<PAGE>
As filed with the Securities and Exchange Commission on January 26, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
REPLAYTV, INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------
<TABLE>
<CAPTION>
Delaware 4841 77-0465127
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
1945 Charleston Road
Mountain View, CA 94043-1201
(650) 210-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------
Earle H. "Kim" LeMasters, III
Chairman and Chief Executive Officer
ReplayTV, Inc.
1945 Charleston Road
Mountain View, CA 94043-1201
(650) 210-1000
(Name, Address Including Zip Code, and Telephone Number Including Area Code,
of Agent for Service)
---------------
Copies to:
<TABLE>
<S> <C>
Mark A. Medearis Richard J. Sandler
Laura A. Donald DAVIS POLK & WARDWELL
Kristen A. Lamb 450 Lexington Avenue
Scott S. Ring New York, NY 10017
VENTURE LAW GROUP (212) 450-4000
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
(650) 854-4488
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act 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 statement 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 statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Title Of Each Class Of Securities To Be Registered Proposed Maximum Aggregate Offering Price(1) Amount Of Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001.................... $150,000,000 $39,600
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) and Rule 457(o) under the
Securities Act.
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 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued January 26, 2000
Shares
[ReplayTV logo]
COMMON STOCK
-----------
We are offering shares of our common stock. This is our initial
public offering and no public market exists for our shares. We anticipate that
the initial public offering price will be between $ and $ per share.
-----------
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol "RPLY."
-----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 10.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Public and Commissions ReplayTV
-------- ---------------------- -----------
<S> <C> <C> <C>
Per Share............... $ $ $
Total................... $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to an additional
shares of common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 2000.
-----------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
CHASE H&Q
DEUTSCHE BANC ALEX. BROWN
WASSERSTEIN PERELLA SECURITIES, INC.
, 2000
<PAGE>
[INSIDE FRONT COVER]
[COLOR ARTWORK]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Special Note About Forward-Looking Statements ........................... 4
Prospectus Summary ...................................................... 5
Risk Factors ............................................................ 10
Use of Proceeds ......................................................... 22
Dividend Policy ......................................................... 22
Capitalization .......................................................... 23
Dilution ................................................................ 24
Selected Financial Data ................................................. 25
Management's Discussion and Analysis of Financial Condition and Results
of Operations .......................................................... 26
Business ................................................................ 32
Management .............................................................. 47
Related Party Transactions .............................................. 57
Principal Stockholders .................................................. 60
Description of Capital Stock ............................................ 62
Shares Eligible for Future Sale ......................................... 65
Underwriters ............................................................ 67
Legal Matters ........................................................... 69
Experts ................................................................. 69
Additional Information Available to You ................................. 69
Index to Financial Statements............................................ F-1
</TABLE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from the
information contained in this prospectus. We are offering to sell, and seeking
offers to buy, the common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of when this prospectus is
delivered or when any sale of our common stock occurs.
Until , 2000, all dealers that buy, sell or trade shares of
common stock, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, including the
section entitled "Management's Discussion and Analysis of Financial Condition
and Result of Operations," that are based on our management's beliefs and
assumptions and on information currently available to our management. Forward-
looking statements include the information concerning our possible or assumed
future results of operations, business strategies, financing plans,
competitive position, potential growth opportunities, benefits resulting from
this offering and the effects of competition. Forward-looking statements
include all statements that are not historical facts and can be identified by
the use of forward-looking terminology such as the words "believes,"
"expects," "anticipates," "intends," "plans," "estimates" or similar
expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these forward-
looking statements. You should not put undue reliance on any forward-looking
statements. We do not have any intention or obligation to update forward-
looking statements after we distribute this prospectus.
You should understand that many important factors, in addition to those
discussed elsewhere in this prospectus, could cause our results to differ
materially from those expressed in forward-looking statements. These factors
include our competitive environment, economic and other conditions in the
markets in which we operate, consumer and retailer preferences, alternative
technological advances, prices and supplies of components and cyclical and
seasonal fluctuations in our operating results.
4
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information in this prospectus, but it may
not contain all of the information that is important to you. To better
understand this offering, and for a more complete description of this offering,
you should read this entire prospectus carefully, including the "Risk Factors"
section and the financial statements and the notes to those statements, which
are included elsewhere in this prospectus. References in this prospectus to
"we," "our," "us" and the "Company" refer to ReplayTV, Inc. Information
contained in our web site, located at www.replaytv.com, does not constitute
part of this prospectus.
REPLAYTV
ReplayTV empowers television viewers to watch what they want when they want.
We have developed the ReplayTV Service as a living room portal through which
viewers can easily access, navigate, control and store television programming.
We believe the ReplayTV Service will transform the way consumers access
television programming, advertising and, ultimately, commerce services. We
believe our portal creates a new, more effective medium for advertisers,
content providers and cable and satellite system operators to target consumers.
Based on ReplayTV-sponsored survey data, viewers using the ReplayTV Service
watch and record more hours of television per week and find television viewing
more appealing than before using the ReplayTV Service. We believe this is
because the ReplayTV Service gives viewers greater choice and more control over
their television viewing.
The ReplayTV Service is currently delivered through a personal video
recorder, or PVR, designed and developed by us. The PVR is a device connected
to a television that employs a hard disk drive, software and other technology
to digitally record and access content. Through ReplayTV's combination of
proprietary software, hardware and media relationships, viewers personalize
their television viewing. The ReplayTV Service allows viewers to set up
personal channels that automatically record their favorite shows. Programs can
then be replayed "on demand," with no tapes to search or rewind. Viewers can
also search for programs based on a theme, a specific hobby or a favorite actor
or director. ReplayTV-enabled PVRs operate with existing broadcast, cable and
satellite infrastructures. In the future, we expect that our PVR technology
will be incorporated into other television-related consumer electronics devices
that will provide access to the ReplayTV Service.
Our goal is to build a major media company that benefits viewers, content
providers, advertisers and cable and satellite system operators.
. Benefits to Viewers. Just as consumers have achieved enhanced freedom and
control over their lives through automated teller machines, cellular
phones, the Internet and 24-hour grocery stores, we believe television
viewers want greater freedom and control with respect to their television
viewing. The ReplayTV Service provides this freedom and control by
enabling viewers to: watch what they want when they want; never miss
their favorite shows; locate, capture and record the best in television
from thousands of weekly programming choices; control live TV; and enjoy
personal television services with no monthly fees.
. Benefits to Content Providers. The ReplayTV Service allows content
providers to reach an audience that may not have watched particular shows
due to constraints including conflicts between broadcast times and their
own personal schedules. ReplayTV-sponsored surveys indicate that viewers
using the ReplayTV Service watch an average of about 2.5 more hours and
record an average of about seven more hours of television each week than
before they began using the ReplayTV Service. The ReplayTV Service also
enables television programmers and broadcasters to pro-actively compile
and promote their content, thereby creating an opportunity for greater
audience growth, loyalty, recognition and measurement. In addition, the
ReplayTV Service is being developed to facilitate an entirely new
paradigm for delivering programming, products and services to viewers.
ReplayTV anticipates that viewers will be able to simply
5
<PAGE>
"point and click" when ordering merchandise, movies, sports events,
programming packages, games and other products and services.
. Benefits to Advertisers. We believe that our ReplayTV Service provides
advertisers a more effective way to deliver information to consumers, a
more efficient way to spend advertising budgets and a better way to
target audiences and identify, monitor and respond to consumers'
programming and purchasing preferences. The ReplayTV Service will enable
advertisers to more effectively target consumers who have actively
selected specific programs to watch and therefore are more likely to
watch an entire show. Advertisers will also be able to target advertising
to viewers who have created theme-based ReplayTV channels based on a
specific topic, such as "tennis." ReplayTV's basic PVR architecture can
support a wide range of additional innovative advertising services. For
example, advertisers may be able to purchase new advertising spots on
recorded shows with the use of lead-in and lead-out advertisements.
. Benefits to Cable and Satellite System Operators. The ReplayTV Service
enables cable and satellite system operators to enhance the
attractiveness of their existing and anticipated services to consumers.
We believe this will enable cable and satellite system operators to
increase acceptance of new service offerings and improve growth prospects
of existing lines of business. Key benefits offered to cable and
satellite system operators include: opportunities to reduce churn and
grow subscriber bases; enhanced appeal of premium offerings; enhanced
appeal of pay-per-view offerings; and a platform for new services for
better capacity utilization.
We intend to establish our proprietary ReplayTV Service as the leading
living room portal to enrich personal television viewing, advertising and
television commerce. We anticipate that, as a media company, the majority of
our revenues will be generated from the sale of advertising on the ReplayTV
Service. We also anticipate recognizing revenue from media sponsorships,
premium and near video-on-demand services and e-commerce via television, or TV-
commerce.
Our strategy includes the following key elements that leverage the benefits
of the ReplayTV Service:
. Enhance the living room experience by establishing the ReplayTV Service
as a portal to access personal television;
. Aggressively drive rapid market penetration through our manufacturing and
distribution relationships;
. Leverage the strength of our existing media relationships to deliver and
promote content;
. Create new and innovative advertising opportunities; and
. Develop enhanced services.
We plan to leverage our media relationships to expand our advertising and
sponsorship opportunities, offer unique programming content, differentiate the
ReplayTV Service and enhance the ReplayTV brand. We are pursuing strategic
relationships with television programmers, advertising agencies and other
potential media partners. For example, we are creating theme-based or branded
content areas called ReplayZones with NBC, Showtime and Turner. Our existing
equity investors include leading media companies such as Disney, Liberty Media,
NBC, Showtime, Time Warner and Tribune.
We announced our ReplayTV Service in January 1999 and began shipment of our
PVRs in April 1999. We intend to commence full-scale retail distribution
through leading consumer electronics companies this year and are pursuing
strategic manufacturing and distribution relationships to accelerate the market
penetration of ReplayTV-enabled products and rapidly grow our installed base of
viewers. For example, we have entered into an agreement with Matsushita-
Kotobuki Electronics Industries, Ltd., or MKE, a subsidiary of Matsushita
6
<PAGE>
Electric Industrial Co., Ltd., the largest manufacturer of VCRs sold in North
America. MKE will initially market and sell PVRs under the Panasonic brand
featuring the ReplayTV logo. The retail launch with MKE is expected to occur in
mid-2000, and MKE is working to develop new consumer electronics devices that
incorporate ReplayTV technology. We are also in discussions with a number of
other consumer electronics companies, cable and satellite system operators and
manufacturers of cable and satellite set-top boxes regarding the manufacture,
marketing and distribution of ReplayTV-enabled products. For example, we have
entered into a non-binding letter of intent with EchoStar Communications
Corporation to incorporate the ReplayTV Service into its DISH Network satellite
set-top boxes and a non-binding letter of intent with Sharp for the manufacture
and distribution of ReplayTV-enabled PVRs. Our existing equity investors
include leading manufacturing and multi-channel distribution companies such as
EchoStar, MKE, Sharp and Time Warner. We intend to leverage these manufacturing
and distribution relationships to accelerate our market penetration and rapidly
grow our installed base of viewers. We believe that relying on MKE and others
in the future to manufacture, market and sell ReplayTV-enabled products will
allow us to focus our creative resources on promoting and enhancing the
ReplayTV Service.
----------------
We were incorporated in California in August 1997 and changed our name to
Replay Networks, Inc. in June 1998. We changed our name to ReplayTV, Inc. in
January 2000 and intend to reincorporate in Delaware prior to the completion of
this offering. Our principal executive offices are located at 1945 Charleston
Road, Mountain View, California 94043. Our telephone number at that location is
(650) 210-1000.
7
<PAGE>
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 net
proceeds of this offering
for working capital and
general corporate
purposes, including:
advertising to promote
the ReplayTV Service and
the ReplayTV brand;
subsidies related to the
manufacture of ReplayTV-
enabled products; product
development; and
expansion of our sales,
marketing and service
capabilities. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.............. RPLY
</TABLE>
The number of shares of common stock to be outstanding after this offering
is estimated based on the number of shares outstanding on December 31, 1999 on
a pro forma basis to reflect the issuance of 5,627,267shares of Series F
preferred stock in January 2000 and the automatic conversion of all shares of
preferred stock, including the shares of Series F preferred stock issued in
January 2000, outstanding as of the date of this prospectus into shares of
common stock. It excludes 18,218,561 shares subject to outstanding options or
reserved for future grants or purchases pursuant to our stock option and
purchase plans and 6,666 shares of common stock subject to an outstanding
warrant. See "Management--Stock Plans" and "Description of Capital Stock."
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. The conversion of all outstanding shares of preferred stock, including
the shares of Series F preferred stock issued in January 2000, into
shares of common stock on a one-for-one basis upon the closing of this
offering;
. No exercise of the underwriters' over-allotment option;
. Our reincorporation into Delaware at or before the closing of this
offering; and
. The filing of our amended and restated certificate of incorporation upon
the closing of this offering.
8
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth a summary of our statement of operations data
for the periods presented. Please see "Use of Proceeds," "Capitalization" and
note 1 to our financial statements for the determination of the number of
shares used in computing actual and pro forma basic and diluted net loss per
share. The statement of operations data does not give effect to the issuance of
5,627,267 shares of Series F preferred stock in January 2000 or the issuance of
shares in this offering.
<TABLE>
<CAPTION>
Period from Nine Months Period from
August 27, 1997 Ended September August 27, 1997
(Inception) Year Ended 30, (Inception)
to December 31, December 31, ----------------- to September 30,
1997 1998 1998 1999 1999
--------------- ------------ ------- -------- ----------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total costs and
expenses............... $ 155 $ 3,256 $ 1,555 $ 20,459 $ 23,870
Interest income
(expense), net......... -- (28) (4) 342 314
Net loss................ (155) (3,284) (1,559) (20,117) (23,556)
Basic and diluted net
loss per share......... $(0.08) $ (0.48) $ (0.23) $ (2.73) $ (3.35)
Basic and diluted
weighted average shares
used in computation of
net loss per share..... 2,026 6,889 6,880 7,359 7,037
Pro forma basic and
diluted net loss per
share.................. $(0.29) $ (0.84)
Pro forma basic and
diluted weighted
average shares......... 11,282 23,953
</TABLE>
The following table summarizes our balance sheet data as of September 30,
1999:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 5,627,267 shares of
Series F preferred stock in January 2000 and the automatic conversion of
31,368,852 shares of preferred stock, including the shares of Series F
preferred stock issued in January 2000, outstanding as of the date of
this prospectus into 31,368,852 shares of common stock; and
. on a pro forma basis as further adjusted to reflect the sale of
shares of common stock in this offering at an assumed initial
public offering price of $ per share after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
As of September 30, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments.................................... $49,840 $111,240 $
Working capital................................. 46,038 107,438
Total assets.................................... 53,406 114,806
Total stockholders' equity...................... 47,999 109,399
</TABLE>
9
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding whether to invest in shares of our common stock. If
any of the following risks actually materialize, our business, financial
condition or operating results could be materially adversely affected. This
could cause the trading price of our common stock to decline, and you may lose
part or all of your investment.
Risks Related to Our Business
We have recognized no operating revenues, and we will need to build an
installed base and enhance the features of our ReplayTV Service before we
can generate significant advertising revenues or achieve profitability.
As a media company, we will need to generate our revenues primarily from
sales of advertising and other media services. To date, we have recognized no
operating revenues, have incurred significant losses and have had substantial
negative cash flow, and we may never achieve profitability. As of September
30, 1999, we had an accumulated deficit of $23.6 million. We expect to incur
significant operating expenses over the next several years in connection with
the continued development and expansion of our business, including substantial
expenses related to advertising and subsidies to encourage purchases of
ReplayTV-enabled products. Although we have received limited proceeds from
shipments of our personal video recorders, these proceeds are considered
incidental to our business and therefore are not recognized as revenues. We do
not expect to generate significant revenues from advertising or other services
in 2000, and we may not be able to generate significant revenues thereafter.
