceed the maximum interest rates established by the law.
4.4 No Conflicts. Neither the execution and delivery of this
Agreement, the Debentures, the Warrants, or the Security Agreement by the
Company nor the consummation by the Company of the transactions contemplated
herein will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii) violate in any
material respect any statute, rule, regulation, order, writ, injunction, decree
or arbitration award applicable to the Company or its assets, or (iii) breach in
any material respect any other material agreement, undertaking, contract, or
security agreement to which the Company is subject.
3.
<PAGE>
4.5 No Defaults. No Event of Default, as defined in Section 9.1 of
this Agreement, shall have occurred and be continuing prior to the Closing or
any subsequent advance.
4.6 Voting. Other than the Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred
Stock, there are no shares of stock in the Company possessing voting rights.
4.7 Authorized Shares. Until the later of the date on which (a) all
the Warrants have been exercised or have expired, or (b) the Maturity Date (as
defined in the Debentures), the Company shall maintain sufficient numbers of
shares of authorized Common Stock to permit the full exercise of the Warrants
and conversion of the Debentures.
5. Representations and Warranties of the Creditor. Each Creditor
represents and warrants to the Company as follows:
5.1 Authorization. This Agreement, when executed and delivered by
it, will constitute a valid and legally binding obligation of it, enforceable in
accordance with its terms.
5.2 Investment. It is acquiring the Debenture to be sold by the
Company to it, the Warrants to be issued by the Company to it, and any equity in
the Company which it may receive therefrom for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof in violation of the Securities Act of 1933, as
amended (the "Securities Act"). It understands that the Debenture to be sold by
the Company to it, the Warrants to be issued by the Company to it, and equity of
the Company to be purchased or received have not been, and will not be,
registered under the Securities Act, by reason of a specific exemption from the
registration provisions of the Securities Act, which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Creditor's representations as expressed herein. It has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. It must bear the economic risk of this investment indefinitely
unless the shares to be issued to it pursuant to the Warrants to be issued by
the Company to it and its conversion rights under the Debenture to be sold by
the Company to it are registered pursuant to the Securities Act of 1933, as
amended, or an exemption from registration is available.
6. Conditions of Creditor's Obligations at Closing. The obligations of
the Creditors under Sections 1.2 and 1.3 of this Agreement are subject to the
fulfillment on or before the Closing, and on or before of each borrowing, of
each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 4 hereof shall be true on and as
of the Closing and each borrowing.
6.2 Performance/No Event of Default. The Company shall have performed
and complied with all agreements and conditions contained herein to be performed
or complied with by it on or before the Closing and there shall exist no Event
of Default.
4.
<PAGE>
6.3 Execution and Delivery of Debenture and Warrant. The Company
shall have authorized, executed and delivered (a) one Debenture to each
Creditor, and (b) one warrant to each Creditor to purchase, on a pro rata basis,
a total of 81,522 shares of the Company's Common Stock at an exercise price of
$2.50 per share (the "Initial Warrants") in a form substantially similar to that
set forth at Exhibit D.
6.4 Security Agreement. The Company shall have duly authorized,
executed and delivered to the Creditor the Security Agreement. Within five (5)
business days of Closing, the Company shall file a UCC-1 financing statement
with the California Secretary of State.
6.5 Good Standing. The Company shall have delivered a Certificate of
Good Standing from the State of Delaware, dated no more than thirty (30) days
prior to the Closing.
7. Conditions of the Company's Obligations at Closing. The obligations
of the Company under Sections 1.2 and 1.3 of this Agreement are subject to the
fulfillment on or before the Closing of the following condition:
7.1 Representations and Warranties. The representations and
warranties of the Creditors contained in Section 5 hereof shall be true on and
as of the Closing.
8. Affirmative Covenants of the Company.
8.1 At the end of each month, the Company shall execute and deliver
to each Creditor, on a pro rata basis, in a form substantially similar to that
set forth in Exhibit D, a warrant to purchase a total number of shares of the
Company's Common Stock equal to the New Borrowing Shares (as defined below) at
an exercise price equal to $2.50 per share. The New Borrowing Shares shall be
that number of shares equal to: (a) 10% of the amount of any new borrowing(s) by
the Company during such month, divided by (b) $3.68.
8.2 At the end of each month, the Company shall execute and deliver
to each Creditor, on a pro rata basis, in a form substantially similar to that
set forth in Exhibit D, a warrant to purchase a total number of shares of the
Company's Common Stock equal to the Unpaid Principal Shares (as defined below)
at an exercise price equal to $2.50 per share. The Unpaid Principal Shares
shall be that number of shares equal to: (a) 5% of the difference between (i)
the outstanding unpaid principal amount of all borrowings as of the last day of
such month and (ii) the amount of any new borrowing(s) during such month,
divided by (b) $3.68.
9. Default.
9.1 Events of Default. With respect to the Debentures, the Warrants,
the Security Agreement, and this Agreement, the following events are "Events of
Default" thereunder and hereunder:
(a) Default shall be made by the Company in the payment of
principal of or any interest on any Debenture after five (5) days' written
notice from the applicable Creditor following the date when the same is due and
payable; or
5.
<PAGE>
(b) Default shall be made in the due performance or observance
of any other material covenant, agreement or provision herein, or in any
Debenture, any Warrant, or the Security Agreement, to be performed or observed
by the Company, or a material breach shall exist in any representation or
warranty herein contained, or in any Debenture, any Warrant, or the Security
Agreement, as of the date when made, and such default or breach shall have
continued for a period of thirty (30) days after written notice thereof to the
Company from the applicable Creditor; or
(c) The Company shall be involved in financial difficulties as
evidenced:
(i) by the Company filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the United States
Bankruptcy Code (as now or in the future amended, the "Bankruptcy Code") or an
admission seeking the relief therein provided;
(ii) by the Company making a general assignment for the
benefit of its creditors;
(iii) by the Company consenting to the appointment of a
receiver or trustee for all or a substantial part of the property of the Company
or approving as filed in good faith a petition filed against the Company under
said Bankruptcy Code (in both cases without the consent of the Company);
(iv) by the commencement of a proceeding or case, without
the application or consent of the Company, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Company or of all or any substantial part of its assets, or (iii) similar relief
in respect of the Company under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts, and such
proceeding or case set forth in (i), (ii), or (iii) above continues undismissed
or uncontroverted, or an order, judgement or decree approving or ordering any of
the foregoing being entered and continuing unstayed and in effect, for a period
of sixty (60) days; or
(v) by the Company admitting in writing its inability to
pay its debts as such debts become due; or
(d) Company shall be terminated, dissolved or liquidated (as a
matter of law or otherwise) or proceedings shall be commenced by the Company or
by any person seeking the termination, dissolution or liquidation of the
Company.
9.2 Acceleration. If any one or more Events of Default described in
Section 9.1 shall occur and be continuing, then the applicable Creditor may, at
such Creditor's option and by written notice to the Company and the other
Creditors, declare the unpaid balance of the Debenture owing to said Creditor to
be forthwith due and payable and thereupon such balance shall become so due and
payable without presentation, protest or further demand or notice of
6.
<PAGE>
intent to accelerate or other notice of any kind, all of which are hereby
expressly waived by the Company.
10. Intercreditor Provisions
10.1 Collateral. Prior to any Creditor taking any action to enforce
any right or remedy with respect to the Collateral (as defined in the Security
Agreement), that Creditor must first obtain the consent of all of the other
Creditors.
10.2 Waivers. Waivers granted pursuant to this Agreement, any
Debenture or the Security Agreement, shall be effective as against all Creditors
if in writing executed by a Majority (as defined below) of the Creditors.
"Majority" shall mean the holders of at least 51% of the principal amount due as
of that date under all of the Debentures.
10.3 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Creditor shall obtain on account of any advance made by it
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) in excess of its Pro Rata Share (as defined below),
such Creditor shall forthwith (a) notify the other Creditors of such fact, and
(b) purchase from the other Creditors such participations in the advances made
by them as shall be necessary to cause such purchasing Creditor to share the
excess payment ratably with each of them. "Pro Rata Share" shall mean an amount
equal to the amount which results when the total amount of principal that is
owing to that Creditor is divided by the aggregate principal owing to all
Creditors (expressed as a percentage).
10.4 Amendment. No amendment of any provision of this Agreement, any
Debenture, any Warrant, or the Security Agreement shall in any event be
effective unless the same shall be in writing and signed by all of the
Creditors.
11. Miscellaneous.
11.1 Notices. All notices, requests, demands and other communications
under this Agreement, the Debentures, the Warrants and the Security Agreement
shall be in writing and shall be deemed to have been duly "given" on the date of
delivery, if delivery is made personally or by telegram or telecopy to the party
to whom notice is to be given, or upon receipt if mailed by first class mail,
either registered or certified, postage prepaid and properly addressed as
follows:
If to the Company: 894 Ross Drive
Sunnyvale, CA 94089
Attn: President
If to the Creditors: At the addresses set forth on Exhibit A
Each party may change its address for purposes of this Section by giving the
other parties written notice of the new address in the manner set forth above.
7.
<PAGE>
11.2 Remedies. No failure on the part of any Creditor to exercise,
and no delay on the part of any Creditor in exercising, any right hereunder or
under the Debentures, the Warrants or the Security Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise of any right owned by
it preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
11.3 Costs and Expenses. The Company shall pay all of the reasonable
costs and expenses, including without limitation all reasonable attorneys' fees
and legal expenses, incurred by it in connection with the documentation of this
Agreement, the Debentures, the Warrants, the Security Agreement and other
documents to be delivered hereunder.
11.4 Binding Effect; Governing Law. This Agreement, the Debentures,
the Warrants, and the Security Agreement shall be binding upon and inure to the
benefit of the Company and the Creditors and their respective successors, except
that no party shall have the right to assign its rights or obligations
hereunder, in the Debentures, the Warrants, or the Security Agreement, or any
interest herein or therein. This Agreement, the Debentures, the Warrants, and
the Security Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California (without reference to any
principles of conflicts of laws).
11.5 Jurisdiction. The Company and Creditors each hereby irrevocably
submit to the non-exclusive jurisdiction of any court sitting in the County of
Santa Clara over any action, suit or proceeding arising out of or relating to
this Agreement, the Debentures, the Warrants, or the Security Agreement. The
Company and the Creditors agree that final judgment in any such action, suit or
proceeding brought in such a court shall be conclusive and binding upon the
Company and the Creditors and may be enforced in any court of the jurisdiction
to which the Company or the Creditors are subject by a suit upon such judgment;
provided, however, that service of process is affected upon the Company or the
Creditors in the manner permitted by law.
11.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.7 Term. This Agreement shall terminate upon repayment or
conversion of all of the Debentures.
8.
<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Company TiVo Inc.
By: /s/ Michael Ramsay
---------------------
Michael Ramsay,
President
and Chief Executive Officer
Creditors Strategic Value I, L.P.
By Its General Partner
SV Partners, LLC
By: /s/ Robert P. Parker
----------------------
Name: Robert P. Parker
--------------------
Title: Managing Member
-------------------
GC&H Investments
By: /s/ John L. Cardoza
-----------------------
John L. Cardoza
Executive Partner
Institutional Venture Partners VII,
L.P.
By Its General Partner
Institutional Venture Management VII, L.P.
By: /s/ Geoffrey Y. Yang
------------------------
Geoffrey Y. Yang
General Partner
9.
<PAGE>
New Enterprise Associates VII, L.P.
By NEA Partners VII, L.P., Its General
Partner
By: /s/ Mark W. Perry
---------------------
Mark W. Perry
General Partner
NEA Presidents Fund, L.P.
By: NEA General Partners, L.P.
By: General Partner
By: /s/ Mark W. Perry
---------------------
Mark W. Perry
General Partner
10.
<PAGE>
EXHIBIT A
CREDITORS
Commitment
----------
(1) Strategic Value I, L.P. $ 301,500.00
Address: 2 Embarcadero Center
Suite 200
San Francisco, CA 94111
Attn: Bob Parker
(2) GC&H Investments (only up to $100,000) $ 99,900.00
Address: 5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Alan Mendelson
(3) Institutional Venture Partners VII, L.P. $1,299,300.00
Address: 3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Attn: Geoffrey Y. Yang
(4) New Enterprise Associates VII, L.P. $1,299,300.00
Address: 2490 Sand Hill Road
Menlo Park, CA 94025
Attn: Mark Perry
Total: $3,000,000.00
11.
<PAGE>
EXHIBIT B
THIS DEBENTURE IS SUBJECT TO A SECURED CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT DATED MARCH____, 1999.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS ("BLUE
SKY LAWS"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A
REGISTRATION STATEMENT UNDER THE ACT AND AS REQUIRED BY BLUE SKY LAWS IS IN
EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL SATISFACTORY TO THE
BORROWER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY
WITH THE ACT AND BLUE SKY LAWS.
SECURED CONVERTIBLE DEBENTURE
$[ ]
March____, 1999
For Value Received, the undersigned, TiVo Inc., a Delaware corporation
("Borrower"), under the terms of this Secured Convertible Debenture
("Debenture") hereby unconditionally promises to pay to the order of ___________
("Creditor"), by wire transfer to such account as Creditor shall provide notice
of to Borrower or by check, in lawful money of the United States of America and
in immediately available funds, the principal amount borrowed and outstanding
hereunder at any time not to exceed $_______ (the "Commitment") and such
interest as will have accrued and been outstanding, both payable in the manner
set forth below, such funds to be advanced by the Creditor to Borrower from time
to time upon the request of Borrower. Borrower may repay any amounts borrowed
hereunder and reborrow any amounts repaid, up to the Commitment, without penalty
or premium from the date hereof through December 31, 1999 (the "Drawdown
Period").
Capitalized terms used herein but not otherwise defined herein shall
have the meanings given to them in that certain Secured Convertible Debenture
Purchase Agreement ("Purchase Agreement") dated of even date herewith among the
Borrower, Creditor, and other creditors named therein.
This Debenture is the Debenture referred to in the Purchase Agreement,
the Warrants, and the Security Agreement.
1. Repayment. Interest on each advance shall be due and payable monthly
in arrears on the last day of each month and shall be payable, at the Creditor's
option, in Common Stock of the Borrower at a conversion rate equal to the fair
market value per share, at the time of conversion, as determined by the Borrower
in good faith. For each advance, all outstanding principal and accrued interest
shall be fully due and payable on the earlier of (the "Maturity Date"): (a) the
date which is six months from the date the advance was initially borrowed, or
(b) June 30, 2000, subject to the right of the Creditor to accelerate after the
occurrence and continuance of an Event of Default as defined in Section 9.1 of
the Purchase Agreement. In addition, Borrower shall repay in full any principal
and accrued interest outstanding hereunder on the date Borrower closes its next
bona fide equity financing (the "Equity Event"). Principal
<PAGE>
and accrued interest shall be paid by wire transfer or by check. At Creditor's
option, if Borrower fails to pay all outstanding principal and interest on the
Maturity Date, upon the Equity Event, or upon acceleration, Creditor may choose
to have all or any part of the outstanding principal and accrued interest repaid
in shares of Common Stock of the Borrower at a conversion rate equal to, in the
case of interest, the fair market value of the Common Stock at the time of
conversion, as determined by the Borrower in good faith (subject to adjustment
as set forth in Section 2 of the Purchase Agreement) or, in the case of
principal, at $3.68 per share (subject to adjustment as set forth in Section 2
of the Purchase Agreement). Such repayment shall not affect Creditor's rights
under any Warrant issued to the Creditor by the Borrower. In the event that
Creditor chooses to convert outstanding principal and accrued interest into
Common Stock of the Borrower, Creditor shall give written notice to the Borrower
of such anticipated conversion no less than fifteen (15) business days prior to
the date of conversion.