As a result, we expect to continue to incur significant losses and negative
cash flow for the foreseeable future. With increased expenses, we will need to
generate significant revenues to achieve profitability. Consequently, 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 cannot be sure that the ReplayTV Service will generate a broad enough
viewer base to sustain our business.
Personal television services are a new and untested media format. The
ReplayTV Service is in an early stage of development, and many viewers,
retailers and potential media, advertising, consumer electronics and
distribution partners are not aware of its benefits. As a result, it is
uncertain whether the market will accept and demand the ReplayTV Service and
ReplayTV-enabled products. We believe that establishing the ReplayTV brand is
critical to attracting and retaining viewers and to enabling us to develop key
strategic relationships and advertising revenue opportunities. Our ability to
promote broad acceptance of the ReplayTV Service depends upon:
. successful marketing and distribution of ReplayTV-enabled products;
. continued development of new ReplayTV services and ReplayTV-enabled
products; and
. high quality customer support.
In addition, the introduction of new consumer electronics products is often
characterized by high rates of return following a product roll-out, as the
result of either product defects or lack of customer satisfaction with the
product category. ReplayTV-enabled products have been and in the future may be
subject to high return rates, which would impair our ability to establish
broad consumer acceptance of the ReplayTV Service.
10
<PAGE>
If our retail launch is not successful, viewers and consumer electronics
manufacturers, distributors and other potential partners may not accept the
ReplayTV Service and ReplayTV-enabled products.
To date, we have generated shipments of ReplayTV-enabled personal video
recorders only through our web site, our 1-877-ReplayTV toll-free telephone
number and a limited number of online retailers. As of December 31, 1999, we
had shipped about 6,000 ReplayTV-enabled personal video recorders. Our success
depends on, among other things, our ability to expand our distribution through
relationships with consumer electronics companies and distributors. We plan to
begin our full-scale retail launch in mid-2000 with Matsushita-Kotobuki
Electronics Industries, Ltd., or MKE, a subsidiary of Matsushita Electric
Industrial Co., Ltd., which will market, sell and distribute ReplayTV-enabled
personal video recorders under the Panasonic brand featuring the ReplayTV
logo.
The launch requires, among other things, that:
. we educate consumers on the benefits of the ReplayTV Service and
ReplayTV-enabled personal video recorder, which will require an extensive
marketing campaign;
. MKE enter into distribution and promotional arrangements with major
national and regional retail chains;
. we commit a substantial amount of human and financial resources to
achieve successful retail distribution; and
. we coordinate our own sales, marketing and support activities with those
of MKE and other distributors and retailers.
We or our strategic partners may not achieve any or all of these objectives.
In addition, the launch may be delayed, consumers may perceive the ReplayTV-
enabled personal video recorder as too expensive or complex or the ReplayTV
Service as not sufficiently appealing, and our marketing campaign may not
effectively attract new viewers. Additionally, since we will rely on MKE and
other distributors and retailers to assist us with sales, marketing and
support activities, the success of the marketing process is not entirely
within our control. We do not control the time and resources that these third
parties devote to our business, and we cannot be sure that these parties will
perform as expected. Any of these events may reduce consumer demand and market
acceptance, diminish our brand and impair our ability to attract and retain
viewers of the ReplayTV Service.
We have established only a limited number of strategic relationships with
media partners, and we must rely on strategic relationships to enhance the
ReplayTV Service.
To be successful, we must establish and maintain strategic relationships
with leaders in the television media industry, including advertisers,
television programmers and broadcast companies. To date, we have established
only a limited number of strategic relationships with media partners, and
these relationships are in the early stages of development. We cannot be
certain that relationships with other media partners will be available to us
in the future or on terms favorable to us. These relationships are critical to
our success, and our failure to establish and maintain these relationships
would:
. limit the acceptance and use of the ReplayTV Service;
. impair our ability to obtain rights to content;
. impair our ability to deploy certain forms of advertising;
. impair our ability to generate revenues from multiple sources; and
. impair our ability to further enhance the ReplayTV brand.
Entering into strategic relationships is complicated because some of our
current and future media partners may decide to compete with us or to enter
into relationships with our competitors. For example, some of our current and
potential partners currently have relationships with our primary competitors
in the market for personal television services. In addition, we may not be
able to establish relationships with key participants in
11
<PAGE>
the media industry if we have established relationships with competitors of
these key participants. Moreover, many potential partners may resist working
with us unless and until the ReplayTV Service and ReplayTV-enabled personal
video recorder have been introduced on a larger scale and have achieved market
acceptance. In order to induce media companies to partner with us, we may have
to share substantial portions of our revenues with them or provide other
incentives to them, which could limit our ability to achieve profitability or
result in dilution to existing investors.
If we fail to establish additional relationships with media partners, or if
our media partners fail to actively pursue additional business relationships
with us, we would not be able to execute our business plan and our business
would suffer significantly.
We need to create multiple revenue streams.
Our future growth and long-term success are dependent upon our ability to
generate multiple revenue streams. Our business model is particularly
dependent upon generating revenues from advertisers, who may not readily adopt
the personal television medium. We compete with traditional advertising media
such as print, radio and television for a share of advertisers' total
advertising budgets. If advertisers do not perceive personal television as an
effective advertising medium or are otherwise opposed to personal television,
they may be reluctant to devote a significant portion of their advertising and
marketing budgets to promotions on the ReplayTV Service.
Our long-term success will also depend in part upon securing multiple
revenue streams in addition to advertising, including premium subscription and
personalized pay-per-view services such as near video-on-demand, sponsorships
from content providers and other media partners and television-commerce. We
will need to work closely with media partners, cable and satellite system
operators, electronic commerce companies and consumer electronics
manufacturers to develop services in these areas. We may not be able to
effectively work with these parties to develop services that are sufficient to
justify their costs.
In addition, to attract and retain viewers and generate revenues from
advertising and other sources, we must continue to add capabilities to the
ReplayTV Service and introduce services that embody new technologies and, in
some instances, new industry standards. For example, version 2.0 of the
ReplayTV Service software, to be offered in conjunction with our full-scale
retail launch, provides advertising and sponsorship capabilities solely on
theme-based or branded content areas called ReplayZones. In order to generate
significant advertising revenues, we need to expand the capabilities of the
ReplayTV Service to permit full-motion video advertisements on multiple viewer
interfaces. We must also expand the capabilities of the ReplayTV Service to
permit premium subscription services, near video-on-demand and television-
commerce, none of which are currently available in version 2.0 of the ReplayTV
Service software. These features will not be available until the release of
future versions of the ReplayTV Service software. If we are unable to add
these features to the ReplayTV Service, or if we delay the introduction of
these capabilities, our ability to attract and retain viewers and generate
revenues will suffer.
Furthermore, early versions of ReplayTV-enabled products may not be capable
of accommodating new services and capabilities we introduce in the future. For
example, early versions of ReplayTV-enabled products may not have sufficient
memory to handle software upgrades required to provide full-motion video
advertisements and near video-on-demand capabilities. If early versions of
ReplayTV-enabled products cannot be upgraded to support new services we
introduce, our ability to generate revenues from these new services will
suffer.
We rely on third parties to manufacture, distribute and market our
products.
We currently rely on a single third party contract manufacturer,
Flextronics International, to manufacture ReplayTV-enabled personal video
recorders. We have entered into an agreement with MKE to manufacture and
distribute ReplayTV-enabled products, and we intend to enter into similar
relationships with other consumer electronics companies in the future. In
addition, we will rely significantly on our relationship with MKE to
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establish our retail distribution channel. We will rely on MKE's sales force,
marketing budget and brand image to promote and support ReplayTV-enabled
products and the ReplayTV Service, both before and after our full-scale retail
launch. We currently anticipate that MKE will begin distributing ReplayTV-
enabled personal video recorders, manufactured by Flextronics, under the
Panasonic brand featuring the ReplayTV logo, in mid-2000.
We do not control the time and resources that third party manufacturers and
distributors devote to our business, and we cannot ensure that these parties
will perform as expected. The use of equipment manufacturers, particularly the
transition to new equipment manufacturers, subjects us to the risk of delays
and unforeseen problems such as defects, shortages of critical components and
cost overruns. In addition, we expect that these manufacturers will require
substantial lead times to manufacture sufficient quantities of ReplayTV-
enabled personal video recorders to satisfy demand. Any delays or unforeseen
problems could impair our full-scale retail launch and brand image and make it
difficult for us to attract and retain viewers. Furthermore, since our
relationships with some of these manufacturers are not based on exclusive
agreements, they may also support services that compete with us or offer
similar or greater support to our competitors. In addition, MKE may terminate
our agreements with them upon written notice to us. The loss of Flextronics,
MKE or any of our other manufacturers or distributors would require us to
identify and contract with alternative sources of manufacturing and
distribution, which may not be available to us when needed or on acceptable
terms. This outcome could harm our ability to compete effectively and achieve
market acceptance and brand recognition.
We are dependent on single suppliers for several key components and
services. If these suppliers fail to provide us with the products necessary
to manufacture our products and provide our services, we may be unable to
find alternative suppliers or deliver our services or ReplayTV-enabled
products to our customers on time.
We currently rely on sole suppliers for a number of the key components and
services used in ReplayTV-enabled personal video recorders. For example:
. Philips is the sole supplier of a number of semiconductors used in the
ReplayTV-enabled personal video recorder;
. Sony is the sole supplier of our MPEG2 encoder semiconductor device;
. Tribune is the sole supplier of program guide data; and
. Universal Electronics, Inc. is the sole supplier of our universal remote
controls and cable set-top box compatibility codes.
Philips, Sony and Tribune each have relationships with TiVo Inc., one of
our primary competitors in the market for personal television services. We
cannot be sure that these and other key components and services used in
ReplayTV-enabled personal video recorders will be available from these
suppliers when needed or, if available, that these components and services
will be available on favorable terms. In addition, we rely on the quality of
the products supplied to us and the program guide data and cable set-top box
compatibility information supplied to us. The number of alternative suppliers
available for these products and services may be very limited. If we or other
manufacturers of ReplayTV-enabled personal video recorders were unable to
obtain sufficient quantities of these components or accurate program guide
data, the search for and/or transition to alternate suppliers could result in
extensive delays, added expense or disruption in services or product
availability. In addition, we could have to re-engineer the ReplayTV-enabled
personal video recorder in order to incorporate alternative products or
services, which could render our products and services unavailable for
extended periods.
We have agreed to subsidize the cost of our personal video recorders, and
we may be unable to generate enough revenues to cover these subsidies and
other obligations.
We have agreed to subsidize the cost of our personal video recorders to
maintain attractive retail prices for ReplayTV-enabled products and to
encourage the manufacture of ReplayTV-enabled personal television products.
For example, we have agreed to subsidize MKE and expect to subsidize other
equipment manufacturers
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in the future. We expect these subsidies to be one of our largest expense
items for the foreseeable future. If our competitors lower the retail price of
their products, we may have to increase the amount of our subsidies. Our
decision to subsidize the manufacturing cost of ReplayTV-enabled products is
based upon our belief that increasing our installed base as rapidly as
possible will help us obtain viewers, broaden market acceptance for personal
television and increase our future revenues. If these expectations are not
met, we may be unable to generate sufficient revenues to cover our expenses
and other obligations.
Intellectual property claims against us could be costly and could result in
the loss of significant rights.
We have been contacted by various parties that have asserted that our
personal television service violates patents, copyrights or other rights of
such parties. If any of these parties, or other parties that may assert
similar claims in the future, were to successfully litigate these claims
against us, the outcome of the litigation could:
. prevent us from manufacturing or licensing products or providing the
ReplayTV Service;
. cause the cancellation of new services;
. cause delays in product delivery and new service introduction; and
. require us to pay significant royalties or licensing fees.
In addition, litigation of these claims, whether or not they are
successful, could divert management's attention and resources away from our
business and otherwise be time-consuming and expensive.
The television industry is highly litigious, particularly in the area of
electronic program guides. Many patents relating to interactive television
technologies have been granted. For example, we are aware of patents relating
to pausing live television, electronic program guides, recording video on
hard-disk drives, viewer profiling and video compression, among others. In
some cases, we have been contacted by patent owners offering us the
opportunity to license their patents. Some of these patent owners have alleged
that ReplayTV is infringing their patents. In each case, we have evaluated the
patents to determine whether a license is necessary or desirable. Despite our
conclusion to date that no licenses are required, we cannot provide any
assurance that the respective patent owners would agree with our decision or
that they will not further pursue the matter by making a claim of infringement
against us.
We may be subject to claims of infringement and may be required to seek
patent licenses from third parties. A number of companies in the television
industry earn substantial profits from technology licensing, and the
introduction of new technologies such as ours is likely to provoke claims
and/or lawsuits from such companies. A successful claim of infringement
against us could result in a finding of significant monetary damages against
us. In addition, if we are unable to obtain an acceptable license from the
holder of the patent or other right or design around an asserted patent or
other right, we might have to cease manufacturing or licensing the ReplayTV-
enabled personal video recorder or providing the ReplayTV Service, or both,
which would eliminate our ability to generate revenues. On January 18, 2000, a
subsidiary of Gemstar International Group, Inc. sued TiVo, Inc., one of our
competitors, for allegedly infringing a patent related to recording of
television programming. This action seeks an injunction and damages. We cannot
assure you that Gemstar will not bring a similar action against us in the
future. If Gemstar were to bring such an action and be successful, it could
materially adversely impact our business. We and TiVo have been sued by
PhoneTel Communications, Inc. for allegedly infringing a patent related to
specifying an order for playback of recorded television programs.
In addition, we are aware that some media companies may attempt to form
organizations to develop standards and practices in the personal television
industry. These organizations or individual media companies may attempt to
require companies in the personal television industry to obtain copyright or
other licenses for the use of the companies' programming. A number of articles
have appeared in the press recently regarding the formation of a consortium of
broadcast and cable television networks called the Advanced Television
Copyright Coalition. Some of those articles have indicated that the coalition
is prepared to support litigation and to explore legislative solutions unless
the providers of personal television services and products agree to obtain
license agreements for the use of the companies' programming. We have received
letters and oral indications from a
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number of content providers, including Fox Television, Universal Studios and
The Walt Disney Company, asserting their belief that our business activities
will require approvals and licenses from these content providers. In addition,
under our Network Service Agreement with Turner Broadcasting Systems, Inc.,
Turner reserved the right to assert any claims or rights against us. We are
also aware of similar indications from other content providers. Lawsuits or
other actions taken by these types of organizations or companies could make it
more difficult or impossible for us to introduce new services, delay
widespread consumer acceptance of our services, restrict our use of some
television content, increase our costs and materially adversely affect our
business.
We face intense competition from a number of sources, which may impair our
ability to generate viewers and future revenues.
The market for personal television services is new and evolving rapidly,
and we are unable to predict the future of the market. We expect competition
from a number of sources. We are likely to face intense direct competition
from companies such as TiVo Inc. and WebTV Networks Inc. These companies
offer, or have announced their intention to offer, products with one or more
of the ReplayTV Service's functions or features and, in some instances,
combine these features with Internet browsing, interactive capabilities or
traditional broadcast, cable or satellite television programming. Many of
these companies have greater brand recognition and market presence, a
significantly larger installed base and substantially greater financial,
marketing and distribution resources than we do. For example, Microsoft
Corporation owns and provides financial backing to WebTV. Some of these
companies also have established relationships with third party consumer
electronics manufacturers, satellite and cable operators, television
programmers, Internet service providers and others, which could make it harder
for us to compete with them and may make it difficult for us to establish
relationships and enter into agreements with these third parties. For example,
TiVo has manufacturing relationships with several consumer electronics
manufacturers and a distribution relationship with DirecTV, Inc. TiVo also
recently announced an agreement with Blockbuster Inc. to cross-market products
and services. In addition, TiVo and Liberate Technologies recently announced
an agreement to bundle Liberate's interactive television platform with TiVo's
service and market it to network operators, as well as to deliver personal
video recorder capabilities in connection with a new interactive television
service to be offered by America Online, Inc. under the brand name AOL TV.
Some of these competitors also have relationships with our strategic partners,
and a number of media partners that have invested in ReplayTV have also
invested in our competitors. WebTV has a distribution relationship with
EchoStar Communications Corporation, the operator of the DISH Network. In
addition, General Instrument Corporation and Charter Communications, Inc.
recently announced an agreement to manufacture and distribute set-top boxes
that provide personal video recorder capabilities. Faced with this
competition, we may be unable to expand our market share and attract an
increasing number of viewers to the ReplayTV Service.
Furthermore, we and our manufacturing partners also compete with consumer
electronics companies that may incorporate competing personal television
capabilities into future generations of their consumer electronics products.
We compete with consumer electronics 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
services. The competition for consumer spending in the television and home
entertainment market is intense, and our services may compete with:
. VCRs and DVD players and recorders;
. video-on-demand services;
. interactive television services; and
. personal computers.
Many of these technologies, services or devices have an established market,
a broad viewer base and proven consumer acceptance. In addition, many of the
manufacturers and distributors of these competing technologies, services and
devices have substantially greater brand recognition, market presence,
financial resources, distribution channels, advertising and marketing budgets
and promotional and other strategic partners than we
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do. Faced with this competition, we may be unable to effectively differentiate
the ReplayTV-enabled personal video recorder or the ReplayTV Service from
these technologies, services or devices.
The cost of ReplayTV-enabled personal video recorders will also impact
consumer choices in the home entertainment market, and many of the alternative
home entertainment devices and services may be purchased by consumers at lower
prices than a ReplayTV-enabled personal video recorder. Further, cable and
satellite services are already a large expense item for many households, and
consumers may be unwilling to make the additional expenditure required to
purchase a ReplayTV-enabled personal video recorder to complement these
services. In addition, since our Internet service provider's access numbers
require long distance calls for a portion of television households in the
United States, some potential ReplayTV viewers may have to pay recurring long
distance charges to connect to the ReplayTV Service network, which could
impact our ability to market ReplayTV-enabled personal video recorders in
these markets.
We may also compete with new and evolving forms of delivery of video
programs to viewers' homes. For example, a number of companies are developing
video-on-demand products and services, which would use broadband delivery
systems to feed video as demanded by viewers in real time. In addition, as
broadband delivery systems become more prevalent, it is possible that more and
more programs may be available for ordering, over the Internet or otherwise,
which may lessen the importance of broadcast television and weaken the appeal
of the ReplayTV Service. If these companies are successful in developing these
services, their products and services may be more appealing to viewers than
ours.
The market for personal television services is evolving rapidly, and we or
our strategic partners may not be able to adequately address this market.
Because of the early stage of the personal television industry, the life
cycle of our services is difficult to estimate. We or our strategic partners
may not be able to develop and introduce new services and enhancements that
respond to technological changes, evolving industry standards or consumer
preferences on a timely basis, or at all, in which case our business would
suffer. In addition, we cannot predict the rate of adoption by consumers of
our services and products which enable our service, or the price they will be
willing to pay for these services and products. As a result, it is extremely
difficult to predict our future prices for these services and the future size,
growth rate and profitability of this market.
We must integrate the ReplayTV Service with the products and services
provided by cable and satellite system operators.
We intend to enter into relationships for the distribution of the ReplayTV
Service with cable and satellite system operators and/or with the
manufacturers of set-top boxes that enable cable and satellite services. We
cannot be certain that these parties will be willing to enter into agreements
with us to directly integrate the ReplayTV Service into set-top boxes or that
we will be able to negotiate agreements on terms favorable to us.
Historically, cable and satellite system operators have been hesitant to
implement new services. In addition, cable and satellite system operators and
the manufacturers of cable and satellite receivers may choose to develop their
own services in competition with us or to enter into relationships with our
competitors. For example, General Instrument Corporation and Charter
Communications, Inc. recently announced an agreement to manufacture and
distribute set-top boxes that provide personal video recorder features. If we
fail to establish distribution relationships with cable and satellite system
operators or the manufacturers of set-top boxes, we may not be able to execute
our business plan, and our business could suffer significantly.
We must also work with cable and satellite system operators to ensure that
the ReplayTV Service and ReplayTV-enabled products are compatible with their
products and services. If a viewer using a ReplayTV-enabled personal video
recorder receives a cable or broadcast signal through a separate set-top box
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rather than a receiver integrated with the ReplayTV Service, then the viewer
must input a number corresponding to the set-top box to enable the ReplayTV-
enabled personal video recorder to work with the particular set-top box. There
are hundreds of models of cable and satellite set-top boxes, with new designs
coming to market on a regular basis and, consequently, hundreds of
corresponding numbers. If we are unable to update these numbers in a timely
manner and adequately ensure that the ReplayTV Service is compatible with our
viewers' cable and satellite systems, we may not be able to attract and retain
viewers and our reputation may be harmed.
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 our inability to hire additional
executive management could harm our business and results of operations. In
addition, we do not have term employment agreements with, or key man insurance
policies for, any of our key personnel.
We have recently hired several senior executive officers. Any inability by
these individuals to execute our business strategy and manage our growth
could harm our ability to generate revenues and achieve profitability.
Several members of our executive management team were hired in 1999,
including our Chief Executive Officer; Executive Vice President, ReplayTV
Service; Executive Vice President, Finance and Chief Financial Officer;
Executive Vice President, Sales and Marketing; and Executive Vice President,
Business Operations. These individuals have not previously worked together nor
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 and each other. 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.
Failure to manage our growth could disrupt our business and impair our
ability to generate revenues.
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 viewer 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:
. We may not be able to fulfill orders for ReplayTV-enabled products as
demand for the ReplayTV Service grows. We do not have experience in
manufacturing a large volume of ReplayTV-enabled products and may not be
able to accurately forecast and respond to consumer demand for our
products and services.
. We may be unable to successfully attract, integrate or retain
sufficiently qualified personnel. Competition for employees is intense in
the San Francisco Bay Area where we are based, especially for engineers
and personnel with the relevant and necessary media and television
experience.
. We must continually improve our systems to accommodate the growth of our
viewer base and add new features to the ReplayTV Service. The ability of
our systems to scale as we add new viewers and capabilities is unproven.
Our inability to accommodate additional viewers or to upgrade our
technology, systems or network infrastructure could adversely affect our
business, cause interruptions in the ReplayTV Service or delay the
introduction of new services.
. We will need to provide acceptable customer support. If we or our
distribution partners are unable to adequately support ReplayTV Service
viewers, our brand and our ability to generate and retain new viewers
will be harmed.
. We will need to improve our operational and financial systems to support
our expected growth, and any inability to do so will adversely impact our
business.
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Seasonal trends in consumer and advertiser spending behavior may cause our
operating results to fluctuate in any period.
Our business model anticipates that a majority of our future revenues will
come from targeted commercials and other forms of television advertising
enabled by the ReplayTV 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 in general could alter current or prospective
advertisers' spending priorities or increase the time it takes to close a sale
with our advertisers, which could cause our revenues from advertisements to
decline significantly in any given period.
In addition, we are subject to seasonality in consumer electronics product
sales, which have traditionally been much higher during the holiday shopping
season (occurring in the fourth quarter) than during other times of the year.
Although predicting consumer demand for our products will be very difficult,
we believe that sales of ReplayTV-enabled personal video recorders and
attraction of new viewers to the ReplayTV Service will be disproportionately
high during the holiday shopping season when compared to other times of the
year. Because we expect to subsidize the purchase price of ReplayTV-enabled
personal video recorders, we will incur greater costs and expenses when more
ReplayTV-enabled personal video recorders are sold.
If we are unable to raise additional capital on acceptable terms, our
ability to effectively manage growth and build a strong brand could be
harmed.
We expect that our existing capital resources, combined with the net
proceeds of this offering, will be sufficient to meet our cash requirements
through the next 12 months. We may be required to raise additional capital
sooner if consumer acceptance of the ReplayTV Service occurs more rapidly than
we expect or if we have to increase our subsidies earlier than we anticipate
to meet competitive retail pricing. In order to continue to grow our business,
we will have 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 services, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements. If we raise additional capital through debt
financing, we may be subject to covenants limiting or restricting our
operations or future opportunities.
Risks Related to our Service and Technology
System failures, interruptions to the ReplayTV Service or product defects
may have a negative impact on our revenues, damage our reputation and
decrease our ability to attract new viewers.
Our ability to provide high quality products, service and customer support
is critical to our success because consumers of television-related products
are not accustomed to, and may not accept, interruptions in their television
service. Our ability to provide this service and support depends on the
efficient and uninterrupted operation of our computer and communications
systems. Substantially all of the computer and networking hardware systems
that form the backbone of the ReplayTV Service are housed in a facility
operated by Exodus Communications, Inc. in Santa Clara, California. We also
rely on UUNET Technologies, Inc. to provide an Internet connection for
communications between ReplayTV-enabled personal video recorders and the
ReplayTV Service network. Interruptions to the services provided by either
Exodus or UUNET would significantly impact the quality of the ReplayTV Service
which could impair our ability to retain existing viewers or attract new
viewers to the ReplayTV Service. Our network, communications hardware and
other operating systems for the ReplayTV 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.
In addition, our hardware and software may contain bugs. These types of
interruptions in the ReplayTV Service may reduce our revenues and profits. Our
business also will 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 or our partners' customer support personnel. Any frequent
or persistent system failures could irreparably damage our reputation and
brand.
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We have detected and may continue to detect errors and product defects in
our software and ReplayTV-enabled personal video recorders. For example, the
hard disk used in the ReplayTV-enabled personal video recorder was originally
designed for use in personal computers, and as a result exhibits behaviors
that are viewed as typical and minimally disruptive when using a personal
computer but may result in the viewer momentarily facing a black television
screen when using the ReplayTV Service. In addition, ReplayTV viewers with
HDTV television sets are currently required to watch and record programming in
standard broadcast resolution as opposed to HDTV resolution. Any errors and
product defects can affect system uptime, result in returns and significant
warranty and repair costs and cause customer relations problems. For example,
as a result of errors and defects detected in product development, we have
experienced some delays in releasing new versions of our ReplayTV-enabled
personal video recorders. In addition, we have agreed to indemnify MKE in
connection with its manufacture and distribution of ReplayTV-enabled products.
Correcting errors in our software and hardware design requires significant
time and resources, which could delay future product releases and affect
market acceptance of the ReplayTV Service. Any delivery by us of products or
upgrades with undetected material product defects or software errors could
harm our credibility and market acceptance of the ReplayTV Service.
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 are currently the assignee of two United States patents. We
have also filed patent applications and provisional patent applications
relating to important aspects of the ReplayTV technology and the ReplayTV
Service, including its features and capabilities. To date, none of these
patents has been granted, and we cannot assure you that any patents will ever
be granted, that any issued patents will protect our intellectual property or
that third parties will not challenge any issued patents. 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.
Laws, regulations, agreements and standards 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
ReplayTV Service and the ReplayTV-enabled personal video recorder represent 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
or amended to restrict the capture or alteration of television programming,
which would materially adversely affect our business. It is unknown whether
existing laws and regulations will apply to the personal television market.
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. Regulations adopted by the FCC may
directly affect us and the strategic partners on whom we substantially rely
for the marketing and distribution of ReplayTV-enabled personal video
recorders and the ReplayTV Service. As such, the effect of these regulations
may negatively impact the adoption of ReplayTV-enabled personal video
recorders and the use of the ReplayTV Service. In addition, the FCC could
promulgate new regulations or interpret existing regulations in a manner that
would cause us to incur significant compliance costs or force us to alter the
features or capabilities of the ReplayTV Service.
Several manufacturers, media companies and content delivery providers, such
as cable and satellite system operators, have developed and will continue to
develop standards that govern how these companies operate and interact with
one another. For example, cable modem manufacturers and cable operators are
developing standards
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relating to cable systems and cable modems. Media companies, consumer
electronics companies, computer companies and semiconductor companies are
developing standards relating to copyright protection of media content. If we
are unable to develop services that comply with the agreements and standards
set by these consortiums, we may be prevented from marketing and distributing
ReplayTV-enabled personal video recorders and providing the ReplayTV Service.
We need to safeguard the security and privacy of our viewers' confidential
data, and any inability to do so may harm our reputation and brand and
could result in lawsuits.
The ReplayTV-enabled personal video recorder collects and stores viewer
preferences and other data that our viewers may consider confidential. Any
compromise or breach of the encryption and other security measures that we use
to protect this data 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 compromise or breach the
systems we use to protect our viewers' confidential information. We may be
required to make significant expenditures to protect against security breaches
or to remedy problems caused by any breaches.
Viewers may be concerned about the use of personal information gathered by
the ReplayTV Service and the ReplayTV-enabled personal video recorder. We do
not release this data to third parties, and we are committed to complying with
all privacy laws and to protecting the confidentiality of our viewers. Privacy
concerns, however, could create uncertainty in the marketplace for personal
television and our services. In addition, privacy concerns or breaches, or
consumers' dissatisfaction with any privacy policy we may adopt, could reduce
demand for the ReplayTV 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.
Risks Related to this Offering and Our Common Stock
Purchasers of our common stock in this offering will suffer immediate and
substantial dilution and may be harmed by future debt or equity issuances.
The initial public offering price per share will significantly exceed our
net tangible book value per share. You will experience immediate dilution of
$ in the pro forma adjusted net tangible book value per share of common
stock, assuming an initial public offering price of $ per share. You also
will experience additional dilution when outstanding options and warrants are
exercised. If we raise additional capital through the issuance of equity
securities, the percentage ownership of our existing stockholders will
decline, you may experience dilution in net book value per share, and 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.
Management has broad discretion as to how to use the proceeds from this
offering and may apply these proceeds to uses that do not increase our
revenues or market value.
We expect to spend a substantial amount, including amounts from the net
proceeds we receive in connection with this offering, to advertise and promote
the ReplayTV Service and the ReplayTV brand, to subsidize the retail price of
ReplayTV-enabled personal video recorders, to develop new services and for
other working capital and general corporate purposes. We have not determined
the specific amounts we intend 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.
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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 delay or prevent a change of control or changes in our
management that a stockholder might consider favorable. Any delay or
prevention of a change of control or change in management could cause the
market price of our common stock to decline. For more information about
particular anti-takeover provisions, see "Description of Capital Stock."
Our stock price may be volatile after this offering and you may lose some
or all of 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. You may not be able to resell
your shares of our common stock at or above the initial public offering price
and you may lose some or all of your investment as a result. We expect our
operating results to fluctuate significantly due to a number of factors, many
of which are described elsewhere in this prospectus. In addition to our
operating results, many factors may cause our stock price to fluctuate,
including:
. economic or market conditions generally or in the technology, television,
media or home entertainment industries;
. our failure to meet estimates of our financial performance by securities
analysts; and
. changes in estimates of our financial performance or changes in
recommendations by securities analysts.
An aggregate of 40,952,916 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 this 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.
We cannot predict 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 this 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. Based on shares outstanding as of
December 31, 1999, as adjusted to reflect the issuance of 5,627,267 shares of
Series F preferred stock in January 2000, 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 this Offering Public Market
------------------- ---------------------------------------------------
<C> <S>
35,306,093 / % 180 days after the date of this prospectus pursuant to
agreements between the stockholders and the underwriters
or ReplayTV, provided that Morgan Stanley & Co.
Incorporated can waive this restriction at any time.
24,070,571 of these shares will also be subject to sales
volume restrictions under Rule 144 under the Securities
Act
5,646,823 / % Upon expiration of applicable one-year holding periods
under Rule 144, which will expire between , 2000
and January 25, 2001, 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 to register an aggregate of 18,218,561 shares of common stock
reserved for issuance under our various stock plans.
21
<PAGE>
USE OF PROCEEDS
We expect to receive net proceeds of about $ from this
offering, or $ if the underwriters exercise their over-allotment
option in full, assuming an initial public offering price of $ per
share, (based on the midpoint of the range set forth on the cover page of this
prospectus) after deducting the estimated underwriting discount and
commissions and estimated offering expenses. We estimate our offering expenses
to be about $ .