2. Interest. Simple interest shall accrue on the outstanding principal
amount hereof from the date funds are advanced until payment in full is received
by Creditor, which interest shall be equal to 4.67% per annum.
3. Secured Debenture. The full amount of this Debenture is secured by the
collateral identified and described as security therefor in the Security
Agreement.
4. Default. Borrower's failure to pay timely any of the principal amount
due under this Debenture or any accrued interest or other amounts due under this
Debenture pursuant to the terms hereof shall constitute an Event of Default as
defined in Section 9.1 of the Purchase Agreement.
5. Waiver. Except as provided for herein, Borrower waives presentment,
notice of dishonor, protest or notice of protest and nonpayment, notice of
costs, expenses or losses and interest thereon and diligence in taking any
action to collect any sums owing under this Debenture or in any proceeding
against any of the rights or interests in or to the properties or assets
securing payment of this Debenture.
6. Governing Law. This Debenture shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
7. Successors. The provisions of this Debenture shall inure to the
benefit of and be binding on any successor or Creditor. This Debenture cannot be
assigned by any party hereto.
2.
<PAGE>
8. Legal Interest Rate. Notwithstanding anything herein to the contrary,
in no event shall Borrower be obligated to pay interest in excess of the legal
limit of the State of California. In the event such interest is determined to
have been paid, such excess shall be deemed to have been paid on the principal
balance outstanding on this Debenture.
TiVo Inc.
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
3.
<PAGE>
THIS SECURITY AGREEMENT IS SUBJECT TO A SECURED
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
DATED APRIL 8, 1999.
SECURITY AGREEMENT
This Security Agreement (this "Security Agreement") dated as of April
8, 1999, is made by TiVo Inc., a Delaware corporation ("Grantor"), in favor of
the creditors listed on the signature page hereof (collectively, the
"Creditors"). Capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement (as defined
below).
Recitals
A. Pursuant to that certain Secured Convertible Debenture Purchase
Agreement dated as of April 8, 1999 (the "Purchase Agreement"), by and among
Grantor and Creditors and the related Debentures, Creditors have agreed,
severally but not jointly, to make certain advances of money and to extend
certain financial accommodations to Grantor in the amounts and in the manner set
forth in the Purchase Agreement and the Debentures (collectively, the "Loan").
B. Creditors are willing to make the Loan to Grantor only upon the
condition, among others, that Grantor shall have executed and delivered to the
Creditors this Security Agreement.
Agreement
Now, Therefore, in order to induce the Creditors to make the Loan and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Grantor hereby
represents, warrants, covenants and agrees as follows:
1. Defined Terms. The following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):
"Collateral" shall have the meaning assigned to such term in Section 3
of this Security Agreement.
"Contracts" means all contracts, undertakings, franchise agreements or
other agreements in or under which Grantor may now hold or hereafter acquires
any right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.
"Event of Default" shall have the meaning set forth in the Purchase
Agreement.
"Permitted Dispositions" means transfers in the ordinary course of
business, including, without limitation, (a) sales of inventory in the ordinary
course of business, and (b) transfers of worn out or obsolete equipment.
<PAGE>
"Permitted Lien" means:
(a) Liens in favor of Creditors;
(b) Liens existing on the date hereof and disclosed in Exhibit A
hereto;
(c) Liens consisting of leases or subleases and licenses and
sublicenses in the ordinary course of Grantor's business and any interest or
title of a lessor or licensor under any lease or license, as applicable;
(d) Liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities;
(e) Liens incurred or deposits made in the ordinary course of
Grantor's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(f) Liens arising from judgments, decrees or attachments;
(g) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property;
(h) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) Any interest or title of a lessor in equipment subject to
any capitalized lease;
(j) Any liens arising from the filing of any financing statement
relating to true leases;
(k) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution;
(l) Liens, not otherwise permitted, which liens do not in the
aggregate exceed $50,000 at any time; and
(m) Liens incurred in the refinancing of any of the obligations
giving rise to any of the liens in (a)-(l) above.
"Secured Obligations" means all indebtedness, liabilities and
obligations of Grantor to Creditors, whether now existing or hereafter incurred,
pursuant to the Debentures and the Purchase Agreement.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of
2.
<PAGE>
mandatory provisions of law, any or all of the attachment, perfection or
priority of Secured Party's security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
In addition, the following terms shall be defined terms having the meaning
set forth for such terms in the UCC (definition sections of the UCC are noted
parenthetically): "Accounts" (9106); "Chattel Paper" (9105(1)(b)); "Deposit
Accounts" (9105(e)); "Documents" (9105(1)(f)); "Equipment" (9109(2)); "Financial
Assets" (8102(a)(9)); "Fixtures" (9313(1)(a)); "General Intangibles" (9106);
"Goods" (9105(1)(h)); "Instruments" (9105(1)(i); "Inventory" (9109(4));
"Investment Property" (9115(1)(f)); "Proceeds" (9306(1)). Each of the foregoing
defined terms shall include all of such items now owned, or hereafter acquired,
by Grantor.
2. Secured Obligations. Grantor agrees to pay to the Creditors all of
the unpaid principal amount of, and accrued interest on, the Debentures, in
accordance with the terms thereof, and all other indebtedness, liabilities and
obligations of Grantor to Creditors, whether now existing or hereafter incurred,
arising out of or in connection with the Purchase Agreement, the Debentures or
this Security Agreement.
3. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
the Creditors to cause the Loan to be made, Grantor hereby, assigns, conveys,
mortgages, pledges, hypothecates and transfers to the Creditors, for the benefit
the Creditors, and hereby grants to Creditors, a security interest in all of
Grantor's right, title and interest in, to and under the following (including
any and all after-acquired property, all of which being herein collectively
called the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Deposit Accounts of Grantor;
(e) All Documents of Grantor;
(f) All Equipment of Grantor;
(g) All Financial Assets of Grantor;
(h) All Fixtures of Grantor;
(i) All Goods of Grantor;
(j) All Instruments of Grantor;
3.
<PAGE>
(k) All Inventory of Grantor;
(l) All Investment Property of Grantor; and
(m) To the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
Notwithstanding the foregoing, "Collateral" shall not include any Contract which
prohibits the granting of a security interest in such Contract or any asset
leased by Grantor.
CREDITORS (1) HEREBY ACKNOWLEDGE THAT QUANTUM CORPORATION HAS A SECURITY
INTEREST IN PART OF THE COLLATERAL (THE "QUANTUM COLLATERAL") AS DESCRIBED IN
FINANCING STATEMENT NUMBER 9831660560 FILED WITH THE CALIFORNIA SECRETARY OF
STATE, AND (2) AGREE THAT THEIR INTEREST IN THE QUANTUM COLLATERAL IS JUNIOR IN
PRIORITY TO THE SECURITY INTEREST OF QUANTUM CORPORATION REGARDLESS OF THE TIME
OF FILING OF ANY UNIFORM COMMERCIAL CODE FINANCING STATEMENTS OR THE TAKING OF
OTHER ACTIONS TO PERFECT EITHER SUCH SECURITY INTEREST.
4. Representations and Warranties. Grantor hereby represents and
warrants to the Creditors that except for the security interest granted under
this Security Agreement and Permitted Liens, Grantor is the sole legal and
equitable owner of each item of Collateral in which it purports to grant a
security interest hereunder, having good, marketable title thereto and that the
Creditors shall have a valid, binding and enforceable lien and/or security
interest in and to the Collateral.
5. Covenants. Grantor covenants and agrees with the Creditors that from
and after the date of this Security Agreement and until the Secured Obligations
have been performed and paid in full:
5.1 Further Assurances. At any time and from time to time, upon the
written request of the Creditors, and at the sole expense of Grantor, Grantor
shall promptly and duly execute and deliver any and all such further instruments
and documents and take such further actions as the Creditors may reasonably deem
desirable to obtain the full benefit of this Security Agreement.
5.2 Maintenance of Records. Grantor shall keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral.
Grantor shall allow reasonable access to such records upon reasonable notice
from Creditors.
5.3 Collateral. The Grantor agrees that it will not, without the
prior written consent of a Majority of the Creditors, consent to, permit or
suffer to occur any sale, transfer, hypothecation, lien, or use of any of the
Collateral adversely affecting the interest of the Creditors therein, other than
Permitted Liens and Permitted Dispositions.
4.
<PAGE>
6. Rights and Remedies Upon Default.
(a) If any Event of Default shall occur and be continuing, the
Creditors shall have the right to take title to, seize, assign, sell, and
otherwise dispose of the Collateral, or any part thereof, either at public or
private sale, in lots or in bulk, for cash, credit or otherwise, with or without
representations or warranties, and upon such terms as shall be reasonable, and
any Creditor may bid or become the purchaser at any such sale, and such Creditor
shall have the right at its option to apply or credit the amount of all or any
part of the Secured Obligations owing to it against the purchase price bid by it
at any such sale. If notification to Grantor of any intended disposition by the
Creditors of any of the Collateral is required by applicable law, such
notification will be deemed to have been reasonable and proper if given at least
20 days prior to such disposition.
(b) If any Event of Default shall occur and be continuing, the
Creditors may exercise in addition to all other rights and remedies granted to
it under this Security Agreement, all rights and remedies of a secured party
under the UCC.
(c) Except as specifically provided for herein, Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed to Creditors in the
following order of priorities:
First, to the Creditors in an amount sufficient to pay
in full the reasonable costs of the Creditors in connection with
such sale, disposition or other realization, including all fees,
costs, expenses, liabilities and advances incurred or made by the
Creditors in connection therewith, including, without limitation,
reasonable attorneys' fees;
Second, to the Creditors pro rata in accordance with
the amount of the Secured Obligations owing to each Creditor; and
Finally, upon payment in full of the Secured
Obligations, to Grantor or its representatives or as a court of
competent jurisdiction may direct.
7. Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's property and assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In
5.
<PAGE>
the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.
8. Miscellaneous.
8.1 No Waiver; Cumulative Remedies.
(a) Creditors shall not by any act, delay, omission or otherwise
be deemed to have waived any of their respective rights or remedies hereunder,
nor shall any single or partial exercise of any right or remedy hereunder on any
one occasion preclude the further exercise thereof or the exercise of any other
right or remedy.
(b) The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
(c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Creditors; provided, however, that a Majority of
Creditors may grant consents and waivers pursuant to Section 5.3.
8.2 Termination of this Security Agreement. This Security Agreement
shall terminate upon the payment and performance in full of the Secured
Obligations.
8.3 Successor and Assigns. This Security Agreement shall be binding
upon the successors of Grantor and Creditors and may not be assigned by any
party.
8.4 Governing Law. In all respects, including all matters of
construction, validity and performance, this Security Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.
8.5 Counterparts. This Security Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Titles and Subtitles. The titles of the sections and subsections
of this Security Agreement are not to be considered in construing this Security
Agreement.
8.7 Separability. In case any provision of this Security Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
8.8 Agreement is Entire Contract. This Security Agreement, together
with the Debentures, the Warrants, and the Purchase Agreement, constitutes the
final, complete and exclusive contract between the parties hereto with respect
to the subject matter hereof and no party shall be liable or bound to the other
in any manner by any warranties, representations,
6.
<PAGE>
guarantees or covenants except as specifically set forth herein and in such
other documents referred to above. Nothing in this Security Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any right, remedies, obligations or
liabilities under or by reason of this Security Agreement, except as expressly
provided herein.
8.9 Relationship of Certain Rights and Obligations. The repayment of
the Loan does not diminish, curtail, amend, alter, or otherwise change the
rights of the Creditors to exercise the Warrants, nor does the exercise of the
Warrants by Creditors alleviate, amend, alter, or otherwise change Grantor's
obligation to repay the Loan.
7.
<PAGE>
In Witness Whereof, the undersigned has caused this Security Agreement to
be executed and delivered by its duly authorized officer on the date first set
forth above.
Grantor TiVo Inc.
By: /s/ Michael Ramsay
--------------------------------
Michael Ramsay, President
and Chief Executive Officer
Creditors Strategic Value I, L.P.
By Its General Partner
SV Partners, LLC
By: /s/ Robert P. Parker
-----------------------------------
Name: Robert P. Parker
---------------------------------
Title: Managing Member
--------------------------------
GC&H Investments
By: /s/ John L. Cardoza
-----------------------------------
John L. Cardoza
Executive Partner
Institutional Venture Partners VII,
L.P.
By Its General Partner
Institutional Venture Management VII, L.P.
By: /s/ Geoffrey Y. Yang
-----------------------------------
Geoffrey Y. Yang
General Partner
8.
<PAGE>
New Enterprise Associates VII, L.P.
By NEA Partners VII, L.P., Its General
Partner
By: /s/ Mark W. Perry
----------------------------------
Mark W. Perry
General Partner
NEA Presidents Fund, L.P.
By: NEA General Partners, L.P.
By: General Partner
By: /s/ Mark W. Perry
----------------------------------
Mark W. Perry
General Partner
9.
<PAGE>
Exhibit A
LISTING OF PERMITTED LIENS
1) Liens in favor of Quantum Corporation pursuant to Financing Statement
#9831660560 as filed with the California Secretary of State.
2) Liens in favor of Silicon Valley Bank pursuant to Financing Statement
#9803460373 as filed with the California Secretary of State.
10.
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS
IS AVAILABLE WITH RESPECT THERETO.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK OF
TIVO INC.
Warrant No. CW-- _______ Shares of Common Stock
TIVO INC.
1. Issuance. This Warrant is issued to ____________, by TiVo Inc., a
Delaware corporation (hereinafter with its successors called the "Company").
2. Purchase Price; Number of Shares. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto as Exhibit A
duly executed, at the principal office of the Company, to purchase from the
Company _______ fully paid and nonassessable shares (the "Shares") of Common
Stock, $0.001 par value, of the Company (the "Common Stock") at a price per
share (the "Purchase Price") of two dollars and fifty cents ($2.50). The person
or persons in whose name or names any certificate representing shares of Common
Stock is issued hereunder shall be deemed to have become the holder of record of
the shares represented thereby as at the close of business on the date this
Warrant is exercised, whether or not the transfer books of the Company shall be
closed.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash
or by certified check or wire transfer, (ii) by the surrender or forgiveness by
the Holder to the Company of any promissory notes or other obligations issued by
the Company, with all such notes and obligations so surrendered being credited
against the Purchase Price in an amount equal to the principal amount thereof
plus accrued interest to the date of surrender, or (iii) by any combination of
the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Common Stock
equal to the value of this Warrant by the surrender of this Warrant to the
Company, with the net issue election notice set forth in Exhibit A annexed
hereto duly executed, at the principal office of the Company. Thereupon, the
Company shall issue to the Holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
<PAGE>
Y(A - B)
X = --------
A
where: X = the number of shares of Common Stock to be issued to the
Holder pursuant to this Section 4.
Y = the number of shares of Common Stock covered by this Warrant
at the time the net issue election is made pursuant to this Section 4.
A = the fair market value of one share of Common Stock,
determined as follows: (i) if the Warrant is being exercised in
connection with an initial public offering of the Company's Common
Stock pursuant to a registration statement filed under the Securities
Act of 1933, as amended (an "Initial Public Offering"), then the per
share offering price to the public in such Initial Public Offering,
(ii) if at such time the Common Stock is listed on a national
securities exchange or on the over-the-counter market and is not being
exercised in connection with an Initial Public Offering, then the
closing price of the Common Stock on the business day immediately
prior to the date of exercise or, if no sale of the Common Stock was
made on such day, the first business day immediately preceding such
day upon which a sale was made, or (iii) if at such time the Common
Stock is not listed on a national securities exchange or on the over-
the-counter market, then as determined in good faith by the Board at
the time the net issue election is made pursuant to this Section 4.
B = the Purchase Price in effect under this Warrant at the time
the net issue election is made pursuant to this Section 4.
5. Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Purchase Price.
6. Exercise; Expiration Date; Automatic Exercise. This Warrant may be
exercised in whole or in part at any time commencing on the date hereof and
ending at the earlier to occur of (i) the closing of an Initial Public Offering
at a per share public offering price of not less than $5.00 (equitably adjusted
for any stock split, combination or similar event) and an aggregate public
offering price of at least $10,000,000, and (ii) 5:00 p.m. Pacific Time on the
fifth anniversary of the date of this warrant (the "Expiration Date") and shall
be void thereafter. Notwithstanding the foregoing, this Warrant shall
automatically be deemed to be exercised in full pursuant to the provisions of
Section 4 hereof, without any further action on behalf of the Holder,
immediately prior to the Expiration Date.
7. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Common Stock of the Company, free from all
preemptive or similar rights therein, as will be sufficient to permit the
exercise of this Warrant in full. The Company further covenants that such shares
as may be issued pursuant to such exercise will, upon issuance, be duly and
2.
<PAGE>
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
8. Stock Splits and Dividends. If after the date hereof the Company
shall subdivide the Common Stock, by stock split or otherwise, or combine the
Common Stock, or issue additional shares of Common Stock in payment of a stock
dividend on the Common Stock, the number of shares of Common Stock issuable on
the exercise of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend, or proportionately decreased in the
case of a combination, and the Purchase Price shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend, or proportionately
increased in the case of a combination.
9. Mergers and Reclassifications. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this Section 9, the term "Reorganization" shall include without
limitation any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 8 hereof), or any consolidation of the Company with, or
merger of the Company into, another corporation or other business organization
(other than a merger in which the Company is the surviving corporation and which
does not result in any reclassification or change of the outstanding Common
Stock), or any sale or conveyance to another corporation or other business
organization of all or substantially all of the assets of the Company.
10. Certain Events. If any change in the outstanding Common Stock of the
Company or any other event occurs as to which the provisions of Section 8 or
Section 9 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Purchase
Price or the application of such provisions, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of the
Warrant upon exercise for the same aggregate Purchase Price the total number,
class and kind of shares as he would have owned had the Warrant been exercised
prior to the event and had he continued to hold such shares until after the
event requiring adjustment.
11. Certificate of Adjustment. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief
3.
<PAGE>
financial officer setting forth the Purchase Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
12. Issue Tax. The issuance of certificates for the Shares upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
13. Notices of Record Date, Etc. In the event of:
(1) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares
of stock of any class or any other securities or property, or to receive
any other right;
(2) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets;
(3) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company; or
(4) the filing of a registration statement under the Securities Act of
1933, as amended, in connection with an Initial Public Offering;
then and in each such event the Company will provide or cause to be provided to
the Holder a written notice thereof. Such notice shall be provided at least
fifteen (15) business days prior to the date specified in such notice on which
any such action is to be taken.
14. Representations, Warranties and Covenants. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized, issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Common Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Common Stock upon the exercise of this Warrant in
accordance with the terms hereof will not, (i) violate or contravene the
Company's certificate of incorporation or
4.
<PAGE>
by-laws, or any law, statute, regulation, rule, judgment or order applicable to
the Company, (ii) violate, contravene or result in a breach or default under any
contract, agreement or instrument to which the Company is a party or by which
the Company or any of its assets are bound or (iii) require the consent or
approval of or the filing of any notice (other than, if any, post-issuance state
securities laws filings) or registration with any person or entity.
15. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase Shares, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such Holder
for the Purchase Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
16. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder.
17. Notices, Etc.
(a) Any notice or written communication required or permitted to be
given to the Holder may be given by United States mail, by overnight courier or
by facsimile transmission at the address most recently provided by the Holder to
the Company or by hand, and shall be deemed received upon the earlier to occur
of (i) receipt, (ii) if sent by overnight courier, then on the day after which
the same has been delivered to such courier for overnight delivery, or (iii) if
sent by United States mail, seventy-two (72) hours after the same has been
deposited in a regularly maintained receptacle for the deposit of the United
States mail.
(b) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant.
18. No Impairment. The Company will not, by amendment of its certificate
of incorporation or through any reclassification, capital reorganization,
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance of performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.
19. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not
5.
<PAGE>
constitute a part of this Warrant. The provisions and terms of this Warrant
shall be governed by and construed in accordance with the internal laws of the
State of California.
20. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors and legal representatives.
Dated____________, 1999 TiVo Inc.
________________________________
Name:___________________________
Title:__________________________
6.
<PAGE>
Exhibit A
SUBSCRIPTION FORM
Date: ____________, ____
TiVo Inc.
894 Ross Drive, Suite 100
Sunnyvale, CA 94089
Attn: President
Ladies and Gentlemen:
The undersigned hereby elects:
to exercise the warrant issued to it by TiVo Inc. (the "Company") and dated
____________, 1999 (the "Warrant") in full and to purchase all of the
_______________________ shares of the Common Stock of the Company (the
"Shares") purchasable thereunder at a purchase price of ___________________
($______) per Share or an aggregate purchase price of ________________
Dollars ($__________) (the "Purchase Price"). Pursuant to the terms of the
Warrant the undersigned has delivered the Purchase Price herewith in full
in cash or by certified check or wire transfer or as otherwise permitted
pursuant to Section 3 of the Warrant; or
to surrender the right to purchase Shares pursuant to this Warrant and to
receive in lieu thereof Shares pursuant to the provisions of Section 4 of
the Warrant.
The undersigned also makes the representations set forth on Exhibit B
attached to the Warrant.
The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
Very truly yours,
1.
<PAGE>
Exhibit B
TO WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO TIVO INC. ALONG WITH
THE SUBSCRIPTION FORM BEFORE THE SHARES ISSUABLE UPON EXERCISE OF THE WARRANT
CERTIFICATE DATED ______________, 1999 WILL BE ISSUED.
_____________________, ____
TiVo Inc.
894 Ross Drive, Suite 100
Sunnyvale, CA 94089
Attention: President
The undersigned, ___________________ ("Purchaser"), intends to acquire up
to ______________ shares of the Common Stock (the "Shares") of TiVo Inc. (the
"Company") from the Company pursuant to the exercise of a certain Warrant to
purchase Shares held by Purchaser. The Shares will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act") and
applicable state securities laws. In connection with such purchase and in order
to comply with the exemptions from registration relied upon by the Company,
Purchaser represents, warrants and agrees as follows:
1. Purchaser is acquiring the Shares for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Shares in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law;
2. Purchaser has been advised that the Shares have not been registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter;
3. Purchaser has been informed that under the 1933 Act, the Shares must
be held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Shares;
4. The Company may refuse to permit Purchaser to sell, transfer or
dispose of the Shares (except as permitted under Rule 144) unless there is in
effect a registration statement under the 1933 Act and any applicable state
securities laws covering such transfer, or unless
1.
<PAGE>
Purchaser furnishes an opinion of counsel reasonably satisfactory to counsel for
the Company, to the effect that such registration is not required;
5. Purchaser has invested in securities of companies in the development
stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Shares. Purchaser represents and warrants that it is an
"accredited investor" within the meaning of Rule 501 of Regulation D of the 1933
Act.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Shares, or any substitutions therefor, legends stating in
substance:
"These securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), or any applicable state
securities laws, and may not be sold, offered for sale or
transferred unless such sale or transfer is in accordance with
the registration requirements of such Act and applicable laws or
an exemption from the registration requirements of such Act and
applicable laws is available with respect thereto."
Any legend required pursuant to applicable state securities laws.
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Shares with
Purchaser's counsel.
Very truly yours,
2.
<PAGE>
EXHIBIT 10.20
FIRST AMENDMENT TO
------------------
HARD DISK DRIVE SUPPLY AGREEMENT
--------------------------------
This First Amendment to Hard Disk Drive Supply Agreement ("First
Amendment") is made and entered into as of the 25th day of June, 1999, by and
between Quantum Corporation, a Delaware corporation ("Quantum"), and TiVo, Inc.,
a Delaware corporation ("TiVo"). Quantum and TiVo may hereinafter be referred
to as a "Party," or together as the "Parties."
Recitals
Whereas, the Parties entered into that certain Hard Disk Drive Supply
Agreement dated as of November 6, 1998 (the "Agreement"), whereby Quantum
supplies hard disk drives to TiVo which TiVo then incorporates into its own
products for sale;
Whereas, in selling The TiVo Center and TiVo Service, TiVo provides a
written commitment to its customers, as amended from time to time, to protect
the privacy of each customer's personal information ("Privacy Promise");
Whereas, the Parties have determined that the terms and conditions of
TiVo's Privacy Promise are in conflict with the terms and conditions of Section
7.5 of the Agreement, entitled "TiVo End-User Mailing List"; and
Whereas, the Parties desire to remedy this conflict and amend Section 7.5
of the Agreement by deleting the existing terms and conditions of such Section
7.5 and replacing them as provided for in this First Amendment.
Now, Therefore, in consideration of the mutual covenants and promises
contained herein, the Parties hereby agree as follows:
Agreement
1. Amendment of Section 7.5. Pursuant to Section 14.5 of the Agreement,
the Parties hereby mutually assent and agree to amend Section 7.5 of the
Agreement, entitled "TiVo End-User Mailing List," by deleting in whole the
existing terms and conditions contained in such Section 7.5, and replacing them
entirely with the following:
Section 7.5. TiVo End-User Information.
(i) TiVo shall have no obligation to provide TiVo Center or TiVo
Service personal viewing information (as described in the TiVo Privacy Promise
to its customers) to Quantum or to any third party representing Quantum.
(ii) TiVo shall have no obligation to provide TiVo Center or TiVo
Service account information (as described in the TiVo Privacy Promise to its
customers) to Quantum or
1.
<PAGE>
First Amendment
Quantum Corporation and TiVo, Inc.
June 25, 1999
Page 2
================================================================================
to any third party representing Quantum without first obtaining prior consent
from each customer included within such information.
(iii) Any TiVo Center and TiVo Service account information made
available to Quantum pursuant to Section (ii) above shall be provided only to a
third party designated by Quantum (and reasonably agreed to by TiVo), as often
as reasonably requested by Quantum, but not more frequently than one (1) time
per calendar quarter. Quantum may direct such third party to use such
information for any market research purpose and for the marketing or promotion
of any Quantum product. Notwithstanding the foregoing, Quantum shall not use
such information, or direct such third party to use such information, to market
or promote a service that directly competes with the TiVo Service.
(iv) To the extent available to TiVo, TiVo shall make TiVo Center
and TiVo Service anonymous viewing information (as described in the TiVo Privacy
Promise to its customers) available to Quantum. Notwithstanding the foregoing,
TiVo shall have no obligation to make such information available if it is
otherwise prohibited by the TiVo Privacy Promise.
(v) In the event TiVo amends its Privacy Promise to its customers,
Quantum shall be informed in a commercially reasonable period of time and
receive at least the same rights and access to TiVo subscriber account
information and anonymous viewing information as any other similar TiVo business
relationship.
2. Remainder of Agreement Unchanged. The Parties further acknowledge and
agree that all other terms and conditions of the Agreement shall remain the
same, and in full force and effect.
In Witness Whereof, the Parties have duly authorized and executed this
First Amendment as of the date first written above.
Quantum Corporation TiVo, Inc.
By: /s/ A. Francesca By: /s/ James Barton
-------------------------- -----------------------------
Name: A. Francesca Name: James Barton
------------------------ ---------------------------
Title: VP & GM Title: CTO
----------------------- --------------------------
2.
<PAGE>
EXHIBIT 10.21
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
HOME OFFICE - 8515 E. ORCHARD RD.
ENGLEWOOD, COLORADO
GROUP CONTRACT HOLDER Teleworld 401(k) Plan
GROUP CONTRACT NUMBER 934098-01
Non-Participating
The provisions on the following pages, together with the application for this
Group Annuity Contract, are part of this Group Annuity Contract.
Signed for the Great-West Life & Annuity Insurance Company on the issuance of
the Group Annuity Contract on the Group Annuity Contract Date.
______________________________ _______________________________
Secretary President
_________________________
For the Actuary
This Group Annuity Contract is the legal contract between the Group
Contractholder, for the benefit of the Participants, and the Great-West Life &
Annuity Insurance Company. PLEASE READ THIS CONTRACT CAREFULLY. IT IS A
CONTRACT WHICH MAY PROVIDE FOR PAYMENTS OR VALUES WHICH ARE NOT GUARANTEED AS TO
FIXED-DOLLAR AMOUNT AND WHICH INCREASE OR DECREASE ACCORDING TO THE INVESTMENT
EXPERIENCE OF A VARIABLE ANNUITY ACCOUNT.
Qualified Group Annuity Contract
Contract No. 934098-01
Form No. QGAC 492 FFSII
1.