The principal reason for this offering is to raise capital for:
. subsidies related to the manufacture of ReplayTV-enabled products;
. advertising to promote the ReplayTV Service and ReplayTV 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 competitive and technological developments and the rate
of growth, if any, of our business. We will retain broad discretion in the
allocation of the net proceeds of 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.
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.
22
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 5,627,267 shares of
Series F preferred stock in January 2000 and the automatic conversion of
31,368,852 shares of preferred stock, including the shares of Series F
preferred stock issued in January 2000, outstanding as of the date of
this prospectus into 31,368,852 shares of common stock; and
. on a pro forma basis as further adjusted to reflect the sale of
shares of common stock in this offering at an assumed initial
public offering price of $ per share (based on the midpoint of the
range set forth on the cover page of this prospectus) after deducting the
estimated underwriting discount 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>
As of September 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments................................... $ 49,840 $111,240 $
======== ======== ===
Line of credit................................. $ -- $ -- $
-------- -------- ---
Stockholders' equity (deficit):
Convertible Preferred Stock, issuable in
series, $0.001 par value; 27,137,306 shares
authorized, 25,741,585 shares issued and
outstanding actual; 35,077,301 shares
authorized, no shares issued and outstanding
pro forma; 5,000,000 shares authorized, no
shares issued and outstanding pro forma as
adjusted.................................... $ 26 $ -- $
Common Stock, $0.001 par value; 75,000,000
shares authorized, 9,209,194 shares issued
and outstanding actual; 75,000,000 shares
authorized, 40,578,046 shares issued and
outstanding pro forma; 200,000,000 shares
authorized, shares issued and
outstanding pro forma as adjusted........... 6 37
Additional paid-in capital................... 93,501 154,896
Notes receivable............................. (1,700) (1,700)
Unearned stock-based compensation............ (20,278) (20,278)
Deficit accumulated during development
stage....................................... (23,556) (23,556)
-------- -------- ---
Total stockholders' equity................. 47,999 109,399
-------- -------- ---
Total capitalization..................... $ 47,999 $109,399 $
======== ======== ===
</TABLE>
This table excludes the following shares as of September 30, 1999:
. 6,666 shares of common stock issuable upon the exercise of an outstanding
warrant at an exercise price of $7.50 per share;
. 8,369,618 shares of common stock issuable upon the exercise of stock
options outstanding under our stock option plans at a weighted average
exercise price of $1.50 per share; and
. 1,210,924 shares of common stock available for issuance under our stock
option plans.
23
<PAGE>
DILUTION
The pro forma net tangible book value of ReplayTV, Inc. as of September 30,
1999 was $109.4 million or $2.70 per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the number of shares of common stock
outstanding, after giving effect to the conversion of all outstanding shares
of preferred stock (including shares of preferred stock issued after September
30, 1999) into common stock immediately prior to the closing of this offering.
Assuming the sale by us of shares of common stock in this offering at an
assumed initial public offering price of $ per share, our pro forma net
tangible book value as of September 30, 1999 would have been $ million,
or $ per share of common stock. This represents an immediate increase in
pro forma net tangible book value of $ per share to our existing
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing shares in this offering. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share as of September
30, 1999..................................................... $2.70
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 September 30,
1999, the number of shares of common stock, including shares of preferred
stock to be converted into shares of common stock at the closing of this
offering, purchased from us, the total consideration paid to us and the
average price per share paid by existing stockholders and by new investors.
The information presented is based upon an assumed initial public offering
price of $ per share for shares purchased in this offering, before
deducting the estimated underwriting discount and commissions and estimated
offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 40,578,046 % $131,863,000 % $3.25
New investors...........
---------- --- ------------ ---
Totals................ 100% $ 100%
========== === ============ ===
</TABLE>
These tables assume no exercise of any outstanding stock options or
warrants to purchase common stock. As of December 31, 1999, there were:
. 10,789,637 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $3.05 per
share; and
. 6,666 shares of common stock issuable upon the exercise of an
outstanding warrant at an exercise price of $7.50 per share.
To the extent these options or warrants are exercised, there will be
further dilution to the new investors.
24
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our financial statements and related notes included elsewhere in this
prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The statement of operations data for the period
from August 27, 1997 (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 statement of operations data for the nine months ended
September 30, 1998 and 1999 and for the period from August 27, 1997
(inception) to September 30, 1999, and the balance sheet data as of September
30, 1999, are derived from our unaudited financial statements included
elsewhere in this prospectus and include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of this
information when read in conjunction with the audited financial statements and
related notes. The diluted net loss per share computation excludes potential
shares of common stock (preferred stock, options and warrants to purchase
common stock and common stock subject to repurchase rights that we hold),
since their effect would be antidilutive. See note 1 of the notes to financial
statements included elsewhere in this prospectus for a detailed explanation of
the determination of the shares used to compute actual and pro forma basic and
diluted net loss per share. The historical results are not necessarily
indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
Period from Nine Months Period from
August 27, 1997 Ended September August 27, 1997
(Inception) to Year Ended 30, (Inception) to
December 31, December 31, ----------------- September 30,
1997 1998 1998 1999 1999
--------------- ------------ ------- -------- ---------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Costs and expenses:
Research and
development.......... $ 136 $ 1,961 $ 1,003 $ 4,814 $ 6,911
Programming and
content.............. -- -- -- 560 560
Sales and marketing... 10 764 293 8,735 9,509
General and
administrative....... 9 325 159 2,091 2,425
Hardware distribution
costs, net........... -- -- -- 770 770
Stock-based
compensation......... -- 206 100 3,489 3,695
------ ------- ------- -------- --------
Total costs and
expenses......... 155 3,256 1,555 20,459 23,870
------ ------- ------- -------- --------
Operating loss.......... (155) (3,256) (1,555) (20,459) (23,870)
Interest income
(expense), net......... -- (28) (4) 342 314
------ ------- ------- -------- --------
Net loss................ $ (155) $(3,284) $(1,559) $(20,117) $(23,556)
====== ======= ======= ======== ========
Basic and diluted net
loss per share......... $(0.08) $ (0.48) $ (0.23) $ (2.73) $ (3.35)
Basic and diluted
weighted average shares
used in computation of
net loss per share..... 2,026 6,889 6,880 7,359 7,037
Pro forma basic and
diluted net loss per
share.................. $ (0.29) $ (0.84)
Pro forma basic and
diluted weighted
average shares......... 11,282 23,953
<CAPTION>
As of December
31, As of
----------------- September 30,
1997 1998 1999
------- -------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $ 103 $ 711 $ 49,840
Working capital
(deficit).............. 94 (392) 46,038
Total assets............ 144 1,068 53,406
Total stockholders'
equity (deficit)....... 125 (260) 47,999
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This prospectus contains statements of a forward-looking nature relating to
future events or the future financial performance of ReplayTV. Prospective
investors are cautioned that forward-looking statements involve risks and
uncertainties, and that actual events or results may differ materially. In
evaluating such statements, prospective investors should specifically consider
the various factors identified in this prospectus, including the matters set
forth under the caption "Risk Factors," which could cause actual results to
differ materially from those indicated by such forward-looking statements.
Overview
ReplayTV was incorporated in August 1997, and through the first quarter of
1999, our operating activities consisted primarily of product and service
development. We continue to operate as a development stage company and have
not yet recognized any operating revenues from advertising or other sources.
In April 1999, we launched the ReplayTV Service and the ReplayTV-enabled PVR
via direct sales from our web site and toll free telephone number. More
recently, our products have become available through online retailers. We have
received proceeds from the shipment of ReplayTV-enabled PVRs; however, these
proceeds are considered incidental to our ongoing business and thus have been
reported as a reduction of the related hardware distribution costs in our
statement of operations. We do not intend to manufacture PVRs. Instead, we
intend to license our technology to partners to manufacture PVRs or
incorporate our technology in their consumer electronics products such as
VCRs, DVD players and recorders, set-top boxes or televisions. We recently
entered into such an agreement with MKE, and we intend to enter into similar
relationships with other consumer electronics companies in the future.
MKE initially will purchase from us a minimum number of ReplayTV-enabled
products manufactured by Flextronics and will market, sell and distribute
those products under the Panasonic brand name featuring the ReplayTV logo. We
will also work with MKE to jointly develop future ReplayTV-enabled products.
MKE will focus on hardware development while we will focus primarily on the
further development of the ReplayTV Service. MKE may also develop ReplayTV-
enabled products independent of us. We will work with MKE to develop and
establish customer service and support standards and processes for ReplayTV-
enabled products. We will also cooperate with MKE to market and promote the
ReplayTV Service and ReplayTV-enabled products. MKE will have primary
responsibility for promoting Panasonic-branded ReplayTV-enabled products while
we maintain primary responsibility for promoting the ReplayTV Service. MKE has
agreed to commit a minimum dollar amount toward the promotion and advertising
of ReplayTV-enabled products to be sold under the Panasonic brand. MKE has
agreed to exclusively deal with us in the area of personal video recorders for
the term of our agreement.
We anticipate that the majority of our revenues will be generated from the
sale of advertising on the ReplayTV Service. We will recognize advertising
revenue ratably over the period in which the advertising is displayed,
provided that no significant performance obligations remain. We do not expect
these revenues to become significant until we reach a substantially larger
installed viewer base and develop additional ReplayTV Service functionality.
We do not expect to generate significant revenues from advertising in 2000,
and we may not be able to generate significant revenues thereafter. As a
result, we expect to continue to incur significant losses and negative
operating cash flow for the foreseeable future.
We also anticipate recognizing revenues from future services, such as media
sponsorships, premium and near video-on-demand services and TV-commerce.
Revenues from media sponsorships will be recognized in the period in which the
programming is delivered, provided that no significant performance obligations
remain. Revenues from premium and near video-on-demand services will be
recognized during the period in which the services are provided to the
subscriber. Commissions revenue received for orders processed over the
ReplayTV Service will be recognized as we forward the order information to the
vendor. We do not generate any revenues from the provision of our basic
service.
26
<PAGE>
Version 2.0 of our ReplayTV Service software, to be offered in conjunction
with our full-scale retail launch, will permit us to deliver certain limited
advertising; however, we are continuing to develop additional functionality to
enable us to deliver additional advertising and other services on the ReplayTV
Service in conjunction with various media partners. Version 2.0 will provide
advertising and sponsorship capabilities solely on theme-based or branded
content areas called ReplayZones. In order to generate significant advertising
revenues, we need to expand the capabilities of the ReplayTV Service to permit
full-motion video advertisements on multiple viewer interfaces. We also intend
to expand the capabilities of the ReplayTV Service to permit premium
subscription services, near video-on-demand and TV-commerce, none of which
will be included in version 2.0 of the ReplayTV Service software.
We expect to share a significant portion of the related advertising and
service revenues with our media partners. We also intend to enter into
agreements with multiple distribution partners to encourage more rapid
adoption of the ReplayTV Service. These agreements will provide for retail and
other distribution of ReplayTV-enabled products as well as subsidization of
hardware costs. Our decision to subsidize the manufacturing cost of ReplayTV-
enabled products is based upon our expectation that lower retail prices will
help us obtain viewers, broaden market acceptance for personal television and
increase our future revenues. If these expectations are not met, we may be
unable to generate sufficient revenues to cover our expenses and other
obligations.
Results of Operations
Nine Months Ended September 30, 1999 and 1998
Research and Development. Research and development expenses consist of
engineering personnel and related expenses, materials, connectivity costs and
outside consulting costs related to developing and enhancing the ReplayTV
Service and ReplayTV-enabled PVR. Total research and development expenses
increased to $4.8 million for the nine-month period ended September 30, 1999
from $1.0 million for the nine-month period ended September 30, 1998. The
increase was attributable to increased engineering personnel, consultants and
materials necessary to support the development and launch of the ReplayTV
platform and related service in April 1999. We expect that research and
development costs will continue to increase in the foreseeable future as we
continue to devote resources to develop additional functionality within the
ReplayTV Service.
Programming and Content. Programming and content expenses consist of
personnel and related expenses and outside consulting costs related to
developing and presenting content on the ReplayTV Service. Programming and
content expenses for the nine-month period ended September 30, 1999 were
$560,000. No programming and content costs were incurred during the nine-month
period ended September 30, 1998, as the ReplayTV Service was not launched
until April 1999. The increase was attributable to increased personnel
necessary for content development. We anticipate that programming and content
costs will continue to increase as we develop and provide additional services
and content within the ReplayTV Service.
Sales and Marketing. Sales and marketing expenses consist of advertising,
promotional activities, trade shows, personnel and related expenses and
outside consulting costs. Sales and marketing expenses increased to $8.7
million for the nine-month period ended September 30, 1999 from $293,000 for
the nine-month period ended September 30, 1998. The increase was attributable
to increased personnel and promotional costs associated with the promotion of
the commercial launch of the ReplayTV Service and ReplayTV-enabled PVR in
April 1999. We anticipate that sales and marketing expenses will continue to
increase as we support the full-scale retail launch of the ReplayTV-enabled
PVR in the year 2000. Starting in the second half of the year 2000, we expect
to incur additional sales and marketing expenses to support the sale of
advertising on the ReplayTV Service.
General and Administrative. General and administrative expenses consist of
personnel and related expenses and professional fees related to the
management, legal, finance, accounting and other administrative functions.
General and administrative expenses increased to $2.1 million from $159,000
for the nine-month
27
<PAGE>
periods ended September 30, 1999 and 1998, respectively. The increase was the
result of increased personnel and consultants necessary to support our growth.
We expect that general and administrative expenses will continue to increase
in the foreseeable future.
Hardware Distribution Costs, Net. Hardware distribution costs, net, include
costs to manufacture and distribute the ReplayTV-enabled PVR net of the
proceeds from sales to customers. As we plan to transition the manufacturing
and distribution of our PVRs to MKE and other partners, sales of PVRs are
considered incidental to our business and, therefore, have been reflected as a
reduction of the related costs. Hardware distribution costs, net, were
$770,000 for the nine-month period ended September 30, 1999. During the
nine-month period ended September 30, 1999, we shipped about 3,000 PVRs and
incurred manufacturing and distribution costs of $4.2 million. Proceeds from
sales of PVRs were $3.4 million during the same period. We have agreed to
subsidize Matsushita in connection with their manufacturing and distribution
of ReplayTV-enabled PVRs in future periods. We expect the subsidies to
increase significantly as we increase our installed base.
Stock-Based Compensation. Stock-based compensation includes the
amortization of unearned employee stock-based compensation and expenses for
stock granted to consultants in exchange for services. In connection with the
grant of employee stock options, we recorded aggregate unearned stock-based
compensation of $23.5 million through September 30, 1999 and additional
unearned stock-based compensation of about $13.5 million for stock options
granted in October, November and December 1999. Employee stock-based
compensation expense is amortized over the vesting period of the options,
which is generally four years, using the multiple-option approach. We recorded
employee stock-based compensation expense of $3.0 million for the nine months
ended September 30, 1999. We currently expect to record employee stock-based
compensation expenses of about $4.0 million for the quarter ended December 31,
1999, $4.7 million for the quarter ending March 31, 2000 and $4.4 million for
the quarter ending June 30, 2000. We anticipate that these expenses will
decrease in future periods. Unearned stock-based compensation expense will be
reduced in future periods to the extent that options are terminated prior to
full vesting. We recorded expenses of $444,000 for the nine months ended
September 30, 1999 in connection with the vesting of stock options issued for
services. Expenses related to options granted to consultants may increase in
future periods if we grant additional options to consultants in exchange for
services or the fair value of our stock increases during the vesting period of
the options. We also recorded expenses of $71,000 for the nine months ended
September 30, 1999 in connection with common stock issued for services.
Interest Income (Expense), Net. Interest income (expense), net, consists of
interest earned on cash equivalents and short-term investments, offset by
interest expense related to bank borrowings and other financing lines.
Interest income (expense), net, was $342,000 for the nine-month period ended
September 30, 1999 and ($4,000) for the nine-month period ended September 30,
1998. The increase in interest income was due to higher average cash
equivalents and short-term investment balances from additional sales of
preferred stock completed in the first three quarters of 1999.