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................. 1
ARTICLE II OWNERSHIP PROVISIONS.................................................................... 6
2.1 Ownership of Series Account........................................................... 6
2.2 Ownership of Group Annuity Contract................................................... 6
2.3 Participant Annuity Account Value..................................................... 6
2.4 Transfer and Assignment............................................................... 6
ARTICLE III GENERAL PROVISIONS.................................................................... 7
3.1 The Group Annuity Contract............................................................ 7
3.2 Entire Contract....................................................................... 7
3.3 Modifications......................................................................... 7
3.4 Non-Participating..................................................................... 7
3.5 Beneficiary........................................................................... 7
3.6 Currency and Payment of Deposits...................................................... 8
3.7 Age................................................................................... 8
3.8 Proof................................................................................. 8
3.9 Plan Amendments and Changes in Procedure.............................................. 8
3.10 Gender................................................................................ 8
3.11 Representations....................................................................... 8
3.12 Notice................................................................................ 9
3.13 Voting Rights......................................................................... 9
3.14 Tax Consequences of Payments.......................................................... 9
ARTICLE IV PURCHASE PROVISIONS..................................................................... 10
4.1 Commencement and Termination of Coverage.............................................. 10
4.2 Deposits.............................................................................. 10
4.3 Allocation of Deposits................................................................ 10
ARTICLE V ACCOUNT VALUE PROVISIONS.............................................................. 12
5.1 Variable Account Value................................................................ 12
5.2 Accumulation Unit..................................................................... 12
5.3 Accumulation Unit Value............................................................... 12
5.4 Annuity Unit Value.................................................................... 12
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5.5 Expense Charge........................................................................ 13
5.6 Net Investment Factor................................................................. 13
5.7 Guaranteed Account Value.............................................................. 14
5.8 Guaranteed Sub-Account Riders......................................................... 14
5.9 Contract Maintenance Charge........................................................... 14
ARTICLE VI TRANSFERS............................................................................... 15
6.1 Right to Transfer..................................................................... 15
6.2 Transfer Terms........................................................................ 15
6.3 Transfers Within the Group Annuity Contract........................................... 15
6.4 Transfers To Investment Vehicles Outside the Contract................................. 15
6.5 Transfer To The Company............................................................... 16
6.6 Non-Taxable Distribution.............................................................. 16
ARTICLE VII RETIREMENT............................................................................ 17
7.1 Retirement Provisions................................................................. 17
ARTICLE VIII PROVISIONS RELATING TO AMOUNT PAYABLE ON DEATH, IN SERVICE WITHDRAWAL, AND SURRENDER.. 18
8.1 Amount Payable On Death of Participant................................................ 18
8.2 In Service Withdrawal................................................................. 18
8.3 Amount Payable On In Service Withdrawal............................................... 18
8.4 Surrender............................................................................. 19
8.5 Amount Payable On Surrender........................................................... 19
8.6 Payment On Death, In Service Withdrawal and Surrender................................. 19
8.7 Establishment of Alternate Payee Account.............................................. 19
ARTICLE IX METHODS OF PAYMENT...................................................................... 20
9.1 Methods of Payment Provisions......................................................... 20
9.2 Amount To Be Applied.................................................................. 20
9.3 Variable Dollar Method of Payment..................................................... 20
9.4 Fixed Dollar Method of Payment........................................................ 22
9.5 How to Elect a Method of Payment...................................................... 23
9.6 Availability of Options............................................................... 23
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
9.7 Settlement............................................................................ 24
ARTICLE X MODIFICATIONS......................................................................... 25
10.1 Contract Modification................................................................. 25
10.2 Modification of Tables................................................................ 25
10.3 Modification of Guaranteed Sub-Account Riders, If Any................................. 25
10.4 Modification of Variable Sub-Accounts................................................. 26
ARTICLE XI CONTRACT TERMINATION.................................................................... 27
11.1 Contract Termination Date............................................................. 27
11.2 Procedures at Contract Termination Date............................................... 27
11.3 Market Value.......................................................................... 28
11.4 Market Value Adjustment............................................................... 28
11.5 Market Value Adjustment Factor........................................................ 28
11.6 Contract Termination Charge........................................................... 29
ARTICLE XII MISCELLANEOUS PROVISIONS.............................................................. 30
12.1 Inspection of Records................................................................. 30
12.2 Subsidiaries and Affiliates........................................................... 30
</TABLE>
TABLE A
TABLE B
TABLE C
GUARANTEED SUB-ACCOUNT RIDERS
CURRENT EXPENSE CHARGE SCHEDULE
iii.
<PAGE>
ARTICLE I
DEFINITIONS
Accumulation Period - the period during which the Participant
is covered under this Group Annuity
Contract prior to the Participant's
Annuity Commencement Date.
Accumulation Unit - an accounting unit used to determine the
Variable Contract Value before the
Annuity Commencement Date.
Annuitant - the person upon whose life the payment
of an annuity is based.
Annuity Commencement Date - the date on which a one sum payment is
to be made, or the date on which
payments under a Method of Payment are
to commence, as provided for in the
Plan.
Annuity Payment Period - the period during which the Participant
is covered under this Group Annuity
Contract after the Participant's Annuity
Commencement Date.
Annuity Unit - an accounting unit used to determine the
dollar value of any variable dollar
annuity payment after the first payment.
Beneficiary - the person(s) designated by the
Participant to receive distributions, if
any, payable upon the death of the
Participant. All records of beneficiary
designation(s) and determinations as to
the correctness and/or adequacy of such
designations are the sole responsibility
of the Group Contractholder.
Certificate - represents the amount deposited into the
Guaranteed Certificate Fund, if offered,
under each Interest Guarantee Period.
Each Certificate has its own interest
rate and term.
Company - the Great-West Life & Annuity Insurance
Company.
Deposit - includes contributions, Transfers and
other amounts deposited into Guaranteed
or
1.
<PAGE>
Variable Sub-Accounts.
Employer - the employer of a Participant.
Eligible Fund - a fund with certain investment
objectives in which the assets of the
Series Account may be invested.
Employer Deposits - contributions made by the Employer
pursuant to the Plan.
Forfeiture - that portion of the Participant's
Annuity Account Value which is not
vested under the terms of the Plan as of
the date of Surrender.
Group Annuity Contract - this Qualified Group Annuity Contract
which is a binding agreement between the
Group Contractholder and the Company.
Group Annuity Contract Date - the earlier of the date on which Plan
Assets transferred from the previous
insurance carrier or funding vehicle to
the Company, if any, are received and
allocated, or the date on which the
initial salary reduction for
Participants under the Plan is made by
the Employer. The Company will confirm
such date to the Group Contractholder in
writing.
Group Contractholder - the Employer, employee retirement plan,
or trustee(s) of such plan, applying for
this Group Annuity Contract.
Guaranteed Account - the portion of this Group Annuity
Contract providing Guaranteed Sub-
Accounts, each of which guarantees
principal.
Guaranteed Account Value - the sum of the values of the Guaranteed
Sub-Accounts credited to the Participant
under his Participant Annuity Account.
Guaranteed Sub-Account - a sub-division of the Guaranteed
Account. Such subdivision(s) is
described in greater detail in the
attached Guaranteed Sub-Account Riders,
if any.
Home Office - the Company's Home Office located at
8515 E. Orchard Rd., Englewood, Colorado
80111.
2.
<PAGE>
Investment Division - there is within the Series Account an
Investment Division for each Variable
Sub-Account. Each Investment Division
invests in one-or more Eligible Funds.
The Company may change the Eligible
Funds within an Investment Division at
its sole discretion.
In Service Withdrawal - a withdrawal of some or all of the
Participant's Annuity Account Value
during his service with the Group
Contractholder.
Participant - a person who has met the requirements
for participation in the Plan as
designated by the Group Contractholder
and for whom an account has been
established under the Group Annuity
Contract. For purposes of the Group
Annuity Contract a person will continue
to be a Participant as long as a
Participant Annuity Account is
maintained in his name.
Participant Annuity Account - a separate record established in the
name of each Participant which reflects
the total value of the Participant's
Deposits into the Guaranteed and
Variable Sub-Accounts.
Participant Annuity Account Value - the sum of the Variable and Guaranteed
Account Values credited to the
Participant under his Participant
Annuity Account.
Participant Effective Date - the date on which the first Deposit is
credited to a Participant Annuity
Account.
Payee - any person receiving distributions or
annuity payments under the Group Annuity
Contract, as designated by the Group
Contractholder.
Plan - the plan established and maintained by
the Employer pursuant to Section 401 of
the Internal Revenue Code, as amended.
Although the Company may have knowledge
of certain provisions of the Plan, the
legal sufficiency of the Plan remains
the sole responsibility of the Group
Contractholder.
3.
<PAGE>
Plan Administrator - the person(s) designated by the Plan to
perform all administrative functions
required by the Employee Retirement
Income Security Act of 1974, as amended
(ERISA), the Internal Revenue Code,
Department of Labor and any other
applicable law.
Plan Year - the 12 month period established by the
Plan for the Plan's reporting,
disclosure and funding.
Premium Tax - the amount of premium tax, if any,
charged by a state or other government
authority.
Qualified Domestic Relations - a domestic relations order that creates
or recognizes Order (QDRO) the existence
of an alternate payee's right to, or
assigns to an alternate payee the right
to, receive all or a portion of the
benefits payable with respect to a
Participant and that complies with
requirements of the Internal Revenue
Code, Treasury Regulations and any other
applicable law.
Series Account - [The FutureFunds Series II Account], a
separate investment account established
by Great-West Life & Annuity Insurance
Company under Colorado law.
Surrender - a lump-sum payment of the entire
Participant Annuity Account Value as
provided for in the Plan other than as
an In-Service Withdrawal.
Transfer - amounts moved from any Sub-Account to
another Sub-Account or outside the Group
Annuity Contract to another Plan
investment vehicle, in accordance with
Plan provisions and the provisions of
the Contract.
Valuation Date - the date on which an Accumulation Unit
Value and an Annuity Unit Value is
determined.
Valuation Period - the period between the ending of two
successive Valuation Dates.
Variable Account - the portion of the Group Annuity
Contract
4.
<PAGE>
providing Variable Sub-Accounts each
having its own Accumulation Unit and
Annuity Unit Value. All monies invested
in the Variable Account are held in the
Series Account, a separate investment
account.
Variable Account Value - the sum of the values of the Variable
Sub-Accounts credited to a Participant
under his Participant Annuity Account.
Variable Sub-Account - a sub-division of the Variable Account.
Each Variable Sub-Account has its own
Accumulation Unit and Annuity Unit
Value.
Written Request - any request in written form,
satisfactory to the Company and received
by the Company at its Home Office, from
the Group Contractholder as required by
any provision of the Group Annuity
Contract. A form or direction in lieu of
the Written Request may be accepted by
the Company in its sole discretion.
5.
<PAGE>
ARTICLE II
OWNERSHIP PROVISIONS
2.1 Ownership of Series Account
The Company has absolute ownership of the assets of the Series Account.
All monies invested in the Series Account, however, are held separate and
apart from the Company's general assets. The assets of such separate
account which are equal to the reserves and other Contract liabilities with
respect to such account (e.g. the Participant Annuity Account invested in
the Variable Account) shall not be chargeable with liabilities arising out
of any other Company business.
2.2 Ownership of Group Annuity Contract
The Group Contractholder is the owner of the Group Annuity Contract for the
benefit of the Participants.
2.3 Participant Annuity Account Value
Each Participant for whom a Participant Annuity Account is established and
for whom Deposits have been received by the Company owns his Participant
Annuity Account Value subject to the vesting provisions of the Plan.
2.4 Transfer and Assignment
The interest of the Group Contractholder in this Group Annuity Contract may
not be transferred, sold, assigned, pledged, charged, encumbered or in any
way alienated.
To the extent permitted by law, no proceeds or payments under the Group
Annuity Contract will be subject to the claims of creditors of or legal
process against the Group Contractholder.
To the extent permitted by law no interest of a Participant or Beneficiary
in this Group Annuity Contract may be assigned, charged, attached,
anticipated, given as security or otherwise alienated, and no such interest
shall be subject to execution, seizure or other legal or equitable process.
To the extent permitted by law neither a Participant nor any Beneficiary
may commute or surrender any payment, benefit, or installment to which he
may become entitled by the terms of the Group Annuity Contract.
6.
<PAGE>
ARTICLE III
GENERAL PROVISIONS
3.1 The Group Annuity Contract
The Group Annuity Contract is issued by the Company to the Group
Contractholder.
3.2 Entire Contract
This Group Annuity Contract, application, tables, Guaranteed Sub-Account
Riders, if any, and any other rider issued in conjunction with this
Contract constitute the entire contract between the Group Contractholder
and the Company. A copy of the application is attached to the Group
Annuity Contract when issued to the Group Contractholder.
All statements in the application, in the absence of fraud, have been
accepted as representations and not as warranties.
The terms and provisions of the Plan shall not for any purpose be deemed to
form part of this Group Annuity Contract and shall not be binding upon the
Company. Notwithstanding the fact that the Company may have knowledge of
the terms of the Plan, the obligations of the Company shall be measured and
determined solely by the terms and provisions of this Group Annuity
Contract.
3.3 Modifications
After issue, modifications to the Group Annuity Contract under the Contract
Modification provisions become part of the Group Annuity Contract.
Only the President, a Vice-President, the Secretary or a person authorized
to sign for the Actuary of the Company can modify or waive any provisions
of the Group Annuity Contract.
3.4 Non-Participating
This Group Annuity Contract is non-participating. It is not eligible to
share in the Company's divisible surplus.
3.5 Beneficiary
Upon the death of the Participant the Company will make payment to the
designated Beneficiary of the Participant or other payee in accordance with
instructions from the Group Contractholder. All records of Beneficiary
designations and determinations as to the correctness and/or adequacy of
such designations are the sole responsibility of the Group Contractholder.
It is the sole responsibility of the Plan Administrator to monitor
compliance with the
7.
<PAGE>
Internal Revenue Code, as amended, when allowing the Participant to-make or
change Beneficiary designations in accordance with Plan provisions. The
Company will rely completely on the instructions of the Plan Administrator.
If the Participant dies and there is no designated surviving Beneficiary or
if the designation of Beneficiary is not adequately made, the Participant
Annuity Account will pass as required under Section 401(a), or other
applicable section, of the Internal Revenue Code of 1986, as amended.
3.6 Currency and Payment of Deposits
All amounts to be paid to or by the Company must be in the currency of the
United States of America. All Deposits to this Group Annuity Contract must
be made payable to the Company or its designated agent.
3.7 Age
If the age of the Participant or Payee has been misstated, the payments
established for him will be made on the basis of his correct age.
If payments were too large because of misstatement, the difference with
interest may be deducted by the Company from the next payment or payments.
If payments were too small, the difference with interest may be added by
the Company to the next payment.
3.8 Proof
The Company reserves the right to require satisfactory proof to establish
the age, continued life, or death of any person, the happening of any event
or contingency provided for under the Plan, or the designation of any
beneficiary before making any payment on the direction of the Group
Contractholder.
3.9 Plan Amendments and Changes in Procedure
The Group Contractholder shall, within thirty (30) days after the adoption
of an amendment to the Plan, send a copy of each such amendment to the
Company at its Home Office.
If the Group Contractholder adopts an amendment to the Plan or adopts any
change in its administrative procedures or policies which are unacceptable
to the Company, the Company reserves the right to adjust the interest rates
credited on the Guaranteed Certificate Fund Sub-Account Rider and the
expense charge provided under Section 5.5, prospectively.
3.10 Gender
Whenever a masculine pronoun is used it shall be deemed in all-instances
where appropriate to mean the feminine pronoun as well.
3.11 Representations
8.
<PAGE>
The Company shall be entitled to rely and act solely on the reports,
directions, proofs, notices, elections and other information furnished it
by the Group Contractholder or its agent, and such acts shall be conclusive
and binding as to all Participants and other persons or corporations
claiming interest hereunder.
3.12 Notice
Whenever any application, report, direction, request or election is made or
notice or proof given to the Company, it must be in writing and received by
the Company at its Home Office in Englewood, Colorado. An election shall
be in a form satisfactory to the Company and if made and accepted shall not
be subject to change or further election unless with the consent of the
Company. The Group Contractholder's actions will bind the Employer.
Notice given to the Group Contractholder is considered notice given to the
Employer.
3.13 Voting Rights
The Company will vote the shares of an Eligible Fund held in an Investment
Division of the Series Account.
3.14 Tax Consequences of Payments
Subject to the provisions of the Plan, the Participant, Annuitant, Payee or
Beneficiary, as the case may be, must determine the timing and amount of
any benefit payable to him. Nothing contained herein shall be construed to
be tax or legal advice and the Company assumes no responsibility or
liability for any damages or costs, including but not limited to taxes,
penalties, interest or attorney's fees incurred by the Plan, the Group
Contractholder, the Participant, the Alternate Payee, the Beneficiary, or
any other person arising out of any such determination.