Provision for Income Taxes. We have incurred operating losses for all
periods from inception through September 30, 1999, and therefore have not
recorded a provision for income taxes. Our deferred tax asset primarily
consists of net operating loss carryforwards and nondeductible accruals and
allowances. We have recorded a valuation allowance for the full amount of our
net deferred tax assets, as the future realization of the tax benefit is not
currently likely.
As of December 31, 1998, we had net operating loss carryforwards for
federal and state tax purposes of about $1.9 million and $1.9 million,
respectively. These federal and state tax loss carryforwards are available to
reduce future taxable income and expire at various dates into the year 2018.
We expect that the amount of net operating loss carryforwards that could be
utilized annually in the future to offset taxable income will be limited by
"change in ownership" provisions of the Internal Revenue Code. This annual
limitation may result in the expiration of net operating loss carryforwards
before their utilization.
28
<PAGE>
Year Ended December 31, 1998 and Period from Inception to December 31, 1997
Research and Development. Research and development expenses increased to
$2.0 million in fiscal 1998 from $136,000 for the period from inception to
December 31, 1997. The increase was the result of growth in ReplayTV's
engineering personnel, consultants and materials from inception throughout
1998.
Sales and Marketing. Sales and marketing expenses increased to $764,000 in
fiscal 1998 from $10,000 for the period from inception to December 31, 1997.
The increase was the result of increased personnel to support the commercial
launch of the ReplayTV Service and ReplayTV-enabled PVR in April 1999.
General and Administrative. General and administrative expenses increased
to $325,000 in fiscal 1998 from $9,000 for the period from inception to
December 31, 1997. The increase was the result of increased personnel costs to
support our overall growth.
Stock-Based Compensation. In connection with the grant of employee stock
options, we recorded unearned stock-based compensation of $857,000 for the
year ended December 31, 1998, which is being amortized over a four-year
vesting period using the multiple-option approach.
Interest Income (Expense), Net. Interest income (expense), net, was
$(28,000) and $0 for the year ended December 31, 1998 and for the period from
inception to December 31, 1997, respectively. The increase in interest expense
was due to interest paid on a convertible promissory note issued by one of our
founders.
Quarterly Results of Operations
The following table sets forth a summary of our unaudited quarterly
operating results for each of the seven quarters in the period ended September
30, 1999. This information has been derived from our unaudited financial
statements contained elsewhere in this prospectus and includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of this information when read in conjunction with our audited
financial statements and related notes. The amount and timing of our costs and
operating expenses generally will vary from quarter to quarter depending on
our level of actual and anticipated business activities. Our revenues, if any,
costs and operating results are difficult to forecast and will fluctuate, and
we believe that period-to-period comparisons of our operating results will not
necessarily be meaningful. As a result, you should not rely on them as an
indication of future performance.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
1998 1998 1998 1998 1999 1999 1999
-------- -------- --------- -------- -------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Costs and expenses:
Research and
development.......... $ 160 $ 297 $ 546 $ 958 $ 1,462 $ 1,148 $ 2,204
Programming and
content.............. -- -- -- -- -- 79 481
Sales and marketing... 6 50 237 471 1,484 3,259 3,992
General and
administrative....... 18 30 111 166 314 532 1,245
Hardware distribution
costs, net........... -- -- -- -- -- 167 603
Stock-based
compensation......... 12 24 64 106 200 915 2,374
----- ----- ----- ------- ------- ------- --------
Total costs and
expenses........... 196 401 958 1,701 3,460 6,100 10,899
----- ----- ----- ------- ------- ------- --------
Operating loss.......... (196) (401) (958) (1,701) (3,460) (6,100) (10,899)
Interest income
(expense), net......... 1 1 (6) (24) (33) 33 342
----- ----- ----- ------- ------- ------- --------
Net loss................ $(195) $(400) $(964) $(1,725) $(3,493) $(6,067) $(10,557)
===== ===== ===== ======= ======= ======= ========
</TABLE>
29
<PAGE>
Costs and expenses increased each quarter from the first quarter of 1998
through the first quarter of 1999 as we completed the development and
introduction of the ReplayTV Service and ReplayTV-enabled PVR. Costs and
expenses increased during the second and third quarters of 1999 as we
continued to enhance the functionality of the ReplayTV Service and increased
personnel and related costs in anticipation of the full-scale retail launch of
the ReplayTV-enabled PVR in 2000. We expect that future costs and expenses
will increase substantially for the foreseeable future due to subsidies of
ReplayTV-enabled products to reduce consumer prices and encourage the
distribution of our products and increased advertising and promotional
efforts.
Seasonality
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 in general
could alter current or prospective advertisers' spending priorities or
increase the time it takes to close a sale with our advertisers, which could
cause our revenues from advertisements to decline significantly in any given
period.
We are subject to seasonality in consumer electronics product sales, which
have traditionally been much higher during the holiday shopping season
(occurring in the fourth quarter) than during other times of the year.
Although predicting consumer demand for our products will be very difficult,
we believe that sales of ReplayTV-enabled products and attraction of new
viewers to the ReplayTV Service will be disproportionately high during the
holiday shopping season when compared to other times of the year. Because we
expect to subsidize the purchase price of ReplayTV-enabled products, we will
incur greater costs and expenses when more ReplayTV-enabled products are sold.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
sales of our equity securities. At September 30, 1999, we had raised $67.8
million from the sale of our preferred and common stock and had an accumulated
deficit of $23.6 million, and held cash, cash equivalents and short-term
investments totaling $49.8 million.
Our operating activities used cash in the amount of $13.5 million for the
nine months ended September 30, 1999, $2.5 million for fiscal 1998 and
$144,000 for the period from inception through December 31, 1997. This
negative operating cash flow resulted primarily from our net losses
experienced during these periods. Since inception, we have invested in the
development of our ReplayTV Service and ReplayTV-enabled PVRs and related
marketing efforts and hired additional personnel to support our growth.
Net cash used in investing activities totaled $36.9 million for the nine
months ended September 30, 1999, $149,000 for fiscal 1998 and $33,000 for the
period from inception through December 31, 1997. The net cash used was
primarily for the purchase of property and equipment and the purchase of
short-term investments in the third quarter of 1999. We will continue to
invest our cash in excess of current operating requirements in short-term,
interest-bearing, investment-grade securities, some of which are classified
for accounting purposes as cash equivalents and some as short-term
investments.
Our financing activities generated cash of $64.3 million for the nine
months ended September 30, 1999, $3.3 million for fiscal 1998 and $280,000 for
the period from inception through December 31, 1997. The issuance of preferred
stock to financial investors and strategic corporate partners generated net
proceeds of $67.8 million, or nearly this entire amount.
In June 1999, we entered into a line of credit agreement with a financial
institution. The line provides for the issuance to ReplayTV of up to $1.25
million on a non-formula basis subject to meeting a monthly liquidity
covenant. The line bears interest at the bank's prime rate plus 0.75% and
expires in May 2000. At September 30, 1999, we had no borrowings and a
$500,000 standby letter of credit to a vendor secured under this line.
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In January 2000, we issued 5,627,267 shares of Series F preferred stock at
$11.00 per share resulting in net cash proceeds of about $61.4 million. Upon
the closing of this offering, all outstanding shares of Series F preferred
stock will be converted on a one-for-one basis into shares of common stock.
For the quarter ending March 31, 2000, the Company will record a non-cash
preferred stock dividend to reflect the beneficial conversion ratio as a
result of the difference between the issuance price of the Series F preferred
stock and the low end of the assumed initial price range of the common stock
in this offering.
As of September 30, 1999, our principal commitments consisted of our line
of credit and a facilities operating lease totaling $16.1 million through its
expiration in March 2006.
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 incur significant losses and
negative cash flow for the foreseeable future. We expect to devote significant
resources to marketing the ReplayTV Service and to subsidizing our partners'
distribution of ReplayTV-enabled products. Although we believe that our
existing cash, cash equivalents, short-term investments and net proceeds from
this offering will be sufficient to satisfy our cash requirements for the next
12 months, there can be no assurance that we will not require additional
financing within this time frame. If market acceptance of our ReplayTV Service
is faster than expected or we increase the amount of subsidy per unit in order
to maintain competitive pricing within the retail market, we will devote
substantially more resources to subsidize our distribution partners than
currently anticipated. In addition, we will need to raise additional capital
beyond the next 12 months in order to fund the continued development and
distribution of the ReplayTV Service. We may not be able to raise additional
funds on terms acceptable to us, or at all. If additional funds are raised
through the sale of equity or convertible debt securities, our stockholders
may experience additional dilution, and these securities may have rights,
preferences or privileges senior to those of our stockholders.
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BUSINESS
Overview
ReplayTV empowers television viewers to watch what they want when they
want. We have developed the ReplayTV Service as a living room portal through
which viewers can easily access, navigate, control and store television
programming. We believe the ReplayTV Service will transform the way consumers
access television programming, advertising and, ultimately, commerce services.
We believe our portal creates a new, more effective medium for advertisers,
content providers and cable and satellite system operators to target
consumers. Based on ReplayTV-sponsored survey data, viewers using the ReplayTV
Service watch and record more hours of television per week and find television
viewing more appealing than before using the ReplayTV Service. We believe this
is because the ReplayTV Service gives viewers greater choice and more control
over their television viewing.
The ReplayTV Service is currently delivered through a personal video
recorder, or PVR, designed and developed by us. The PVR is a device connected
to a television that employs a hard disk drive, software and other technology
to digitally record and access content. Through ReplayTV's combination of
proprietary software, hardware and media relationships, viewers personalize
their television viewing. The ReplayTV Service allows viewers to set up
personal channels that automatically record their favorite shows. Programs can
then be replayed "on demand," with no tapes to search or rewind. Viewers can
also search for programs based on a theme, a specific hobby or a favorite
actor or director. ReplayTV-enabled PVRs operate with existing broadcast,
cable and satellite infrastructures. In the future, we expect that our PVR
technology will be incorporated into other television-related consumer
electronics devices that will provide access to the ReplayTV Service.
We announced our ReplayTV Service in January 1999 and began shipment of our
PVRs in April 1999. We intend to commence full-scale retail distribution
through leading consumer electronics companies this year. Matsushita-Kotobuki
Electronics Industries, Ltd., or MKE, a subsidiary of Matsushita Electric
Industrial Co., Ltd., the largest manufacturer of VCRs sold in North America,
has agreed to market and sell PVRs under the Panasonic brand featuring the
ReplayTV logo. The retail launch with MKE is expected to occur in mid-2000,
and MKE is working to develop new consumer electronics devices that
incorporate ReplayTV technology. We believe that relying on MKE in the future
to manufacture, market and sell ReplayTV-enabled products will allow us to
focus our creative resources on promoting and enhancing the ReplayTV Service.
We are also in discussions with a number of other consumer electronics
companies regarding the manufacture, marketing and sale of ReplayTV-enabled
products.
The ReplayTV Service has been designed to enable advertisers, content
providers and cable and satellite system operators to exploit the dramatic
growth potential of PVRs. Paul Kagan Associates, Inc. estimates that there
will be about six million devices with PVR functionality installed in U.S.
households by 2002, with that number increasing to about 16 million by 2005,
representing about 15% of projected U.S. households in 2005. International
Data Corporation estimates that there will be about nine million devices with
PVR functionality installed in U.S. households by 2002, with that number
increasing to about 40 million by 2005, representing about 37% of projected
U.S. households in 2005.
Industry Background
More American households have televisions than have telephone service. The
average television adult in the United States spends about 4.3 hours per day
watching television. According to Kagan, there are about 100 million
television households in the United States, implying a market penetration of
nearly 98%. According to U.S. government data, the average American household
owns about 2.4 televisions.
The number of television programming options available to the average
viewer has increased significantly in recent years. The explosive growth in
the number of available channels has led to an overwhelmingly diverse
selection of programming through which viewers must sort. Viewers have
thousands of programming choices each week.
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Television advertising remains the dominant medium for building general
awareness for consumer products and services. Kagan estimates that over $52
billion was spent on broadcast and cable television advertising in the U.S. in
1999. Over the past several decades, revenue from television advertising has
consistently increased despite the introduction of new technologies that
initially appeared to threaten traditional TV advertising, such as the remote
control and the VCR. Indeed, even in the face of viewer fragmentation, revenue
from television advertising has increased in every year but one since 1975.
The ubiquitous nature of television, its singular ability to reach large
and increasingly more targeted audiences, and the growing number of television
viewing choices are creating significant new challenges for viewers, content
providers, advertisers and system operators. These challenges create
opportunities for personal television service providers.
Challenges Faced by Viewers. Television has always provided viewers with
programming choices. However, with rapidly increasing numbers of channels and
programs, viewer choice now borders on confusion. Despite an increasing number
of available channels and programs, viewers continue to complain that they
cannot find anything that they want to watch. Viewers desire greater ease of
use, convenience and control in television viewing, particularly in light of
their decreasing leisure time. We believe today's television viewers want the
ability to:
. view the shows they want to watch at times that are convenient to them,
rather than at the times at which they are scheduled;
. easily find and record every episode of their favorite show whenever it
is on;
. easily navigate through available content offerings to locate interesting
programs to watch, especially when they do not have a particular show in
mind; and
. access expanded information about available programming content.
Challenges Faced by Content Providers. Competition for the attention of
television viewers has dramatically increased over the past decade. The
expansion of the cable and satellite broadcast infrastructure and the
subsequent proliferation of available channels have fragmented the television
audience. In addition, the emergence of rival media, such as the Internet and
DVDs, and even the videocassette, has further compounded the problem.
This fragmentation and broader competition has placed additional pressure
on content providers to attract more targeted audiences and to more
effectively evaluate viewer habits, preferences and frequency of watching
specific television shows. These developments make it increasingly more
difficult for content providers to attract more viewers. In order to do so,
content providers must:
. promote their shows more effectively and efficiently;
. continue to increase television usage in the face of alternative media;
. build their own brand recognition and loyalty; and
. provide viewers with easier access to their programs.
Challenges Faced by Advertisers. Despite declining market share and ratings
with respect to individual networks and programs, the cost of broadcast
advertising has increased. According to data from Nielsen Media Research, the
average cost of prime time advertisements on the major television networks
increased almost 28% between the 1994/95 season and the 1998/99 season. In
addition, cost constraints and the basic nature of traditional broadcast
television have placed limits on the length of messages that advertisers can
deliver. At the same time, advertisers have been forced to spend increasing
amounts to target desired demographic groups and
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to spread their advertising budgets over an ever-expanding number of channels
and programs. As a result of these trends, advertisers must:
. target viewers by finding better ways to identify, measure and respond to
viewers' programming and purchasing preferences;
. deliver information to consumers more effectively; and
. spend advertising budgets as efficiently as possible.
Challenges Faced by Cable and Satellite System Operators. Cable and
satellite system operators continue to make heavy investments to upgrade their
broadband infrastructures in response to competitive pressures, growing
consumer demand for additional and better programming and the advent of new
technologies. In order to realize returns on these investments, system
operators face the challenge of increasing revenues through the launch of new
services without cannibalizing existing lines of business. Furthermore,
selling excess network capacity can provide additional returns on these
investments. In addition, reducing subscriber churn and growing subscriber
bases have become core strategic goals because the market valuations of cable
and satellite system operators are largely based on numbers of subscribers. As
a result of these trends, cable and satellite system operators must:
. provide new features and functionality in order to retain existing
customers and attract new customers;
. enhance the appeal of existing premium offerings, thereby increasing
premium penetration and reducing subscriber churn rates for premium
services;
. enhance the appeal of existing pay-per-view offerings, thereby increasing
pay-per-view buy rates; and
. launch new and enhanced services such as video-on-demand and TV-commerce
at the lowest possible cost to maximize returns.
The ReplayTV Service
We have developed the ReplayTV Service to become the living room portal
that allows viewers to easily store, navigate and control television viewing,
thereby creating a new medium for advertisers, content providers and cable and
satellite system operators. Through this new medium, content providers and
advertisers can promote and deliver their programming and commercial messages
more effectively to consumers. The ReplayTV Service has won several consumer
awards, including the "Best of Show" award in the video category announced at
the International Consumer Electronics Show in January 1999, the "Innovations
2000" award in both the video software and video hardware categories announced
at the International Consumer Electronics Show in January 2000 and David
Coursey's Showcase 1999 People's Choice Award.
Benefits to Viewers. Just as consumers have achieved enhanced freedom and
control over their lives through automated teller machines, cellular phones,
the Internet and 24-hour grocery stores, we believe television viewers want
greater freedom and control with respect to their television viewing
experiences. The ReplayTV Service provides this freedom and control by
enabling viewers to:
. Watch what they want when they want. With ReplayTV, viewers can watch
shows on their own schedules. Viewers can easily select, view or replay
television shows through a simple-to-use on-screen channel guide.
ReplayTV's interactive channel guide and clock are conveniently and
automatically updated and synchronized on a nightly basis when the
ReplayTV-enabled PVR dials into a secure remote server.
. Never miss their favorite shows. ReplayTV is unlike any VCR. Most viewers
use their VCRs only for viewing pre-recorded tapes rather than recording
their favorite shows, due to the complexity involved in programming the
VCR. ReplayTV uses a hard disk drive rather than videotape to record,
store and replay currently up to twenty hours of television programming
and content using MPEG2, a digital compression technology. Recordings are
activated at the touch of a button using ReplayTV's universal remote.
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Programs can be easily configured into personal, or on-demand channels, so
that viewers will never miss their favorite shows.
. Locate, capture and record the best in television. ReplayTV enables
viewers to locate programs of interest, especially when they do not have
a particular show in mind to watch. With the ReplayTV Service, viewers
will be able to find and record programs that match their viewing
preferences so that when they are ready to watch TV, they will be able to
choose from a number of shows that interest them. The ReplayTV Service is
expected to feature unique and exciting program information, promotions
and content on theme-based or branded content areas called ReplayZones.
ReplayZones will allow viewers to easily navigate through the wide
variety of content that viewers might otherwise be unaware of.
. Control live TV. The ReplayTV Service offers real-time viewing features
not possible with VCRs, such as pause, multi-speed slow motion, rewind
and seven-second instant replay because the ReplayTV Service continuously
records the program being watched. In addition, viewers can use the fast
forward feature to catch up to the live broadcast in progress.
. Enjoy personal television services with no monthly fees. With the
purchase of a ReplayTV-enabled PVR, the basic ReplayTV Service is
provided to viewers with no monthly fees and includes free software
upgrades and promotional content.
Benefits to Content Providers. The ReplayTV Service can enable television
programmers and broadcasters to proactively compile their content in ways that
will effectively promote their shows, thereby creating an opportunity for
greater audience growth, loyalty, recognition and measurement. Key benefits
offered to content providers include:
. Generating a larger audience. The ReplayTV Service allows content
providers to reach an audience that may have been unable to watch their
shows due to conflicts between broadcast times and their own personal
schedules. ReplayTV-sponsored surveys indicate that viewers using the
ReplayTV Service watch an average of about 2.5 more hours and record an
average of about seven more hours of television each week than before
they began using the ReplayTV Service. In addition, because these viewers
are able to watch programming on their own schedule with VCR-like
functionality, we believe they are more likely to actually watch the
whole show. The ReplayTV Service will allow content providers to create
ReplayZones that will deliver program information, promotions and content
on channels that are branded and edited by the content providers
themselves. In the future, we also plan to offer content providers the
opportunity to promote shows that are similar even if the shows are not
broadcast sequentially. Other future programming opportunities include
sponsoring premium personal channels and providing additional footage,
such as "director's cuts," of programs for ReplayTV viewers.
. Enhanced viewer loyalty and retention. We believe that the ability to
easily record programs using the ReplayTV Service will increase the
likelihood that viewers will continue viewing new episodes of a
particular series or show. For example, the show-based recording feature
allows viewers to automatically record every episode of their favorite
show. Viewers also can easily replay the shows they have recorded at
their convenience long after they have aired, thereby enhancing viewer
retention and loyalty.
. New platform for innovative content delivery. The ReplayTV Service is
being developed to facilitate an entirely new paradigm for delivering
programming, products and services to viewers. We anticipate that viewers
will be able to simply "point and click" when ordering merchandise,
movies, sports events, programming packages, games and other products and
services, thereby offering content providers a new way to attract viewers
and expand audiences.
Benefits to Advertisers. We believe that our ReplayTV Service will offer
advertisers a new platform that provides a more effective way to deliver
information to consumers, a more efficient way to spend advertising budgets and
a better way to target audiences and identify, monitor and respond to
consumers' programming and purchasing preferences. Key benefits offered to
advertisers include:
. More effective targeting of consumers. The ReplayTV Service creates a
platform for specialized advertising. The ReplayTV platform is expected
to provide more accurate audience measurement and
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viewer data, while maintaining viewer privacy on an individual basis. The
ReplayTV Service will enable advertisers to more effectively target
consumers who have actively selected specific programs to watch and
therefore are more likely to watch an entire show. Advertisers will also
be able to target advertising to viewers who have created theme-based
ReplayTV channels based on a specific topic, such as "tennis."
. Platform for new advertising opportunities. ReplayTV's basic PVR
architecture can support a wide range of future innovative advertising
services. For example, advertisers may be able to purchase new
advertising on recorded shows with the use of lead-in and lead-out
advertisements. Viewers may also be able to click on banners or short,
full motion video commercials to obtain longer, infomercial-style
content. Ultimately, viewers may be able to purchase a featured product
or service using the remote control, creating an interactive on-air
shopping experience for the viewer.
Benefits to Cable and Satellite System Operators. The ReplayTV Service
enables cable and satellite system operators to enhance the attractiveness of
their existing and anticipated services to consumers. We believe this will
enable cable and satellite system operators to increase acceptance of new
service offerings and improve growth prospects of existing lines of business.
Furthermore, we believe that greater customer satisfaction will lead to
reduced subscriber churn rates and increase the operators' ability to market
to new customers. Key benefits offered to cable and satellite system operators
include:
. Opportunities to reduce churn and grow subscriber base. The ReplayTV
Service is designed to reduce viewer frustration, make programming
accessible to viewers on their schedule, assist viewers in navigating the
expanding programming universe and allow viewers to customize their
viewing experience based on their personal preferences. We expect that
these benefits will increase customer satisfaction with cable and
satellite subscriptions and, therefore, reduce subscriber churn. In
addition, these benefits provide system operators with new marketing
tools to convert households that have never subscribed to or have
cancelled cable or satellite services into paying subscribers.
. Enhanced appeal of premium offerings. We believe that there is a
significant portion of cable and satellite customers who do not subscribe
to premium channels such as HBO and Showtime because they lack the
ability to easily watch what they want when they want. By enabling
subscribers to view their favorite premium shows on their own schedules,
we believe that service operators can increase premium penetration and
retention rates.
. Enhanced appeal of pay-per-view offerings. Convenience increases pay-per-
view usage. For example, the buy rates, or movie purchases per month, for
households with access to more advanced cable or satellite technologies
known as near video-on-demand are more than three times those for
conventional pay-per-view systems. With future versions of the ReplayTV
Service, subscribers will be able to watch selected movies or events when
they want, with the ability to control how they view the movie or event
with features that exceed VCR functionality.
. Platform for new services and better capacity utilization. We expect that
the ReplayTV Service will provide new sources of revenue for system
operators, such as near video-on-demand or TV-commerce services. For
example, system operators could pre-deliver onto ReplayTV-enabled
products a variety of pay-per-view movies or events from which
subscribers could choose to purchase and view at their convenience. The
hard disk capacity of the ReplayTV Service can be used to store data
transmitted into viewers' homes during off- or non-peak hours, thereby
supporting data-intensive services such as near video-on-demand with
bandwidth for which there are few current applications.
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ReplayTV Strategy
Our goal is to build a major media company by establishing our proprietary
ReplayTV Service as the leading living room portal to enrich personal
television viewing, advertising and TV-commerce. Our strategy to achieve this
goal includes the following key elements that leverage the benefits of the
ReplayTV Service:
Enhance the Living Room Experience. The ReplayTV Service is designed to
enhance the traditional living room experience. ReplayTV incorporates the best
personal computer technologies, such as hard drive storage, a search engine
and a microprocessor, while still maintaining the ease and comfort of living
room TV entertainment. Because we do not identify the ReplayTV Service as
either a personal computer or an Internet-based service, we believe the
ReplayTV Service will appeal to a broader range of viewers.
Aggressively Drive Rapid Market Penetration. We are focused on making
ReplayTV the standard for personal television, which depends upon vigorously
accelerating our market penetration.
. Partnership-based distribution model. Our strategy is to increase our
market penetration by incentivizing consumer electronics manufacturers
and cable and satellite system operators to deliver ReplayTV-enabled
products to their customers. We plan to license our technology to major
consumer electronics manufacturers to manufacture, distribute and market
ReplayTV-enabled units to customers. We have a manufacturing, marketing
and distribution agreement with MKE, a subsidiary of Matsushita Electric
Industrial Co., Ltd., the largest manufacturer of VCRs sold in North
America, and we intend to enter into similar relationships with other
consumer electronics companies in the future. We anticipate that future
versions of our service will be integrated into other consumer
electronics products, such as cable set-top boxes, satellite receivers,
DVD players, television sets and Internet access devices. By offering
consumers a broad array of ReplayTV-enabled products, we can expand the
infrastructure upon which our services may be offered and increase our
installed base.
. Lower consumer price point. We plan to subsidize the retail price of our
PVRs in order to lower the cost to the consumer. We anticipate that the
prices of our PVRs and size of the subsidy will generally decrease over
the long term as economies of scale and decreasing component costs reduce
manufacturing costs. We expect that component costs will decline largely
because our PVRs utilize components that are under continual pricing
pressure as a result of the proliferation of consumer electronics
products, such as DVD players and personal computer peripherals, that
incorporate many of these components.
. Multi-channel marketing to customers. We intend to dedicate substantial
resources to promoting the ReplayTV brand through multiple advertising
and marketing channels, including direct mail, infomercials, non-
infomercial television, radio, online and print advertising, and free-
standing inserts.
. Free ReplayTV Service and customer support. We have designed the ReplayTV
Service with customer needs in mind. The basic ReplayTV Service is
available free of charge to purchasers of ReplayTV-enabled products,
while the services offered by our competitors are subscription-based. We
also provide free promotional content and free upgrades, which we
download remotely without effort by the viewer. In addition, we provide
free customer support by e-mail and telephone.
Leverage the Strength of Our Existing Media Relationships. We are building
strong industry relationships by offering benefits to established industry
participants. The ReplayTV Service is designed to benefit broadcasters, cable
and satellite system operators, content companies and other existing industry
participants by offering new revenue opportunities while preserving
traditional revenue streams. Based on this model, we are building strong
relationships with some of the largest media companies in the world. For
example, we are creating ReplayZones for NBC, Showtime and Turner, and our
existing equity investors include Disney, Liberty Media, NBC, Showtime, Time
Warner and Tribune. Our ability to build strong industry relationships is
greatly enhanced by our senior management team, which has substantial high-
level experience in television programming, content development, advertising
and promotion, and media-related finance.
Create New and Innovative Advertising Opportunities. We believe our
ReplayTV portal will provide advertising opportunities that do not exist in
television today. For example, we plan to offer graphic and full-
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motion advertising on the Replay Guide and other viewer interfaces,
transitional advertisements when the pause or other features are activated,
lead-in or lead-out advertisements inserted at the beginning or end of
recorded programs and, with the cooperation of content providers, targeted
advertisements inserted over existing broadcast messages.
Develop Enhanced Services. We plan to expand the revenue-generating
opportunities of the ReplayTV Service by working with and, in appropriate
cases, securing licenses from, strategic partners to include future generation
services such as premium subscription services, near video-on-demand, and TV-
commerce.
. Premium subscription services. We intend to offer subscriptions to a
premium service that would allow customers to create personalized
channels such as individualized news, sports, business and weather
channels containing segments of content that are automatically combined
according to viewer preferences. For example, we are working with CNN to
index its program segments by key word and deliver targeted segments to a
viewer's personal news channel based upon his or her customized
preferences. We believe that sponsorship of premium subscription services
by content providers will provide a new revenue stream.
. Near video-on-demand. We intend to offer near video-on-demand services
that would enable viewers to watch select pay-per-view movies at the
times convenient to them. A selection of pay-per-view movies would be
downloaded to the ReplayTV Service overnight, and viewers could then
choose a movie for viewing at their desired time for a one-time fee. With
future increases in both hard disk storage and transmission capacity, we
expect to be able to pre-deliver a substantial library of movies to the
ReplayTV Service, which viewers could conveniently access on a pay-per-
view basis.
. TV-commerce. As a living room portal, the ReplayTV interface provides
several TV-commerce opportunities. Similar to the Internet, we intend to
provide the viewer with access to one-click shopping for merchandise
offered by partners through the ReplayTV Service.
The ReplayTV Platform
The ReplayTV-enabled PVR. The ReplayTV Service is delivered through a
personal video recorder, or PVR, designed and developed by ReplayTV. The
ReplayTV-enabled PVR connects with a viewer's television set and cable or
satellite set-top box and employs a hard disk drive and software technology to
digitally record and replay analog or digital broadcast television signals. As
a viewer watches television, the ReplayTV-enabled PVR automatically records
the current program onto its hard disk, enabling the viewer to control live
television with features such as pause, rewind and multi-speed slow motion.
Using the ReplayTV remote control, the viewer can manipulate a live broadcast,
select shows to record or replay recorded shows stored on the hard disk. The
hard disk in the current model of the ReplayTV-enabled PVR can accommodate up
to 20 hours of recording under standard resolution, and we expect to introduce
an additional model that will accommodate 30 hours of standard recording
capacity in mid-2000.
The ReplayTV Network. The ReplayTV network forms the backbone of the
ReplayTV Service. ReplayTV-enabled PVRs automatically dial into the ReplayTV
network each night through a standard telephone line to receive downloads of
updated information. Through this connection, individual ReplayTV-enabled PVRs
are able to receive regular updates of Channel Guide data, advertisements and,
in the future, ReplayZone content. In addition, connecting to the ReplayTV
network allows ReplayTV-enabled PVRs to receive free software upgrades and to
automatically download new features of the ReplayTV Service. We expect that
current users of the ReplayTV Service will be upgraded to version 2.0 of the
ReplayTV Service software in mid-2000.
Communications services for the ReplayTV network are currently provided by
UUNET Technologies, Inc. The software for the ReplayTV network is currently
maintained in servers owned by ReplayTV and operated by Exodus Communications,
Inc. in a data center located in Santa Clara, California. ReplayTV has also
arranged for backup data center services at a second outside facility. We are
in the process of qualifying additional network communications providers in
order to incorporate redundancy in our network. We plan to enter into an
arrangement with an additional network provider in the near future, and then
to set up a duplicate data center in the eastern United States.
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The ReplayTV Experience
The ReplayTV Service is designed for television viewers who want to watch
their favorite shows when they want to watch them, with no monthly fees. The
ReplayTV Service is customized for the traditional living room viewing
experience. With an easy-to-use interface, the ReplayTV Service allows viewers
to personalize their television viewing by:
. automatically recording television shows on a hard disk;
. controlling live television using features such as pause, rewind, multi-
speed slow motion and seven-second instant replay;
. easily finding the shows that interest them; and
. accessing specialized content on theme-based or branded content areas
called ReplayZones, to be available in version 2.0 of the ReplayTV
Service software.
Using the ReplayTV Service. The viewer navigates the ReplayTV Service using
the ReplayTV remote control. ReplayTV offers three basic interfaces--the
Channel Guide, the Replay Guide and, with the introduction of version 2.0 of
the ReplayTV Service software, ReplayZones--rather than just one access point.