9.
<PAGE>
ARTICLE IV
PURCHASE PROVISIONS
4.1 Commencement and Termination of Coverage
A person may commence coverage under the Group Annuity Contract when the
Plan's conditions for participation have been met and the Company has
received written notice from the Group Contractholder that such person has
been designated a Participant. The responsibility for such designation
will rest solely with the Group Contractholder.
Coverage of a Participant will commence as of the Participant Effective
Date and terminate upon a Surrender.
4.2 Deposits
Unless a Contract Termination Date has been declared, the Group
Contractholder shall promptly pay Deposits in cash for all Participants,
and will make all required Group Contractholder Deposits as well. Deposits
on behalf of a Participant will cease upon the his death, Annuity
Commencement Date, Surrender of the Participant Annuity Account, or
election to cease making Deposits to the Plan.
The-amount of Deposits to be paid by the Group Contractholder for any
Participant will be determined by the Participant's election and the terms
of the Plan.
The Group Contractholder will report the amount paid as Deposits on forms
acceptable to the Company. The Group Contractholder's report is conclusive
and binding on it and anyone claiming an interest under the Group Annuity
Contract. When the Group Contractholder's report does not coincide with
the Deposits received, the Group Contractholder must reconcile and correct
them. At its sole discretion, the Company may make an interim allocation
to any Variable or Guaranteed Sub-Account which allows for immediate
transfers. Such allocation will be effective until such time as the
Company receives from the Group Contractholder a report which coincides
with the Deposits received.
4.3 Allocation of Deposits
Deposits less Premium Tax, if any, will be allocated in the Participant
Annuity Account effective as of the later of date both the Written Request
of the Group Contractholder on behalf of the Participant and such Deposits
are received by the Company at its Home Office.
Deposits for the Participant will be allocated among any number of
currently offered Variable and Guaranteed Sub-Accounts in accordance with
the latest recorded Written Request of the Group Contractholder on behalf
of the Participant. In the event such
10.
<PAGE>
Written Request is, in the sole opinion of the Company, inadequate or
unsatisfactory then no allocation to any Variable or Guaranteed Sub-Account
will be made until a Written Request which is adequate and/or satisfactory
to the Company is received.
Notwithstanding the above the Company may at its sole discretion make an
interim allocation to any Variable or Guaranteed Sub-Account which allows
for immediate Transfers provided however, that if the Group Contractholder
has prior to the Group Annuity Contract Date, provided the Company with
written instructions which designate the Sub-Account to which Deposits
without adequate or satisfactory Written Requests, or Deposits which do not
coincide with the Group Contractholder's Report, are to be automatically
allocated then the Company will make such allocation upon receipt of such
Deposit. Such allocation will be effective until such time as a Written
Request which is adequate and/or satisfactory to the Company is received.
The Group Contractholder on behalf of the Participant may submit a Written
Request for a change in allocation of Deposits, at any time, provided such
change is permitted under the terms of the Plan.
A change of allocation will be effective upon the Company's receipt at its
Home Office of a Written Request unless a later date has been requested on
such Written Request. Such changes in allocation will be effective only for
Deposits which are received after the Company's receipt and recording of
such Written Request.
11.
<PAGE>
ARTICLE V
ACCOUNT VALUE PROVISIONS
5.1 Variable Account Value
The Variable Account Value for a Participant on any date during the
Accumulation Period will be the sum of the values of the Variable Sub-
Accounts of the Series Account held for the Participant.
The value of a Participant's interest in a Variable Sub-Account will be
determined by multiplying the number of the Participant's Accumulation
Units by the Accumulation Unit Value for that Variable Sub-Account.
5.2 Accumulation Unit
Deposits will be allocated as requested and applied as of the Valuation
Date coincident with the effective date described in Section 4.3, to
provide Accumulation Units of the selected Variable Sub-Accounts of the
Series Account.
The number of Accumulation Units credited for each Participant to a
Variable Sub-Account will be determined by dividing the amount of the
Deposits and Transfers then applied to such Variable Sub-Account by the
Accumulation Unit Value for that Variable Sub-Account on the Valuation Date
on which the Deposits were allocated and Transfers were made.
The number of Accumulation Units will not change because of a later change
in the Accumulation Unit Value, but the Accumulation Unit Value will vary
to reflect the investment experience of the Variable Sub-Account.
5.3 Accumulation Unit Value
The Accumulation Unit Value of a Variable Sub-Account on any Valuation Date
is equal to the Accumulation Unit Value of that Variable Sub-Account as of
the immediately preceding Valuation Date multiplied by the Net Investment
Factor for the Valuation Period ending on the Valuation Date on which the
Accumulation Unit Value is being determined.
The Accumulation Unit Value may increase, decrease, or remain unchanged as
a result of the investment experience of the Eligible Fund.
5.4 Annuity Unit Value
The Annuity Unit Value of any Variable Sub-Account on any Valuation Date is
equal to the Annuity Unit Value for the immediately preceding Valuation
Date multiplied by the net investment factor for that Variable Sub-Account
for the Valuation Period ending on
12.
<PAGE>
the Valuation Date on which the Annuity Unit Value is being determined, and
multiplying the result by a factor of .999905 to neutralize the assumed
investment rate of 3.5% per year used in the applicable Table for Variable
Dollar Method of Payment Options 1, 2, 3, and 4.
The Annuity Unit Value may increase, decrease or remain unchanged as a
result of the investment experience of the Eligible Fund.
5.5 Expense Charge
The Company will deduct an expense charge in the calculation of the net
investment factor. This expense charge may change periodically but for the
first three years after the Group Annuity Contract Date such charge will
not be more than 1.50 % per annum. One three hundred sixty-fifth of the
per annum charge is deducted daily. A copy of the company's current
Expense Charge Schedule is attached to the Group Annuity Contract.
5.6 Net Investment Factor
The Net Investment Factor for any Variable Sub-Account for any Valuation
Period is determined by dividing (A) by (B), and subtracting (C) from the
result where:
(A) is the net result of:
(1) the net asset value per share of the Eligible Fund shares held in
the Variable Sub-Account determined as of the end of the current
Valuation Period, plus
(2) the per share amount of any net dividend (or, if applicable, net
capital gain distributions) made by the Eligible Fund on shares
held in the Variable Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period, minus or plus
(3) a per unit charge or credit for any taxes incurred by or reserved
for in the Variable Sub-Account, which is determined by the
Company to have resulted from the investment operations of the
Variable Sub-Account.
(B) is the net result off
(1) the net asset value per share of the Eligible Fund shares held in
the Variable Sub-Account determined as of the end of the
immediately preceding Valuation Period, minus or plus,
(2) the per unit charge or credit for any taxes incurred by or
reserved for in the Variable Sub-Account for the immediately
preceding Valuation Period.
(C) is the expense charge.
The net investment factor may be greater than, less than, or equal to
one.
13.
<PAGE>
Therefore, the Accumulation Unit Value and the Annuity Unit Value may
increase, decrease or remain unchanged.
5.7 Guaranteed Account Value
The Guaranteed Account Value of a Participant Annuity Account on any date
during the Accumulation Period will be the sum of the values of the
Guaranteed Sub-Accounts credited to such Participant Annuity Account.
The Company may offer one or more Guaranteed Sub-Accounts into which
contributions will be deposited at the Written Request of the Participant.
5.8 Guaranteed Sub-Account Riders
The computation of the value of a Guaranteed Sub-Account is described in
greater detail in the attached Guaranteed Sub-Account Riders, if any.
5.9 Contract Maintenance Charge
On the first day of each calendar year a contract maintenance charge will
be declared by the Company and deducted from the Participant Annuity
Account. For the first three calendar years, including the calendar year
in which the Group Annuity Contract Date occurs, the contract maintenance
charge will not be more than $60. If a Participant Annuity Account is
established for a Participant after that date, the contract maintenance
charge will be deducted on the first day of the next quarter and will be
pro-rated for the year remaining. No refund of this charge will be made.
The deduction will be pro-rated among the Variable and Guaranteed Sub-
Accounts based upon their Variable and Guaranteed Account Values on the
date of deduction. Whenever a deduction for a contract maintenance charge
is to be made from a Variable Sub-Account, the Company will cancel
Accumulation Units having a total value equal to the amount of the
deduction. The Group Contractholder may elect to pay such expenses to the
Company separately. If such an election has been made, then the company
will bill the Group Contractholder for such expenses on the first day of
each calendar year and no charge will be made against the Variable and
Guaranteed Sub-Accounts unless payment is not received by the Company
within 60 days of such billing.
14.
<PAGE>
ARTICLE VI
TRANSFERS
6.1 Right to Transfer
The Group Contractholder may make Transfers by Written Request on behalf of
the Participant.
6.2 Transfer Terms
(A) When the Company requires it, the Group Contractholder on behalf of
the Participant will execute forms provided by the Company as
necessary to the requested transfer.
(B) No transfers are permitted after the Annuity Commencement Date.
(C) No transfers from the Guaranteed Certificate Fund may be made prior to
the Certificate Maturity Date, as defined in the Guaranteed
Certificate Fund Rider, if any. The amount available for transfer is
the value of that Certificate on its Maturity Date.
6.3 Transfers Within the Group Annuity Contract
(A) Subject to the provisions of Section 6.2, at any time prior to the
Annuity Commencement Date, the Group Contractholder on behalf of the
Participant may by Written Request transfer all or a portion of the
Participant Annuity Account Value within and between the Variable and
Guaranteed Sub-Accounts then offered under the Group Annuity Contract.
(B) If a Transfer under this Section is made within 30 days of the Annuity
Commencement Date, the Company may delay the Annuity Commencement Date
by 30 days, provided however, that upon notification by the Group
Contractholder that such 30 day delay will violate the provisions of
the plan or regulations pertaining to the Plan, the Company will
reduce the period of delay to one which will preclude such violation.
(C) If a Participant dies prior to the Annuity Commencement Date, a
Transfer under this Section may be made after the death of the
Participant by the Group Contractholder on behalf of the Payee to
effect the election or a Method of Payment.
6.4 Transfers To Investment Vehicles Outside the Contract
(A) At any time prior to the Annuity Commencement Date, the Group
Contractholder on behalf of the Participant may by Written Request
transfer all or a portion of the
15.
<PAGE>
Participant Annuity Account Value to an account currently offered by
another investment vehicle under the terms of the Plan.
(B) At any time prior to the Annuity Commencement Date, the Group
Contractholder on behalf of the Participant may by Written Request
transfer the entire Participant Annuity Account Value to an account
offered by investment vehicle under another plan which is eligible to
receive such Transfers under the Internal Revenue Code of 1986, as
amended.
(C) The Company will be responsible for meeting the effective date of any
Transfer under Section 6.4(A) or 6.4(B) but the effective date of the
establishment of an account of any transferred investment vehicle
outside the Contract will be the sole responsibility of such
transferee investment vehicle.
(D) If the amount of Transfers to investment vehicles outside the Group
Annuity contract for any calendar year exceeds 10% of the value of the
Guaranteed and Variable Sub-Accounts at the beginning of the calendar
year then such Transfers will be subject to any Termination Charge in
accordance with the provisions of Article XI of the Group Annuity
Contract.
6.5 Transfer To The Company
Amounts transferred to the Company shall be treated as Deposits under
Article IV of this Contract.
6.6 Non-Taxable Distribution
No amount transferred pursuant to these provisions will be treated as a
taxable distribution to the Participant.
16.
<PAGE>
ARTICLE VII
RETIREMENT
7.1 Retirement Provisions
If the Group Contractholder reports that a Participant has become eligible
for a retirement benefit in accordance with the provisions of the Plan, the
Company shall pay such benefit in accordance with the provisions of this
section.
On the Company's receipt of the Written Request at least 30 days before the
Annuity Commencement Date, the Group Contractholder on behalf of the
Participant, may, if permitted by the Plan:
(A) elect payment in one sum;
(B) elect or change a Method of Payment;
(C) elect or change the Participant's Annuity Commencement Date to any
future date which is not later than allowed under the terms of the
Plan. If any Annuity Commencement Date would be less than 30 days
from the date that the written request is received, the Company may
delay the Annuity Commencement Date elected by 30 days;
(D) elect payment of a portion of the retirement benefit in one sum and
the balance of such benefit to be paid under a Method of Payment.
The responsibility for determining whether or not an election or Method of
Payment is permitted by the Plan or federal regulations existing at the
time the Written Request is submitted, lies solely with the Plan
Administrator.
17.
<PAGE>
ARTICLE VIII
PROVISIONS RELATING TO AMOUNT PAYABLE ON DEATH, IN SERVICE WITHDRAWAL, AND
SURRENDER
8.1 Amount Payable On Death of Participant
If the Participant dies before the Annuity Commencement Date, the amount
payable on death will be the Participant Annuity Account Value, less
Premium Tax, if any.
The Beneficiary of an amount payable on death may elect that payment be
made under the Surrender provisions permitted by the Plan and the Internal
Revenue Code. It is the sole responsibility of the Plan Administrator to
ensure compliance with the required distribution rules of Section 401(a),
or other applicable section, of the Internal Revenue Code of 1986, as
amended, when allowing Beneficiary elections. The Company will rely
completely on the Plan Administrator's instructions. The election of the
Beneficiary must be made not later than sixty (60) days after the date the
Company receives adequate proof of the Participant's death. If no election
is made, payment will be made to the Beneficiary pursuant to the required
distribution rules of Section 401(a), or other applicable section, of the
Internal Revenue Code of 1986, as amended.
8.2 In Service Withdrawal
By Written Request the Group Contractholder may direct the Company to make
an In Service Withdrawal from the Participant Annuity Account payable to
the Participant. The In Service Withdrawal will take effect on the later
of the date elected and the date the Written Request is received at the
Home Office of the Company.
The Group Contractholder must designate in the Written Request the Variable
or Guaranteed Sub-Account(s), or a combination of them, from which the In
Service Withdrawal is to be made.
8.3 Amount Payable On In Service Withdrawal
The amount payable on In Service Withdrawal will be paid in one sum under
the In Service Withdrawal provisions equal to:
(A) all or any portion of the Participant's Annuity Account Value as
requested by the Group Contractholder, on behalf of the Participant,
in accordance with the terms of the Plan, less
(B) Premium Tax, if any, less
(C) Forfeiture, if any, as determined by the Plan Administrator in
accordance with the vesting schedule of the Plan.
18.
<PAGE>
8.4 Surrender
By Written Request the Group Contractholder may surrender the Participant
Annuity Account on behalf of the Participant. The Surrender will take
effect on the later of the date elected and the date the Written Request is
received at the Home Office of the Company. Instructions as to the
allocation of any Forfeiture as a result of such surrender must accompany
the Written Request. The responsibility for determining that such
instructions are in accordance with the provisions of the Plan lies solely
with the Plan Administrator.
8.5 Amount Payable On Surrender
If permitted by the Plan the amount payable on Surrender may either be
applied under the Methods of Payment provisions or paid in one sum under
the Surrender provisions equal to:
(A) the Participant Annuity Account Value as of the effective date of the
Surrender, less
(B) Premium Tax, if any, less
(C) Forfeiture, if any.