The Channel Guide combines regularly updated television programming with
proprietary software to provide an interactive lineup of all channels
available to the viewer. The Replay Guide is an on-screen guide of personal
channels that viewers create based on shows they select to record or themes
they define to locate and record shows. ReplayZones are portals to access
theme-based programming focused around a category or a network. The viewer can
directly access the central screens through their corresponding remote control
buttons or by selecting them from the Main Menu, both of which are shown
below:
[SCREEN SHOTS OF 1. MAIN MENU, AND 2. REPLAYTV PVR AND REMOTE CONTROL]
Channel Guide. The ReplayTV Service includes an on-screen Channel Guide
that combines regularly updated television programming with proprietary
software to provide an interactive lineup of all channels available to the
viewer. The Channel Guide is shown here:
[SCREEN SHOT OF CHANNEL GUIDE SHOWING ALLY McBEAL]
The Channel Guide is updated nightly via an automatic download from the
ReplayTV Service and is based directly on the analog broadcast, cable or
satellite services that the viewer subscribes to, as specified by the viewer
during the on-screen setup process. If the viewer receives television from
more than one source, the Channel Guide presents all of the available
programming in one convenient guide. From the Channel Guide screen, the viewer
can either select a show to watch or select a show for recording at a later
time.
Finding shows to record. The ReplayTV Service allows the viewer to quickly
find a show for recording through its Find Shows feature. The viewer can
search by entering the show title, a part of the title, an actor or director
or even a topic. A sample search using the Find Shows feature is shown below:
[SCREEN SHOT OF FIND SHOWS SEARCH FOR "TENNIS"]
Once the ReplayTV Service completes a search, the viewer can choose to
record an episode of a particular show located by the Find Shows feature or
create a show-based ReplayTV channel that will automatically record every
episode of a selected show. A single-record ReplayTV channel is a channel that
the viewer has set up to record just one broadcast of a show. Only the chosen
show is recorded. A show-based ReplayTV channel set up by the viewer will
record every episode of a recurring show, whether it is broadcast daily or
weekly. When searching by topic, the viewer can also create a theme-based
ReplayTV channel that will automatically search for and record every show
related to that topic on an ongoing basis. For example, the viewer can create
a theme-based channel to record all shows related to the keyword "tennis." In
addition to capturing televised tennis matches, the tennis-themed ReplayTV
channel would also record a biography about a famous tennis player or a show
about the history of tennis at Wimbledon.
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Recording shows. The ReplayTV Service allows the viewer to record a show
with the touch of a button without programming exact start times or channel
settings. Once the viewer has identified a particular show, the viewer simply
presses the Record button on the remote control to record the show for future
viewing. By pressing the Record button twice, the viewer creates a show-based
ReplayTV channel, which automatically records every episode of the show. The
viewer can also select shows to record by pressing the Select button on the
remote control and completing the Record Options screen, as shown below:
[SCREEN SHOTS OF 1. CHANNEL GUIDE SHOWING ALLY McBEAL, AND 2. RECORD
OPTIONS SCREEN]
Once a show has been selected for recording, the Channel Guide displays a
single solid red dot to confirm a guaranteed recording of a single show and
two solid red dots to confirm a guaranteed recording of a show-based ReplayTV
channel. Non-guaranteed recordings are represented by hollow red dots. The
ReplayTV Service will always record guaranteed shows, and will record non-
guaranteed shows if space is available on the hard disk at the time the show
is scheduled to air. The viewer manages hard disk space by setting up
guaranteed and non-guaranteed shows and by deleting recorded shows after they
have been watched.
ReplayZones. ReplayZones, to be available in version 2.0 of the ReplayTV
Service software, are portals to access theme-based programming around a
category or a network. ReplayZones, which are created by our media partners or
by ReplayTV, contain program information, promotions and content for viewers.
Viewers can browse through topical ReplayZones and choose programs to record.
For example, we plan to introduce a Movie Zone, where the viewer chooses movie
channels that are organized by genre, such as action adventure, romantic
comedy or drama. Once the viewer selects a particular channel from the
ReplayZone, it is added to the Replay Guide for future recording. By choosing
a genre represented within a ReplayZone instead of a specific program, a
viewer can record many programs automatically. ReplayZones are a dynamic part
of the ReplayTV Service, and we plan to continuously adapt them in order to
encourage repeated visits and use. In addition, through strategic
relationships with ReplayTV, television programmers and other content
providers can create their own branded ReplayZones with customized content and
promotions for viewers.
An example of a ReplayZone is shown here:
[SCREEN SHOT OF REPLAYZONE]
Replay Guide. Recorded shows are listed in the Replay Guide, shown below.
To watch a recorded show, the viewer selects a show from the Replay Guide and
chooses "Play" from the on-screen menu. All control features offered by the
ReplayTV Service, such as pause, rewind, multi-speed slow motion, fast
forward, seven-second instant replay and frame-by-frame advance, are available
while viewing a recorded ReplayTV show. Viewers can also cancel a recording
before it airs and change the recording options they had previously set for
any ReplayTV show.
[SCREEN SHOT OF REPLAY GUIDE]
Customer support. Viewers can access our free high-quality customer support
by e-mail and telephone.
ReplayTV Advertising Services
Advertisers have embraced every new avenue and medium to reach their
audience, but continue to favor television over other forms of media due to
its unique "living room" access and its broad reach. We believe that our
ReplayTV Service will offer advertisers a new platform that provides a more
effective way to deliver information to consumers, a more efficient way to
spend advertising budgets and a better way to target audiences and identify,
monitor and respond to consumers' programming and purchasing preferences. The
ReplayTV Platform is expected to provide more accurate audience measurement
and viewer data, while maintaining viewer privacy on an individual basis. This
should allow advertisers to better target advertisements at viewers who have
actively selected and chosen specific programs to watch.
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<PAGE>
Version 2.0 of the ReplayTV Service software will offer advertisers the
ability to advertise in theme-based or branded content areas called
ReplayZones. For example, a "health" zone focused on healthcare and fitness-
related programming would provide a target audience for pharmaceutical
companies and other advertisers seeking a health-focused demographic.
ReplayTV's basic PVR architecture can support a wide range of future
advertising services. In the future, we intend to offer a variety of
additional advertising opportunities through the ReplayTV Service, such as:
. graphic and full-motion video advertising on the Replay Guide and other
viewer interfaces;
. transitional advertising such as screen swipes when the pause button or
other features are activated;
. lead-in and lead-out advertising inserted at the beginning or end of
recorded programming; and
. targeted advertisements inserted over existing broadcast messages with
the cooperation of content providers.
Future Offerings
The ReplayTV Service is being developed to facilitate an entirely new
paradigm for delivering programming, products and services to viewers based on
TV-commerce. We anticipate that viewers will ultimately be able to use the
ReplayTV Service to simply "point and click" when ordering movies, sports
events, programming packages, games and other products and services. In
particular, we plan to expand the revenue-generating opportunities of the
ReplayTV Service by working with, and, in appropriate cases, securing licenses
from, strategic partners to include future generation services such as premium
subscription services, near video-on-demand, and TV-commerce.
. Premium Subscription Services. We intend to offer subscriptions to a
premium service that would allow customers to create personalized
channels, such as individualized news, sports, business and weather
channels containing segments of content that are automatically combined
according to viewer preferences. For example, we are working with CNN to
index its program segments by key word and deliver targeted segments to a
viewer's personal news channel based on his or her customized
preferences.
. Near Video-on-Demand. We intend to offer near-video-on-demand services
that would enable viewers to watch select pay-per-view movies at the
times convenient to them. A selection of pay-per-view movies would be
downloaded to the ReplayTV Service overnight, and viewers could then
choose a movie for viewing at their desired time for a one-time fee.
. TV-Commerce. We intend to provide the viewer with access to one-click
shopping for merchandise offered by partners, including sponsors of
ReplayZones, through the ReplayTV Service.
Media Relationships
As part of our strategy to become a major media company, we are pursuing
strategic relationships with television programmers, advertising agencies and
other potential media partners. Our existing equity investors include leading
media companies such as Disney, Liberty Media, NBC, Showtime, Time Warner and
Tribune.We plan to leverage our media relationships to expand our advertising
and sponsorship opportunities, offer unique programming content, differentiate
the ReplayTV Service and enhance the ReplayTV brand.
For example, we have entered into an agreement with Turner Broadcasting to
produce ReplayZones that highlight current and upcoming programming from the
Turner television networks. Turner and ReplayTV will jointly sell advertising
space on the Turner ReplayZones and will share advertising revenues. In
addition, we have agreed to work with Turner to develop future collaborative
offerings on the ReplayTV Service, including a CNN premium channel,
advertisements promoting Turner television programs and TV-commerce for Turner
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products. We have also entered into agreements to produce ReplayZones with NBC
and Showtime, and we expect to enter into additional programming and
sponsorship relationships with other media companies in the future.
Distribution and Manufacturing Relationships
We are pursuing strategic relationships with consumer electronics
manufacturers, cable and satellite system operators and manufacturers of cable
and satellite receivers to manufacture, distribute and market ReplayTV-enabled
products. Our existing equity investors include leading manufacturing and
multi-channel distribution companies such as EchoStar, MKE, Sharp and Time
Warner. We intend to leverage these manufacturing and distribution
relationships to accelerate our market penetration and rapidly grow our
installed base of viewers.
All ReplayTV-enabled PVRs are currently manufactured by Flextronics
International, a third party contract manufacturer. In addition, we have
entered into an agreement with MKE, a subsidiary of Matsushita Electric
Industrial Co., Ltd., the largest manufacturer of VCRs sold in North America,
to manufacture, distribute and market ReplayTV-enabled PVRs under the
Panasonic brand featuring the ReplayTV logo. We anticipate that MKE will begin
distributing ReplayTV-enabled PVRs manufactured by Flextronics in mid-2000.
Under our agreement with MKE, MKE has been granted subsidies and favored
customer terms, as well as licenses to manufacture and distribute ReplayTV-
enabled PVRs incorporating our driver and client device software. We also
intend to enter into agreements with other equipment manufacturers to
integrate the ReplayTV Service into additional consumer electronics products,
such as DVD players, television sets and Internet access devices. We believe
that entering into strategic relationships with MKE and other consumer
electronics companies to manufacture and sell ReplayTV-enabled products will
enable us to focus our creative resources on promoting and enhancing the
ReplayTV Service. In addition, we intend to leverage these partners'
established retail distribution channels to drive the rapid market penetration
of the ReplayTV Service.
We also plan to establish distribution relationships with cable and
satellite system operators and manufacturers of cable and satellite set-top
boxes. We believe that strategic relationships with cable and satellite system
operators will enable us to rapidly expand our installed base of viewers.
Furthermore, we intend to enter into relationships with cable and satellite
equipment manufacturers to integrate the ReplayTV Service with cable set-top
boxes and satellite receivers and expand the distribution of the ReplayTV
Service.
To drive rapid market penetration, we anticipate that all of our agreements
with third-party manufacturers will require us to subsidize the manufacturing
cost of ReplayTV-enabled products for the foreseeable future in order to lower
the retail price to the consumer. We anticipate that the size of the subsidy
and the price of ReplayTV-enabled products will generally decrease over the
long term as the cost of manufacturing ReplayTV-enabled products declines due
to increases in volume and also as the costs of the components incorporated
into ReplayTV-enabled products decrease. We expect that component costs will
decline largely because our ReplayTV-enabled products utilize components that
are under continual pricing pressure as a result of the proliferation of
consumer electronics products, such as DVD players and personal computer
peripherals, that incorporate many of these components.
Sales and Marketing
ReplayTV's sales and marketing strategy is designed to establish the
ReplayTV brand, increase customer awareness of personal television and the
ReplayTV Service and build our installed base of viewers. Beginning in mid-
2000, we plan to initiate an aggressive marketing campaign to promote the
ReplayTV Service as the brand leader in the personal television market. This
multi-channel campaign will include infomercials, conventional television and
radio advertising, print, outdoor and online advertising, and free-standing
inserts, on both national and regional levels.
We anticipate that retail distribution will become the primary channel for
sales of ReplayTV-enabled products in 2000. Since we began shipping ReplayTV-
enabled PVRs in April 1999, we have sold PVRs to
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consumers principally through our web site, www.replaytv.com, and our toll-
free number, 1-877-ReplayTV, as well as through online retailers such as
Amazon.com, Roxy.com and 800.com. MKE plans to launch the full-scale retail
distribution of ReplayTV-enabled PVRs under the Panasonic brand featuring the
ReplayTV logo in mid-2000 through major national and regional retail chains.
We intend to leverage the established retail distribution channels of MKE and
our other distribution partners to drive our installed base of ReplayTV
viewers. In addition, we intend to subsidize the cost of manufacturing
ReplayTV-enabled products in order to maintain an attractive retail price and
accelerate our market penetration.
MKE and our other distribution partners will take primary responsibility
for selling ReplayTV-enabled products to retailers and supporting the retail
channel through marketing, in-store promotions and sales force training.
However, we will guide the creative content of these marketing efforts in
conjunction with our broader marketing campaign. In addition, we will support
the sales and marketing efforts of MKE and our other distribution partners by
educating retailers about PVRs and the ReplayTV Service and by training their
sales teams.
The current version of our ReplayTV Service permits us to provide certain
limited advertising; however, we are continuing to develop additional
functionality to enable us to deliver additional advertising and other
services on the ReplayTV Service in conjunction with various media partners.
We expect to share a significant portion of the related advertising and
service revenues with these media partners. Beginning in the second half of
2000, we expect to build a direct sales force to market our advertising
inventory.
Research and Development
Our engineering efforts are focused on three main areas: hardware platform
engineering, client service software development and network infrastructure
development.
Hardware Platform Engineering. We have developed hardware reference
implementations (including both electrical and mechanical designs) and the
necessary platform-specific software to enable our partners to design,
manufacture and distribute a large number of products enabled by the ReplayTV
Service, including stand-alone devices, DVD players and cable and satellite
set-top boxes. Our implementations are used by our partners as the basis for
their own product designs, with each partner deciding how much of our
reference implementation it will use. We also develop and provide
documentation of our reference platform designs, as well as samples of various
elements of the platform-specific software. As with our agreement with MKE, we
anticipate that we will grant third-party manufacturers licenses to use our
client device and driver software to distribute and manufacture ReplayTV-
enabled devices and to develop improvements to the platform-specific software.
We work closely with our partners and with component suppliers and data
storage suppliers to lower the cost of the ReplayTV platform and to take
advantage of newly developed technologies. We intend to work with a broad
range of partners to develop our technology platform and to establish ReplayTV
as the leading platform in the personal television market.
Client Service Software Development. Because we plan ultimately to deliver
the ReplayTV Service on a variety of hardware platforms, we devote significant
engineering effort to building a flexible and robust client software
implementation of our network services. This client software is designed to
operate on many different platforms in a manner that provides a consistent and
clearly branded ReplayTV Service offering. Version 2.0 of the ReplayTV Service
software is currently in beta testing, and we plan to release it to coincide
with our full-scale retail launch in mid-2000. Viewers receive automatic
updates of the ReplayTV Service via the nightly download from the ReplayTV
Service network.
Network Infrastructure Development. The creation of content and advertising
by our partners and the aggregation, management and delivery of that content
to the ReplayTV Service requires a complex network infrastructure. We develop
tools that allow our media partners and advertisers to create content for the
ReplayTV Service quickly and easily, using non-technical personnel and
existing equipment. We also develop software to run on the ReplayTV Service
servers to verify the quality of that content and to deliver it to the correct
viewers.
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Our research and development expenses totaled $136,000 for the period from
inception to December 31, 1997, $1,961,000 for the year ended December 31,
1998 and $4,814,000 for the nine months ended September 30, 1999. As of
December 31, 1999, we had 49 employees engaged in research and development
activities.
Competition
The market for home entertainment goods and services is intensely
competitive, rapidly evolving and subject to rapid technological change. We
believe that the principal competitive factors in this market are brand
recognition, performance, pricing, ease of use, features, installed base and
quality of service and support. Because the personal television market is new
and rapidly evolving, we expect to face significant barriers in our efforts to
secure broad market acceptance and will confront intense competition at
several different levels.