8.6 Payment On Death, In Service Withdrawal and Surrender
Payment under any of the provisions relating to Amount Payable on Death, In
Service Withdrawal, and Surrender must be made to the order of the Group
Contractholder on behalf of the Participant as directed in the Written
Request.
8.7 Establishment of Alternate Payee Account
In the event the Company receives a request for a payment in connection
with a Qualified Domestic Relations Order (QDRO) and the Group
Contractholder notifies the Company that the Plan does not permit immediate
distributions or in the event the Company is unable to obtain all necessary
information to make a distribution, pursuant to such order, then the
Company will establish a separate account on behalf of the Alternate Payee
named in such order.
19.
<PAGE>
ARTICLE IX
METHODS OF PAYMENT
9.1 Methods of Payment Provisions
One of the variable or fixed dollar Methods of Payment or a combination of
them may be elected under this Article, provided however that any Method of
Payment which is not in compliance with the provisions of the Plan may not
be elected.
The provision of Methods of Payment under the Group Annuity Contract is
neither intended to nor shall be construed as providing methods of payment
to a Participant which are not available in accordance with the provisions
of the Plan.
The Company will rely solely on the Plan Administrator's determination that
the amount and Method of Payment elected comply with the provisions of the
Plan and federal regulations existing at the time the Written Request is
submitted.
9.2 Amount To Be Applied
The amount to be applied under the methods of payment provision elected is
the Participant Annuity Account Value, less Premium Tax, if any, and
forfeitures under the Plan.
If a variable dollar method of payment is elected, the amount to be applied
is the Variable Account Value less any Premium Tax, if any and
forfeiture(s) as of the Annuity Commencement Date. The amounts paid may
vary from time to time depending upon the investment experience of the
Variable Sub-Accounts of the Series Account. The essential features as to
how the dollar amounts of these variable annuity values are determined are
explained below in the "Variable Dollar Method of Payment" section.
If a fixed dollar method of payment is elected, the amount to be applied is
the Guaranteed Account Value less any Premium Tax, if any, and
forfeiture(s), as of the Annuity Commencement Date.
If the Participant or Beneficiary elects to apply any or all of the
Guaranteed Account Value to a variable dollar method of payment, or any or
all of the Variable Account Value to a fixed dollar method of payment, a
Transfer(s) must be made pursuant to Section 6.3, prior to the Annuity
Commencement Date. The Transfer(s) must comply with the provisions of
Article VI of the Contract.
9.3 Variable Dollar Method of Payment
(A) Amount of First Monthly Payment
The first monthly payment under a variable dollar method of payment
will be
20.
<PAGE>
based on the Variable Account Value credited to the Participant
Annuity Account on the 5th Valuation Date preceding the Annuity
Commencement Date and will be determined by applying the appropriate
rate from the applicable table to the amount applied under the method
of payment. The first monthly payment will be the sum of the variable
dollar annuity payments for each Variable Sub-Account.
(B) Annuity Units
The number of Annuity Units for each Variable Sub-Account to be
credited to the Participant Annuity Account will be determined by
dividing the portion of first monthly payment to be taken from such
sub-account by the sub-account's Annuity Unit Value on the 5th
Valuation Date preceding the date the first payment is due for which
the number of Annuity Units is being computed. The number of Annuity
Units for a Variable Sub-Account remains fixed during the Annuity
Payment Period.
(C) Amount of Monthly Payments After the First
Monthly payments after the first under a variable dollar method of
payment option will vary in amount from time to time depending upon
the investment experience of the Variable Sub-Accounts of the Series
Account. After the first monthly payment, the annuity unit value of
each subsequent monthly payment will increase, decrease, or remain
unchanged depending upon the investment experience of the Variable
Sub-Accounts of the Series Account, as described in the next
paragraph.
The dollar amount of each variable dollar annuity payment to the
Participant or Payee after the first for each Variable Sub-Account is
determined by multiplying (a) the number of Sub-Account Annuity Units
credited to the Participant Annuity Account by (b) the Sub-Account
Annuity Unit Value on the [5th] Valuation Date preceding the date the
annuity payment is due. The total dollar amount of each variable
dollar annuity payment will be the sum of the variable dollar annuity
payments for each Variable Sub-Account.
(D) Variable Dollar Methods of Payment:
Option 1: Variable Life Annuity with Guaranteed Period
The Company will pay a monthly payment for the guaranteed Annuity
Payment Period elected. Payments will continue for the lifetime of the
Annuitant. The guaranteed Annuity Payment Period elected may be 5, 10,
15 or 20 years. The provision on Settlement applies to amounts payable
after the death of the Annuitant. The Table A in effect at the
Participant's Annuity Commencement Date will be applicable to this
Method of Payment.
Option 2: Variable Life Annuity
The Company will pay a monthly payment during the Annuitant's
lifetime. The
21.
<PAGE>
Table A in effect at the Participant's Annuity Commencement Date will
applicable to this Method of Payment.
Option 3: Joint and One-Half Survivor Variable Annuity
A joint and one-half survivor variable annuity provides a variable
monthly payment to an Annuitant for his lifetime; thereafter, and upon
receipt by the Company of adequate proof of the Annuitant's death,
one-half of the variable payment continues to a designated Payee, if
living, and terminates upon his death. The Table B in effect at the
Participant's Annuity Commencement Date will be applicable to this
Method of Payment.
Option 4: Any Other Form
The Company will pay any other form of variable annuity which is
acceptable to it, provided for in the Plan, and which has been filed
and approved by the applicable state insurance authority.
9.4 Fixed Dollar Method of Payment
(A) Amount of Payment
Payments under a fixed dollar method of payment option are guaranteed
by the Company as to dollar amount throughout the Annuity Payment
Period.
The amount of payment under any fixed dollar method of payment option
will be determined by applying the Company's then current non-
participating group single premium rates for this class of group
annuity contracts to the amount applied under the Option. Those
current rates will not be less than the rate obtained from the table
which is applicable to the elected Method of Payment.
(B) Fixed Dollar Method of Payment Options:
Option 1: Income of Specified Amount
The Company will pay an income, at 12-, 6-, 3-, or 1-month intervals,
of the amount elected by the Annuitant for an Annuity Payment Period
of not less than 36 months nor more than 240 months. The provision on
Settlement applies to amounts payable after the death of the
Annuitant. The Table C in effect at the Participant's Annuity
Commencement Date will be applicable to this Method of Payment.
Option 2: Income for a Specified Period
The Company will pay an income, at 12-, 6-, 3-, or 1-month intervals,
for the number of years elected by the Annuitant for an Annuity
Payment Period of not less than 36 months nor more than 240 months.
The provision on Settlement applies to amounts payable after the death
of the Annuitant. The Table C in effect
22.
<PAGE>
at the Participant's Annuity Commencement Date will be applicable to
this Method of Payment.
Option 3: Fixed Life Annuity with Guaranteed Period
The Company will pay a monthly payment for the lifetime of the
Annuitant but in no event for less than the Guaranteed Annuity Payment
Period. The provision on Settlement applies to amounts payable after
the death of the Annuitant. The Table A in effect at the
Participant's Annuity Commencement Date will be applicable to this
Method of Payment.
The guaranteed Annuity Payment Period elected may be 5, 10, 15 or 20
years, or may be a period referred to as "installment refund". Under
the installment refund period, guaranteed annuity payments will be
made until the total of the payments made equals the amount applied.
Option 4: Fixed Life Annuity
The Company will pay a monthly payment during the Annuitant's
lifetime. The Table A in effect at the Participant's Annuity
Commencement Date will be applicable to this Method of Payment.
Option 5: Joint and One-Half Survivor Fixed Annuity
A joint and one-half survivor fixed annuity provides a fixed monthly
payment to an Annuitant for his lifetime; thereafter, and upon receipt
by the Company of adequate proof of the Annuitant's death, one-half of
the fixed payment continues to a designated Payee, if living, and
terminates upon his death. Table B in effect at the Participant's
Annuity Commencement Date will be applicable to this Method of
Payment.
Option 6: Any Other Form:
The Company will pay any other form of Fixed Annuity which is
acceptable to it, provided for in the Plan, and which has been filed
with and approved by the applicable state insurance authority.
9.5 How to Elect a Method of Payment
The Written Request of the Group Contractholder on behalf of the
Participant or Payee is required to elect, or change the election of, a
Method of Payment option and must be received by the Company at least 30
days prior to the Annuity Commencement Date, or, if the Participant dies
prior to the Annuity Commencement Date, within 60 days of the date the
Company receives adequate proof of the Participant's death. Once payment
has commenced, a change in Method of Payment Option may only be made if
acceptable to the Company.
9.6 Availability of Options
23.
<PAGE>
If any payment to be made under the elected Method of Payment will be less
than $50, the Company may make the payments in the most frequent interval
which produces a payment of at least $50.
The minimum amount that may be applied under a variable or fixed dollar
Method of Payment is $3,500. If the amount is less than $3,500, the
Company may pay it in one sum, if such a payment is permitted by the Plan.
9.7 Settlement
If the Payee has died and has received payments or was to receive payments
which had not yet commenced under Variable Dollar Method of Payment Option
1 (Variable Life Annuity with a Guaranteed Period) or under Fixed Dollar
Method of Payment Option 1 (Income of Specified Amount), Option 2 (Income
for a Specified Period), or Option 3 (Fixed Life Annuity with Guaranteed
Period), then any remaining amounts payable under the option elected will
be paid to the Beneficiary or designated Payee subject to Section 3.4 of
the Group Annuity Contract.
24.
<PAGE>
ARTICLE X
MODIFICATIONS
10.1 Contract Modification
This Group Annuity Contract may be modified at any time by written
agreement between the Company and the Group Contractholder. No such
modification will, without the written consent of the affected
Participants, affect the terms, provisions, or conditions of this Group
Annuity Contract which are or may be applicable to Deposits paid for
Participants prior to the date of such modification.
However, the Company may at any time and without the consent of the Group
Contractholder or any Participant or other person, but upon 30 days written
notice to the Group Contractholder, modify this Group Annuity Contract in
any respect to conform it to changes in tax or other law, including
applicable regulations or rulings.
10.2 Modification of Tables
Tables A, B, and C are guaranteed for three years commencing on the Group
Annuity Contract Date. The Company may at any time thereafter and without
the consent of the Group Contractholder or any Participant or other person,
but upon 30 days written notice to the Group Contractholder, modify any or
all of Tables A, B, and C.
Provided, however, that if a Method of Payment Option is elected under the
provisions of Sections 9.3 or 9.4 of the Group Annuity Contract, the
applicable table will be the Table A, B or C in effect on the Participant's
Annuity Commencement Date.
10.3 Modification of Guaranteed Sub-Account Riders, If Any
Any Guaranteed Sub-Account Rider may be modified at any time by written
agreement between the Company and the Group Contractholder. No such
modification will, without the written consent of affected Participants,
affect the terms, provisions, or conditions of the riders which are or may
be applicable to Deposits paid for Participants prior to the date of such
modification.
Provided however:
(A) if the Company ceases to offer the Guaranteed Certificate Fund 30 days
written notice will be given to a Participant, no new Deposits will be
allocated and no new Certificates will be issued after the cessation
date. Amounts allocated to Certificates prior to such date will
continue to receive the Credited Interest Rate until the Certificate
Maturity Date.
25.
<PAGE>
(B) if the Company ceases to offer the Daily Interest Guarantee Fund then
the provisions of the Daily Interest Guarantee Fund Rider relating to
the cessation of such offering will apply.
10.4 Modification of Variable Sub-Accounts
Notwithstanding the other contract modification provisions, the Company may
offer new or cease offering existing Variable Sub-Accounts. No such
modification shall affect the terms, provisions or conditions which are or
may be applicable to Deposits previously paid to any Variable Sub-Account
which is no longer offered by the Company provided, however, if the Company
ceases to offer a variable Sub-Account [30] days notice will be given to a
Participant. The Group Contractholder on behalf of the Participant must
then transfer the value of the Variable Sub-Account to another Variable
Sub-Account then offered by the Company. If the Group Contractholder on
behalf of the Participant fails to make such Transfer then the company at
its sole discretion will make an allocation to any Variable or Guaranteed
Sub-Account which allows for immediate Transfers. Such allocation will
become effective until such time as a Written Request, for a different
allocation, which is adequate and/or satisfactory to the Company is
received.
26.
<PAGE>
ARTICLE XI
CONTRACT TERMINATION
11.1 Contract Termination Date
Either party to the Group Annuity Contract may upon thirty (30) days
advance written notice to the other party declare a "Contract Termination
Date", which shall be any date on or after the expiration of the thirty
(30) day notification period, provided however that the Company may
declare a Contract Termination Date only if:
(A) the Group Contractholder adopts an amendment to the Plan or operates
the Plan in a manner which is unacceptable to the Company, or
(B) the Group Contractholder fails to comply with any provision contained
in this Group Annuity Contract, or
(C) the Plan fails to qualify or becomes disqualified under Internal
Revenue Code Section 401 (a), as amended, or
(D) the total amount of Deposits received by the Company in the preceding
twelve months is less than $25,000,
(E) the sum of all Participant Annuity Account Values falls below $25,000,
or
(F) the Group Contractholder fails to make Deposits which have been
deducted from Participants' paychecks within 90 days of the date on
which such deduction was made, or
(G) Transfers to Investment Vehicles outside the Group Annuity Contract
exceed the limitations provided under Section 6.4(D)
11.2 Procedures at Contract Termination Date
The provisions of this section will apply to Contract Termination for any
reason including termination of the Plan.
After the Contract Termination Date has been declared, no benefit payment
will commence, no Transfers will be made, no method of payment option will
be elected by a Participant, and no Deposits will be accepted under the
provision of the Group Annuity Contract.
If a Contract Termination Date has been declared and them are outstanding
expense charges as set forth in Articles V and VIII of the Group Annuity
Contract, the Company will on the Contract Termination Date debit each
Sub-Account with its share of the amount of outstanding expenses. No later
than thirty (30) days after the Contract
27.
<PAGE>
Termination Date and the Company has received payment of the Market Value
Adjustment and the Contract Termination Charge, the Company will pay to
any one person, corporation or other entity named by the Group
Contractholder one sum equal to the value of all monies held in Guaranteed
and Variable Sub-Accounts.
Notwithstanding the above, the Company, at its sole discretion, may pay to
any one person, corporation or other entity named by the Group
Contractholder one sum equal to:
(a) the value of all monies held in the Variable Sub-Account; and
(b) the Market Value of all monies held in the Guaranteed Certificate
Fund relating to the Group Annuity Contract, less
(c) the Contract Termination Charge, if any.
11.3 Market Value
The Market Value of the Guaranteed Certificate Fund on any date is the sum
of the market values of each Certificate of the Guaranteed Certificate
Fund.
The Market Value of any such Certificate will be equal to the value of the
Certificate on the Contract Termination Date declared less the Market
Value Adjustment.
The value of each Guaranteed Certificate on the Contract Termination Date
will be determined by adding Guaranteed Certificate Deposits, Credited
Interest, and Transfers from other Guaranteed Sub-Accounts, and from
Variable Sub-Accounts and subtracting In-Service Withdrawals, Surrenders,
Amounts Payable on Death, Amounts Applied under a Method of Payment
Option, Contract Maintenance Charges, and Premium Tax, if any.
11.4 Market Value Adjustment
The Market Value Adjustment is equal to the value of the Certificate on
the Contract Termination Date declared multiplied by the Market Value
Adjustment Factor.
11.5 Market Value Adjustment Factor
The Market Value Adjustment factor is equal to (a) plus (b), multiplied by
(c) where:
(a) is the difference between
(1) the level equivalent of the Credited Interest Rate on a
Certificate currently offered by the Company to a plan with
the same characteristics as the Plan and which has the same
term as the original term of the Certificate Terminated, and
(2) the level equivalent of the Credited Interest Rate of the
Certificate being terminated.
(b) is .01
28.
<PAGE>
(c) is the remaining number of months to the Certificate Maturity
Date of the Certificate being terminated divided by twelve (12).
For purposes of this section "the level equivalent of the Credited
Interest Rate" means the effective interest rate over the term of each
Certificate.
If (a) plus (b) is not positive then the Market Value Adjustment Factor
will be equal to 0 and there will be no Market Value Adjustment.
11.6 Contract Termination Charge
A Contract Termination Charge is applicable if a Contract Termination Date
has been declared subsequent to the nine month period after the Group
Annuity Contract Date and prior to the end of the seven year period
commencing on such date. Such charge is not applicable if the sum of
Participant Annuity Account values exceeds $2,000,000.
The Contract Termination Charge is equal to the following percentage of
the sum of the values of the Guaranteed Account and the Variable Account
on the Contract Termination Date plus the value of all distributions
characterized as plan loans to a Participant over the twelve month period:
<TABLE>
<CAPTION>
Number of Years Elapsed
Since Group Annuity
Contract Date Percentage
----------------------- --------------
<S> <C>
Less than 1 7%
1 but less than 2 6%
2 but less than 3 5%
3 but less than 4 4%
4 but less than 5 3%
5 but less than 6 2%
6 but less than 7 1%
</TABLE>
29.
<PAGE>
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Inspection of Records
The Company may inspect the Group Contractholder's records which are
pertinent to the operation of the Plan and the Group Annuity Contract.
Such inspection can take place while the Group Annuity Contract is in
force and during the first year after it is terminated.
12.2 Subsidiaries and Affiliates
The Company may approve the inclusion of subsidiaries and affiliates under
the Group Annuity Contract if such subsidiaries and affiliates under the
Group Annuity Contract if such subsidiaries or affiliates become covered
under the Plan.
30.
<PAGE>
TABLE A - Life Annuity
------
Monthly Payment for Each $1,000
of Participant Annuity Account Value
<TABLE>
<CAPTION>
With Guaranteed Period
-----------------------------------
Without
Age of Guaranteed
Payee Period 5 Years 10 Years 15 Years 20 Years
----- ------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
50 3.83 3.83 3.82 3.80 3.78
55 4.13 4.12 4.10 4.07 4.02
60 4.52 4.51 4.48 4.41 4.31
65 5.06 5.04 4.97 4.84 4.64
70 5.82 5.77 5.61 5.33 4.94
75 6.93 6.80 6.41 5.82 5.19
</TABLE>
If payments commence on any other date than the exact age of the Payee as shown
above, the amount of the monthly payment shall be determined by the Company on
the actuarial basis used by it in determining the above amounts.
31.
<PAGE>
TABLE B - Joint and One-Half Survivor Annuity
Monthly Payment for Each $1,000
of Participant Annuity Account Value
<TABLE>
<CAPTION>
Age of If Designated Payee Is Age
------------------------------------------------
Annuitant 50 55 60 65 70 75
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
50 3.72 3.75 3.78 3.80 3.81 3.82
55 3.92 3.98 4.02 4.06 4.08 4.10
60 4.16 4.25 4.33 4.39 4.44 4.47
65 4.45 4.58 4.70 4.81 4.89 4.95
70 4.79 4.96 5.14 5.32 5.47 5.59
75 5.18 5.42 5.67 5.94 6.20 6.42
</TABLE>
If payments commence on any other date than the exact age of the Annuitant or
designated Payee as shown above, the amount of the monthly payment shall be
determined by the Company on the actuarial basis used by it in determining the
above amounts.
32.
<PAGE>
TABLE C - Income of Specified Amount
- Income of a Specified Period
Monthly Payment for Each $1,000
of Participant Annuity Account Value
<TABLE>
<CAPTION>
Years Payment
------- -------
<S> <C>
3 28.61
4 21.82
5 17.75
6 15.04
7 13.10
8 11.66
9 10.54
10 9.63
11 8.90
12 8.30
13 7.78
14 7.34
15 6.96
16 6.63
17 6.34
18 6.08
19 5.85
20 5.64
</TABLE>
To determine the payment for other frequencies of payment, multiply the above
monthly payment by the following factors:
<TABLE>
<CAPTION>
Factor
--------
<S> <C>
Quarterly payment 2.99
Semi-annual payment 5.96
Annual payment 11.81
</TABLE>
If payments are for an amount or duration different than that outlined above,
the Company will determine the proper amount or duration using the actuarial
basis used to determine the above Table.
33.
<PAGE>
GUARANTEED CERTIFICATE FUND
GUARANTEED SUB-ACCOUNT RIDER
ATTACHED TO AND FORMING PART OF THE GROUP ANNUITY CONTRACT
The Guaranteed Certificate Fund is a Guaranteed Sub-Account, whereby credited
interest rates, are credited to Deposits held for varying Interest Guarantee
Periods. With the consent of the Group Contractholder, the Company may offer
Certificates to the Participant who may by Written Request allocate any Deposit
to any one Certificate. The Participant may allocate his Deposits only to those
Certificates currently being offered by the Company.
If the Participant allocates Deposits to Certificates not currently offered by
the Company, the Company will: allocate such Deposits to any Variable or
Guaranteed Sub-Account which allows for immediate transfers.
DEFINITIONS
- -----------
Certificate - represents the amount deposited into the
Guaranteed Certificate Fund under each
Interest Guarantee Period, Term and
credited interest rate. Each Certificate
has its own credited interest rate and
Term.
Term - the duration of the Certificate expressed
in months, which will consist of two
periods:
a) an initial Window Period during which
Deposits are received. The duration of
the Window Period will be specified by
the Company.
b) a Holding Period which begins on the day
after the end of the Window Period and
ends on the Certificate Maturity Date.
The Terms available may be limited by the
Company.
Certificate Maturity Date - the last day of the Term.
Interest Guarantee Period - the period from the date of the Deposit to
the Certificate Maturity Date.
Guaranteed Certificate Fund Rider
Form No. GCFR-492
34.
<PAGE>
GUARANTEED CERTIFICATE FUND SUB-ACCOUNT RIDER (Continued)
- ---------------------------------------------
Interest Crediting and Selection of Method of Payment
- -----------------------------------------------------
The credited interest rate on an annual effective basis will be compounded daily
and will equal the annual effective rate declared by the Company. A Deposit to
the Guaranteed Certificate Fund until the Certificate Maturity Date will earn a
credited interest rate for the Certificate's Interest Guarantee Period.
If the Participant dies or if the Group Contractholder determines that the
Participant is eligible for a distribution under the provisions of the Plan,
then upon Written Request from the Group Contractholder on behalf of the
Participant, amounts deposited into the Guaranteed Certificate Fund may be paid
in one sum or applied to a Method of Payment pursuant to Article IX of this
Group Annuity Contract prior to the Certificate Maturity Date. Such amounts
will receive the credited interest rate from the date of Deposit to the date the
amount is paid or applied to the elected Method of Payment. No transfers from
the Guaranteed Certificate Fund may be made prior to the Certificate Maturity
Date.
If the Participant has not qualified for a distributable event in accordance
with the provisions of the Plan, amounts deposited into the Guaranteed
Certificate Fund must remain in the Certificate until the Certificate Maturity
Date. Thus, no Method of Payment Option may be elected, and no distributions or
Transfers will be permitted prior to the Maturity Date of each respective
Certificate.
In the event of Contract Termination under Article XI of the Group Annuity
Contract, the provisions of such article will apply.
Certificate Maturity
- --------------------
Prior to the Certificate Maturity Date, the Company will offer a Guaranteed or
Variable Sub-Account into which the value of the Certificate may be deposited on
its Maturity Date. The Sub-Account so offered may be either the Guaranteed
Certificate Fund or another Sub-Account.
If the Guaranteed Certificate Fund is offered, the value of the Certificate on
its Maturity Date may upon Written Request be deposited to a new Certificate
which has its own interest rate and Term. The Credited Interest Rate of this
new Certificate may be higher or lower than the Credited Interest Rate of any
other Certificate or Deposit.
If another Sub-Account is offered, the value of the Certificate on its Maturity
Date may upon Written Request be deposited into that Sub-Account. The Credited
Interest Rate of this Deposit may be higher or lower than the Credited Interest
Rate of any other Deposit.
Guaranteed Certificate Fund Rider
Form No. GCFR-492
35.
<PAGE>
GUARANTEED CERTIFICATE FUND SUB-ACCOUNT RIDER (Continued)
- ---------------------------------------------
The Group Contractholder however on behalf of the Participant may elect by
Written Request to Transfer the value of the Certificate on its Maturity Date.
If the Group Contractholder fails to make such request then the Company at its
sole discretion will make an allocation to any variable or Guaranteed Sub-
Account which allows for immediate Transfers. Such allocation will become
effective until such time as a Written Request, for a different allocation is
received.
Transfers
- ---------
The terms of Article VI of the Contract will apply to any Transfer to or from
the Guaranteed Certificate Fund.
Value of Guaranteed Certificate Fund
- ------------------------------------
The value of the Guaranteed Certificate Fund of the Participant will be
determined by adding his/her Guaranteed Certificate Fund Sub-Account Deposits
and Credited Interest, and subtracting his/her In-Service Withdrawals,
Surrenders, Amounts Payable on Death, Amounts Applied Under a Method of Payment
Option, Transfers, Contract Maintenance Charges, and Premium Tax, if any.
Guaranteed Certificate Fund Rider
Form No. GCFR-492
36.
<PAGE>
EXPENSE CHARGE SCHEDULE
<TABLE>
<CAPTION>
Sum of Participant Annuity Section 5.5
Account Values* Expense Charge
----------------------------------- --------------------
<S> <C>
less than 1,000,000 1.50 %
1,000,000 but less than 2,500,000 1.25 %
2,500,000 but less than 5,000,000 1.00 %
5,000,000 but less than 10,000,000 0.75 %
10,000,000 but less than 15,000,000 0.65 %
15,000,000 but less than 25,000,000 0.50 %
25,000,000 or more 0.25 %
</TABLE>
* This sum is reviewed once annually to determine the appropriate range.
Expense Charge Schedule
Form No. ECS-492
37.
<PAGE>
CALIFORNIA LIFE INSURANCE
GUARANTY ASSOCIATION ACT
NOTICE CONCERNING GENERAL PURPOSES
AND COVERAGE LIMITATIONS
Residents of California who purchase life insurance and annuities should
know that the insurance companies licensed in this state to write these types of
insurance are members of the California Life Insurance (Guaranty Association.
The purpose of this Association is to assure that policyholders will be
protected, within limits, in the unlikely event that a member insurer becomes
financially unable to meet its obligations. If this should happen, the Guaranty
Association will assess its other member insurance companies for the money to
pay the claims of insured persons who live in this state and, in some cases, to
keep coverage in force. The valuable extra protection provided by these
insurers through the Guaranty Association is not unlimited, however, as noted
below.
The California Life Insurance Guaranty Association may not provide coverage
for this policy. If coverage is provided, it may be subject to substantial
limitations or exclusions, and require continued residency in California. You
should not rely on coverage by the California Life Insurance Guaranty
Association in selecting an insurance company or in selecting an insurance
policy.
Coverage is NOT provided for your policy or any portion of it that is not
---
guaranteed by the insurer or for which you have assumed the risk, such as a
variable contract sold by prospectus. Nor is coverage provided for unallocated
annuity contracts.
Insurance companies or their agents are required by law to give or send you
this notice. However, insurance companies and their agents are prohibited by
law from using the existence of the guaranty association to induce you to
purchase any kind of insurance policy.
Policyholders with additional questions may contact:
The California Life Insurance Guaranty Association
P.O. Box 70069 Los Angeles, CO 90070
California Department of Insurance
100 Van Ness Avenue - 17th Floor
San Francisco, California 94102
38.
<PAGE>
California Notice
The state law that provides for this safety-net coverage is called the
California Life Insurance Guaranty Association Act. Below is a brief summary of
this law's coverages, exclusions and limits. This summary does not cover all
provisions of the law; nor does it in any way change anyone's rights or
obligations under the Act or the rights or obligations of the Association.
COVERAGE
Generally, individuals will be protected by the California Life Insurance
Guaranty Association if they live in this state and hold a life insurance
contract, or an annuity, or if they are insured under a group insurance
contract, issued by a member insurer. The beneficiaries, payees or assignees of
insured persons are protected as well even if they live in another state.
EXCLUSIONS FROM COVERAGE
However, persons holding such policies are not protected by this Association if:
. they are eligible for protection under the laws of another state (this
may occur when the insolvent insurer was incorporated in another state
whose guaranty association protects insureds who live outside that
state);
. the insurer was not authorized to do business in this state;
. their policy was issued by a charitable organization, a fraternal
benefit society, a mandatory state pooling plan, a mutual assessment
company, an insurance exchange, or a grants and annuities society
holding a certificate of authority under Section 11520.
The Association also does not provide coverage for:
. any policy or portion of a policy which is not guaranteed by the
insurer or for which the individual has assumed the risk, such as a
variable contract sold by prospectus;
. any policy of reinsurance (unless an assumption certificate was
issued);
. interest rate yields that exceed an average rate;
. dividends;
. credits given in connection with the administration of a policy by a
group contractholder;
. unallocated annuity contracts;
. any plan or program of an employer or association that provides life
or annuity benefits to its employees or members to the extent the plan
is self-funded or uninsured.
California Notice
LIMITS ON AMOUNT OF COVERAGE
The act also limits the amount the Association is obligated to pay out: The
Association cannot pay more than 80% of what the insurance company would owe
under a policy or contract. Also,
39.
<PAGE>
for any one insured life, the Association will. pay a maximum of $250,000-no
matter how many policies and contracts there were with the same company, even if
they provided different types of coverages. Within this overall $250,000 limit,
the Association will not pay more than $100,000 in cash surrender values,
$100,000 in present value of annuities, or $250,000 in life insurance death
benefits - again, no matter how many policies and contracts there were with the
same company, and no matter how many different types of coverages.
40.
<PAGE>
Tribune Media Services
435 N. Michigan Ave., Suite 1500
Chicago, Illinois 60611
312-222-8650
TRIBUNE MEDIA SERVICES TELEVISION LISTINGS AGREEMENT
This Agreement is made this June 1, 1998, between Tribune Media Services,
Inc., (TMS), a Delaware corporation d/b/a TMS TV Listings and Teleworld, Inc.
(Publisher). TMS TV Listings herein grants to Publisher the non-exclusive
right and privilege of using TMS television program listings information
within its "Product" (as defined in Addendum 1) located at 894 Ross Drive,
Suite 100, Sunnyvale, California 94089 on terms and conditions set forth
herein.
1. TMS shall provide to Publisher [*] television programming listings
as defined in Addendum 2. The service shall be delivered to Publisher over
communication equipment owned by Publisher at Publisher's premises.
2. (a) Publisher shall pay to TMS [*] fees as described in
Addendum 4 for services provided hereunder. TMS will bill Publisher [*]
and invoices shall be payable on or before the last day of the following
[*].
3. Publisher shall pay all sums accruing in each [*] on or before the
last day of the following [*]. Should it become necessary to institute
collection proceedings, Publisher agrees to pay all costs, including
reasonable attorneys' fees, in the event suit is filed. Publisher consents to
the personal jurisdiction of the courts of Illinois for all purposes and
consents to venue in the courts of Cook County, Illinois. Any objections as to
jurisdiction and venue being expressly waived.
4. This Agreement shall continue for eighteen (18) months from June 1,
1998, and shall renew itself for further terms of one (1) year each unless
either party notifies the other by certified letter received by Publisher at
894 Ross Drive, Suite 100, Sunnyvale, California 94089 or by TMS at Tribune
Media Services, Inc., 435 N. Michigan Avenue, Suite 1500, Chicago, Illinois
60611 at least [*] before the end of the then current term of its desire to
terminate, in which event this agreement shall terminate at the end of the then
current term. TMS may also terminate this agreement if any invoice specified in
Clause Two above is not paid within [*] following receipt by Publisher.
Notwithstanding the above, Publisher shall have the right to terminate this
Agreement upon [*] notice to TMS if TMS fails to perform the services it has
agreed to perform as described in Addendum 2 and if such failure continues for
[*] days after Publisher gives TMS notice of the failure or if TMS fails to
deliver the Licensed Data for [*]. In the event TMS fails to deliver the agreed
upon services (as described in Addendum 2) TMS shall remit to Publisher an
amount equal to the [*] multiplied by [*]. Publisher shall pay [*] of [*]
license fees up to [*].
5. Publisher agrees to review all TMS television program listing
transmissions as described in Addendum 2 and notify TMS of any mistakes,
errors or omissions in data. TMS
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
shall not be liable for any loss or damage arising to Publisher by reason of
nondelivery, delay or interruption in delivery of data due to circumstances
beyond the control of TMS, which shall include without limitation, failure of
communication equipment. IN NO EVENT SHALL TMS' LIABILITY TO PUBLISHER OR ANY
OTHER PARTY FOR MISTAKES, ERRORS, OR OMISSIONS IN DATA, FOR NONDELIVERY OR
LATE DELIVERY OF DATA, EXCEED THE AMOUNT PAYABLE BY PUBLISHER TO TMS FOR THE
DATA IN WHICH THE MISTAKE, ERROR, OR OMISSION OCCURRED, OR FOR THE DATA WHICH
WAS NOT DELIVERED OR WAS NOT DELIVERED ON A TIMELY BASIS. IN NO EVENT SHALL
TMS OR PUBLISHER BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES
OR LOST-PROFIT DAMAGES.
6. TMS and Publisher (each, "the Indemnifying Party") shall indemnify
and hold the other party and its Affiliates (as defined in this Agreement) and
their respective employees, officers and directors (the Indemnified
Party(ies)) harmless from and against any and all claims, damages, costs,
expenses and other liabilities (whether under a theory of strict liability or
otherwise) by third parties incurred by, or threatened, imposed or filed
against, any Indemnified Party (including, without limitation, (a) costs of
investigation and defense, which shall include without limitation court costs
and reasonable attorney and other expert and third party fees and (b) to the
extent permitted by Law, any fines, penalties and forfeitures in connection
with any proceedings against an Indemnified Party) caused by (i) any breach of
this Agreement by the Indemnifying Party; and (ii) any personal injury,
property damage or physical damage or any other harm or damage, to any person
resulting from or arising out of or related to the Indemnifying Party's
performance or misperformance of any obligation under this Agreement; and
(iii) an actual or alleged infringement of any patent, copyright, trademark,
servicemark or other intellectual property right and/or interest (including
without limitation, misappropriation of trade secrets) arising out of any
action or inaction by an Indemnified Party and/or its agents or employees with
respect to its obligations under this Agreement or any portion thereof, or any
and all other materials or Services furnished directly or indirectly to, or
the use thereof by, the Indemnifying Party(ies) (Infringement Claim(s)). The
indemnification obligations under this Section 6 expressly include an
obligation to indemnify the Indemnified Party for the actions or inactions of
any and all agents, contractors, employees, officers, directors,
subcontractors or other persons working for, under the director of, or on
behalf of the Indemnifying Party with respect to its obligations under this
Agreement. Affiliate(s) mean any corporation or other entity controlling, or
controlled by, or under common control with, a person, as the case may be.
7. Publisher shall not use any of the data provided by TMS hereunder
except for use within its "Product.
8. CONFIDENTIAL/PROPRIETARY INFORMATION
(a) Licensed Data as Confidential/Proprietary Information. The
parties acknowledge that the Licensed Data listed in Addendum 2 received by
Publisher from TMS will be deemed Confidential/Proprietary Information, the
use and disclosure of which is restricted by this Section.
(b) Security Conditions. Confidential/Proprietary Information will
be maintained under secure conditions by Publisher using reasonable security
measures but in any
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
event (a) not less than the same security procedures used by Publisher for the
protection of its own Confidential/Proprietary Information of a similar kind,
and (b) any specific security measures required by this Agreement.
(c) Non-Disclosure Obligation.
(i) Except as my be otherwise permitted by this Agreement,
Publisher shall not disclose any Confidential/Proprietary Information to any
third party without the prior consent of TMS.
(ii) Publisher may disclose the Confidential/Proprietary
Information to those of its personnel who have a substantial need to know the
specific information in question in connection with the Publisher's exercise
of rights under this Agreement. All such Personnel will be instructed by
Publisher that the Confidential/Proprietary Information is subject to the
obligation of confidence set forth by this License Agreement.
(d) No Unauthorized Copying. Except as may be otherwise permitted
by this Agreement, Publisher shall not copy, duplicate, reverse engineer,
reverse compile, disassemble, record, or otherwise reproduce any part of
Confidential/Proprietary Information, nor attempt to do any of the foregoing,
without the prior written consent of TMS. Any tangible embodiments of the
Confidential/Proprietary Information that may be generated by Publisher,
either pursuant to or in violation of this Agreement, will be deemed to be the
sole property of TMS and fully subject to the obligation of confidence set
forth in this Section.
(e) Reports of Third-Party Misappropriation. Publisher shall
immediately report to TMS any attempt by any person of which Publisher has
knowledge (a) to use or disclose Confidential/Proprietary Information without
authorization from TMS, or (b) copy, reverse assemble, reverse compile or
otherwise reverse engineer any part of the Licensed Data.
(f) Post-Termination Procedures. Upon any termination of
Publisher's right to possess and/or use Confidential/Proprietary Information
(e.g., termination or expiration of the license), Publisher shall turn over to
TMS (or, if agreed by TMS, delete or destroy) any disks, tapes, Documentation,
drawings, blueprints, notes, memoranda, specifications, devices, documents, or
any other tangible embodiments of any Confidential/Proprietary Information.
9. In the event Publisher requests format revisions or additional
service, there may be increases in the [*] rate set forth in Paragraph Two
above, or an additional [*], depending on the additional service
requested. Specific rate increases or charges shall be provided to Publisher
by TMS in advance of the actual format changes requested by Publisher.
10. This Agreement shall be governed by and interpreted under the laws
of the State of Illinois. This Agreement shall not take effect until accepted
and executed by an officer of Tribune Media Services, Inc., at Chicago,
Illinois.
11. This Agreement contains the entire understandings of the parties
concerning the subject matter herein, and supersedes and cancels all prior
understandings, agreements, representations, oral or otherwise, between the
parties. This Agreement may only be amended in writing.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
3.
<PAGE>
In Witness Whereof, the undersigned have executed this Agreement on
the dates indicated.
<TABLE>
<CAPTION>
Accepted by: Accepted by:
TELEWORLD, INC. TRIBUNE MEDIA SERVICES, INC.
<S> <C>
/s/ Michael Ramsay /s/ signature illegible
- ---------------------------------------------- -----------------------------------------------
(Signature of Publisher) (Signature of Tribune Media Services, Inc.,
officer)
Michael Ramsay
- ---------------------------------------------- -----------------------------------------------
(Publisher) (Tribune Media Services, Inc., officer)
President and CEO
- ---------------------------------------------- -----------------------------------------------
(Title) (Title)
June 1, 1998 June 1, 1998
- ---------------------------------------------- -----------------------------------------------
(Date) (Date)
</TABLE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
4.
<PAGE>
ADDENDUM 1: PRODUCT DESCRIPTION AND LIMITATIONS OF USE
Publisher will use television program listings information as described in
Addendum 2 provided by TMS for the delivery of Publisher's personalized
television service to consumers on consumer hardware devices or [*]. Publisher
may use a sample of the Licensed Data for promotional purposes on its Internet
site. No other redistribution or derivative product uses are permitted without
the express written consent of TMS.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
5.
<PAGE>
ADDENDUM 2: DEFINITION OF SERVICE FOR LICENSED DATA
1. TV Schedules ("Schedules"):
--------------------------
SEE ATTACHED DOCUMENT "Data Specification: TV Schedules," including
updates, modifications and revisions thereof.
2. System-Specific Channel Lineups ("Channel Lineups"):
---------------------------------------------------
SEE ATTACHED DOCUMENT "Data Specification: Channel Lineups," including
updates, modifications and revisions thereof.
Publisher agrees to accept the Licensed Data as defined in the attached
documents during the term of this Agreement.
TMS agrees not to change the record format of the Licensed Data without
deliberation, if at all, and only then by notifying Publisher in writing at
least [*] in advance of such change.
TMS and Publisher agree that TMS may change the Licensed Data only by
adding fields at the end of file(s) and/or modifying field formats, but
that TMS may not delete any fields.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
6.
<PAGE>
ADDENDUM 3: SUB-LICENSE AGREEMENT FOR NIELSENTV CODE DATA
Publisher shall be deemed a sublicensee of the Agreement between Tribune Media
Services, Inc. ("Licensee") and Nielsen Media Research, Inc. (NielsenTV") for
use of NielsenTV's Cable On-Line Data ("CODE Data") and shall have a right to
sublicense CODE Data subject to the restrictions and limitations under such
Agreement. Publisher is permitted to store, analyze, reformat, print and
display CODE Data in whole or in part from the TMS Service. Publisher may not
redistribute such CODE Data in whole or in part, nor use such material in a
commercial or business-related manner except in its capacity as a sublicensee as
described herein. Thc termination of the Agreement between Tribune Media
Services as Licensee and NielsenTV shall terminate any and all sublicense rights
and privileges to Publisher.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
7.
<PAGE>
ADDENDUM 4
FEES
On a [*] basis, within Publishers [*]. Publisher pays TMS the following:
<TABLE>
<CAPTION>
1. TV Schedules:
<S> <C>
[*]: $[*] for the Schedules defined in Addendum 2,
delivered [*] each [*].
[*]: $[*] for the Schedules defined in Addendum 2,
delivered [*] each [*].
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
2. System-Specific Channel Lineups;
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for the Channel Lineups defined in Addendum 2, delivered [*] in [*].
[*]: $[*] per Channel Lineup per [*] for the Channel
Lineups defined In Addendum 2.
</TABLE>
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
8.
<PAGE>
AMENDMENT TO THE DATA LICENSE AGREEMENT BETWEEN TELEWORLD INC.,
AND TRIBUNE MEDIA SERVICES, INC.
This amendment, dated November 10, 1998, amends the Tribune Media Services TV
Listings Agreement between Tribune Media Services, Inc., ("TMS") and Teleworld
Inc., ("Publisher") dated June 1, 1998. The same terms of the referenced
agreement will apply to the following amendments, which replace the first
sentence of Section 4 and replace the entire Addendum 4: Fees:
Replace the first sentence in Section 4 with the following:
This Agreement shall continue for twenty-one (21) months from June 1, 1998, and
shall renew itself for further terms of one (1) year each unless either party
notifies the other by certified letter received by Publisher at 894 Ross Drive,
Suite 100, Sunnyvale, California 94089 or by TMS at Tribune Media Services,
Inc., 435 N. Michigan Avenue, Suite 1500, Chicago, Illinois 60611 at least
[*] before the end of the then current term of its desire to terminate,
in which this agreement shall terminate at the end of the then current term.
Replace ADDENDUM 4: FEES with the following:
ADDENDUM 4: FEES
On a monthly basis, within Publisher's fiscal year, Publisher pays TMS the
following:
1. TV Schedules:
[*]: $[*] for the Schedules defined in Addendum 2, delivered
[*] each [*].
[*]: $[*] for the Schedules defined in Addendum 2, delivered
[*] each [*].
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: [*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
[*]: $[*] for the Schedules defined in Addendum 2.
2. System-Specific Channel Lineups:
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*].
[*]: $[*] for [*] and [*], delivered [*] in [*]
[*]: $[*] for the Channel Lineups defined in Addendum 2,
delivered [*] in [*].
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
1.
<PAGE>
[*]: $[*] per Channel Lineup per [*] for the Channel Lineups
defined in Addendum 2.
[*]: [*] for the Channel Lineups defined in Addendum 2.
[*]: $[*] for the Channel Lineups defined in Addendum 2.
[*]: $[*] for the Channel Lineups defined in Addendum 2.
[*]: $[*] for the Channel Lineups defined in Addendum 2.
[*]: $[*] per Channel Lineup per [*] for the Channel Lineups
defined in Addendum 2.
Accepted by:
Teleworld, Inc. Tribune Media Services, Inc.
By: /s/ Michael Ramsay By /s/ Barbara Needleman
------------------------ ----------------------------------
Michael Ramsay Barbara Needleman
- ---------------------------- -------------------------------------
Printed name Printed name
President and CEO VP, Database and Advertising Products
- ---------------------------- -------------------------------------
Title Title
- ---------------------------- -------------------------------------
Date Date
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
2.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
_____________________________________
July 22, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 2,248,000 11,967,000
<SECURITIES> 164,000 7,623,000
<RECEIVABLES> 0 516,000
<ALLOWANCES> 0 (14,000)
<INVENTORY> 120,000 1,202,000
<CURRENT-ASSETS> 2,751,000 22,362,000
<PP&E> 962,000 1,794,000
<DEPRECIATION> (170,000) (352,000)
<TOTAL-ASSETS> 3,543,000 23,804,000
<CURRENT-LIABILITIES> 1,422,000 4,141,000
<BONDS> 0 0
0 0
12,242,000 39,580,000
<COMMON> 5,000 8,000
<OTHER-SE> (10,126,000) (20,483,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,543,000 23,804,000
<SALES> 0 0
<TOTAL-REVENUES> 0 8,000
<CGS> 0 0
<TOTAL-COSTS> 9,837,000 11,735,000
<OTHER-EXPENSES> 0 178,000
<LOSS-PROVISION> 0 14,000
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (9,721,000) (11,628,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (9,721,000) (11,628,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,721,000) (11,628,000)
<EPS-BASIC> (2.21) (1.75)
<EPS-DILUTED> (2.21) (1.75)
</TABLE>