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. PVRs and
the ReplayTV Service compete with products and technologies that have
established markets and proven consumer support, including VCRs, DVD players,
cable and satellite television systems and personal computers. In addition,
many of the manufacturers and distributors of these products have more
strategic partners and greater brand recognition, market presence, financial
resources, distribution channels, advertising and marketing budgets and
promotional and other strategic partners than we do. To be successful, we
believe we will need to spend significant resources to develop consumer
awareness of the ReplayTV Service and the personal television product
category.
Our ability to establish an installed base will depend on consumers
purchasing ReplayTV-enabled PVRs. Many consumers who have purchased VCRs, DVD
players or other home video entertainment products may be reluctant to
purchase PVRs. The ReplayTV-enabled PVR and the ReplayTV Service do, however,
offer several advantages over traditional home video entertainment products,
including:
. an on-air guide to television programming updated on a nightly basis;
. the ability to digitally store and retrieve up to 20 hours of television
programming using the current model of the ReplayTV-enabled PVR, and up
to 30 hours of programming using an additional model we expect to
introduce in mid-2000;
. the ability to pause and rewind live television, and fast forward to
catch up to live broadcasts in progress;
. the ability to record every episode of a given show at the click of a
button;
. the ability to search and navigate television shows by theme based on a
viewer's customized preferences; and
. specialized programming and content, including ReplayZones.
In addition to competition from established consumer electronics products,
we face competition from companies that offer personal television
capabilities. For example, TiVo Inc. markets a PVR that includes a hard disk
drive and features similar to those of the ReplayTV-enabled PVR. Although the
TiVo PVR is less expensive to purchase than the ReplayTV-enabled PVR, TiVo
charges viewers a monthly subscription fee for its service, unlike the basic
ReplayTV Service, which is free to the customer. TiVo currently offers a one-
time lifetime subscription fee, resulting in an overall cost of the TiVo
product substantially equivalent to that of the ReplayTV-enabled PVR. We also
face competition from companies that intend to combine personal video recorder
features with Internet access, interactive television features and/or
broadcast, cable or satellite television reception into a single medium. For
example, WebTV Networks, Inc., a subsidiary of Microsoft Corporation, and
EchoStar Communications Corporation have released products that combine
Internet access with an electronic program guide and offer features similar to
those of the ReplayTV-enabled PVR. The WebTV personal television service is
offered on a monthly subscription fee basis. TiVo recently announced an
agreement with Blockbuster Inc. to
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jointly develop the capability to deliver products and video-on-demand
services. In addition, TiVo and Liberate Technologies have announced an
agreement to bundle Liberate's interactive television platform with TiVo's
service and market it to network operators, as well as to deliver PVR
capabilities in connection with a new interactive television service to be
offered by America Online, Inc. under the brand name AOL TV. While some of
these competitive products and services offer fewer services than the ReplayTV
Service, we do not currently offer Internet or interactive television
features.
We may also face additional competition as a result of future technological
developments. For example, cable and satellite system operators could in the
future offer video-on-demand services that might reduce consumer demand for
personal television services. As broadband delivery systems become more
prevalent, it is possible that more and more programs may be available for
ordering, over the Internet or otherwise, which may lessen the importance of
broadcast television and weaken the appeal of the ReplayTV Service.
Patents and Intellectual Property
We have adopted a proactive patent and trademark strategy designed to
protect our technology and intellectual property. We are the assignee of two
United States patents, have filed twelve United States patent applications and
have filed four international patent applications. Our pending patent
applications relate to our technology, including hardware, software and the
ReplayTV Service features and appearance; however, these patent applications
may never result in the issuance of patents.
We have filed trademark applications covering substantially all of our
trade dress, logos and slogans, including:
<TABLE>
<C> <S>
. ReplayTV logo .Watch What You Want When You Want
. ReplayTV .Zone
. Primetime. Anytime. .It's Television Made Personal
</TABLE>
These applications are currently pending with the United States Patent and
Trademark Office. We also have international trademark applications pending
for our ReplayTV logo. We have licensed the use of our name and logo to some
of our strategic partners.
The emerging enhanced television industry is highly litigious, particularly
with respect to patent infringement and other intellectual property claims. In
some cases we have been contacted by patent owners offering us the opportunity
to license their patents. Some of these patent owners have alleged that we are
infringing their patents.
Trademarks
Our trademarks are listed above. All other trademarks and service marks
appearing in this prospectus are trademarks or service marks of the respective
companies that use them.
Employees
As of December 31, 1999, we had 127 full-time employees, including 58 in
product management and engineering, five in programming and content, 15 in
sales and marketing, 27 in business operations, nine in finance and
administration and 13 in customer care. We expect our workforce to increase
substantially over the next 12 months. We believe our employee relations are
good.
Facilities
We have 61,728 square feet of space in a facility located in Mountain View,
California, under a lease that expires in March 2006. We believe that our
current facilities are adequate to meet our needs through the end of 2000, at
which time we may need to lease additional space.
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Legal Matters
We are aware that media companies and other organizations may support
litigation or explore legislative solutions unless the members of the personal
television industry agree to obtain license agreements for the use of certain
programming. We have received letters and oral indications from a number of
content providers, including Fox Television, Universal Studios and The Walt
Disney Company, asserting their belief that our business activities and those
of some of our competitors will require approvals and licenses from these
content providers. In addition, under our Network Service Agreement with
Turner Broadcasting Systems, Inc., Turner has reserved the right to assert any
claims or rights against us. In addition, we and TiVo have been sued by
PhoneTel Communications, Inc. for allegedly infringing a patent related to
specifying an order for playback of recorded television programs.
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MANAGEMENT
Executive Officers and Directors
The names and ages of our executive officers and directors as of December
31, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Earle H. "Kim"
LeMasters, III......... 50 Chief Executive Officer and Chairman of the Board
Anthony J. Wood......... 34 President, Products and Director
Layne L. Britton........ 44 Executive Vice President, ReplayTV Service
Craig W. Dougherty...... 43 Executive Vice President, Finance and Chief Financial Officer
Alexander Gray.......... 42 Executive Vice President, Business Operations
Bruce L. Kaplan......... 50 Executive Vice President, Sales and Marketing
Jeffrey Berg (1)........ 52 Director
Kevin L. Bohren......... 42 Director
Sky D. Dayton (1)....... 28 Director
William R. Hearst III
(1).................... 50 Director
</TABLE>
- --------
(1) Member of audit committee and compensation committee.
Earle H. "Kim" LeMasters, III has served as Chief Executive Officer and
Chairman since September 1999. Previously, Mr. LeMasters worked as a freelance
television writer from June 1999 to September 1999 and served as Executive
Producer at Twentieth Television from May 1996 to June 1999. From June 1992 to
May 1996, Mr. LeMasters served as President of Stephen J. Cannell Productions,
a television production company which was acquired by New World Television in
1996. From 1976 to 1990, Mr. LeMasters was employed by CBS Television, serving
most recently as President of CBS Entertainment. Mr. LeMasters holds a
Bachelor of Arts from the University of California at Los Angeles.
Anthony J. Wood founded ReplayTV and has served as President, Products
since November 1999 and as a director since August 1997. From August 1997 to
August 1999, he served as Chairman and from November 1997 to August 1999 he
served as President and Chief Executive Officer. Previously, Mr. Wood served
as Vice President of Internet Authoring at Macromedia from March 1996 to
September 1997. From January 1995 to March 1996, Mr. Wood co-founded and
served as President and Chief Executive Officer of iband, Inc., which was
acquired by Macromedia in 1996. From August 1990 to January 1995, he founded
and served as President and Chief Executive Officer of SunRize Industries, a
developer of audio hardware and software. Mr. Wood holds a Bachelor of Science
in Electrical Engineering from Texas A&M University.
Layne L. Britton has served as Executive Vice President, ReplayTV Service
since June 1999. From October 1997 to May 1999, Mr. Britton served as
Executive Vice President of Business Operations at United Paramount Networks.
From October 1996 to October 1997, he served as President and Chief Operating
Officer of Ticketmaster Ventures, a ticketing and merchandising company
acquired by Home Shopping Network in 1997. Previously, Mr. Britton was
employed as Vice President of Business Affairs at CBS Entertainment, as
Vice President of Business Affairs at NBC Entertainment, and as Director of
Business Affairs at The Dick Clark Company, Inc. Mr. Britton holds a Bachelor
of Arts from Loyola University and a Juris Doctorate from the UCLA School of
Law.
Craig W. Dougherty has served as Executive Vice President, Finance and
Chief Financial Officer since November 1999. Previously, Mr. Dougherty was
employed at Union Bank of California from 1979 to October 1999, serving most
recently as Executive Vice President and Manager of the Specialized Industries
Group, which provides corporate financing to the entertainment, media,
communication, telecom and retailing industries. Mr. Dougherty was also
President of the Private Capital Group, a merchant banking arm that provides
equity and mezzanine financing for privately held growth companies. Mr.
Dougherty holds a Bachelor of Arts in Economics and French from Tufts
University.
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Alexander Gray has served as Executive Vice President, Business Operations
since November 1999. From July 1997 to November 1999, Mr. Gray was employed at
Lucent Technologies, serving most recently as Vice President and General
Manager of Internet Communications, a business unit developing a family of
next-generation Internet-oriented communications systems. Previously, Mr. Gray
was employed by Octel Communications, serving as Senior Vice President of
Operations from January 1996 to July 1997 and as Vice President and Chief
Information Officer from December 1992 to January 1996. Mr. Gray holds a
Bachelors of Science in Computer Science and a Masters in Electrical
Engineering from Washington University.
Bruce L. Kaplan has served as Executive Vice President, Sales and Marketing
since November 1999. Previously, Mr. Kaplan served as President of Kaplan &
Co., a marketing consulting firm, from February 1990 to September 1999. From
March 1990 to February 1999, Mr. Kaplan also served as Executive Vice
President of Fattal & Collins, a wholly-owned subsidiary of Grey Advertising.
From January 1997 to February 1998, Mr. Kaplan served as Vice Chairman of
American Cybercast, an online entertainment company. Mr. Kaplan holds a
Bachelor of Arts in Political Science and a Juris Doctorate from the
University of California at Los Angeles.
Jeffrey Berg has served as a director since April 1999. Since November
1994, Mr. Berg has served as Chairman and Chief Executive Officer of
International Creative Management, a talent agency. Since November 1997, he
has served as a director of Oracle Corporation, an enterprise software
company. Mr. Berg holds a Bachelor of Arts from the University of California
at Berkeley and a Masters of Liberal Arts from the University of Southern
California.
Kevin L. Bohren has served as a director since July 1998. Since October
1998, Mr. Bohren has been employed as a private investor. From January 1997 to
October 1998, Mr. Bohren served as President and Chief Executive Officer of
Traveling Software (now LapLink.com), a leading manufacturer of remote
communications software. From March 1983 to January 1997, Mr. Bohren was
employed at Compaq Corporation, serving most recently as Vice President,
Desktop Division. Mr. Bohren holds a Bachelor of Arts in Geography from the
University of Minnesota.
Sky D. Dayton has served as a director since April 1999. Since June 1999,
Mr. Dayton has been a co-founder of eCompanies LLC, an incubator of Internet
start-ups. Mr. Dayton founded Earthlink Network, an Internet service provider,
in May 1994 and served as its Chairman until January 2000. Mr. Dayton remains
a director of Earthlink.
William R. Hearst III has served as a director since March 1999. Since
January 1995, Mr. Hearst has been a Partner at Kleiner Perkins Caufield &
Byers, a venture capital firm. From May 1995 until August 1996, he was the
Chief Executive Officer for @Home Network, a high speed Internet access and
consumer online services company. Previously, Mr. Hearst served as Editor and
Publisher of the San Francisco Examiner from 1984 until 1995. Mr. Hearst is a
director of Juniper Networks, Excite@Home, Com21 and Hearst-Argyle Television.
Mr. Hearst holds a Bachelor of Arts in Mathematics from Harvard College.
Board Composition
We currently have authorized six directors. Currently, each director is
elected for a period of one year at our annual meeting of stockholders and
serves until the next annual meeting or until his successor is duly elected
and qualified. Beginning at the first annual meeting of stockholders after the
annual meeting of stockholders at which we have at least 800 stockholders, the
board of directors will be divided into three classes, each serving staggered
three-year terms: Class I, whose term will expire at the first annual meeting
of stockholders after our first annual meeting of stockholders at which we
have 800 stockholders; Class II, whose term will expire at the second annual
meeting of stockholders after our first annual meeting of stockholders at
which we have 800 stockholders; and Class III, whose term will expire at the
third annual meeting of stockholders after our first annual meeting of
stockholders at which we have 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other classes continuing for the remainder of their respective terms. Our
officers are appointed by the board of directors and serve at the discretion
of the board of directors. There are no family relationships among any of our
directors or executive officers.
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Board Compensation
Our directors do not currently receive compensation for their services as
members of the board of directors, except for reimbursement for reasonable
travel expenses relating to attendance at board meetings. Employee directors
are eligible to participate in our 1997 stock option plan and 1999 stock plan
and will be eligible to participate in our 2000 employee stock purchase plan.
Nonemployee directors are eligible to participate in our 1997 stock option
plan and 1999 stock plan and will be eligible to participate in our 2000
directors' stock option plan. See "Stock Plans."
In July 1998, we granted Kevin L. Bohren an option to purchase 120,000
shares of common stock at $0.03 per share. The option becomes exercisable at
the rate of 1/3rd of the total number of shares on July 27, 1999 and 1/36th of
the total shares per month thereafter. In April 1999, we granted Mr. Bohren an
option to purchase 80,000 shares of common stock at $0.25 per share. The
option becomes exercisable at the rate of 1/3rd of the total number of shares
on April 23, 2000 and 1/36th of the total shares per month thereafter. We
entered into a consulting relationship with Mr. Bohren in March 1999, pursuant
to which he has earned an aggregate of $71,666 and have issued him an
aggregate of 38,720 shares of restricted stock as of December 31, 1999.
In April 1999, we granted Sky D. Dayton and Jeffrey Berg each an option to
purchase 200,000 shares of common stock at $0.25 per share. These options
become exercisable at the rate of 1/3rd of the total number of shares on April
28, 2000 and 1/36th of the total shares per month thereafter.
In April 1999, we granted Anthony J. Wood an option to purchase 275,000
shares of common stock at $0.275 per share. The option becomes exercisable at
the rate of 1/12th of the total number of shares per month from and after
August 1, 2000.
In September 1999, we granted Earle H. "Kim" LeMasters, III an option to
purchase 2,500,000 shares of common stock at $4.00 per share. The option is
immediately exercisable, but the underlying shares are subject to a repurchase
option in favor of us which lapses at the rate of 1/8th of the total number of
shares on March 13, 2000 and 1/48th of the total shares per month thereafter.
Board Committees
In January 2000, the board of directors established the audit committee and
the compensation committee. The compensation committee currently consists of
Jeffrey Berg, Sky D. Dayton and William R. Hearst III. The functions of the
compensation committee are to:
. review and approve the compensation and benefits for our executive
officers and grant stock options under our stock option plans; and
. make recommendations to the board of directors regarding these matters.
The audit committee consists of Jeffrey Berg, Sky D. Dayton and William R.
Hearst III. The functions of the audit committee are to:
. make recommendations to the board of directors regarding the selection of
independent auditors;
. review the results and scope of the audit and other services provided by
our independent auditors; and
. review and evaluate our audit and control functions.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of the board of directors are
currently Jeffrey Berg, Sky D. Dayton and William R. Hearst III, none of whom
has ever been an officer or employee of ReplayTV. None of our executive
officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
board of directors or compensation committee. Before establishing
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<PAGE>
the compensation committee in January 2000, the board of directors as a whole
performed the functions delegated to the compensation committee.
Executive Compensation
The following table sets forth the compensation received for services
rendered to us during the year ended December 31, 1999 by the two individuals
who served as Chief Executive Officer during 1999 and the four other most
highly compensated executive officers during the year ended December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Securities
Name and Principal Salary Other Annual Underlying All Other
Position ($) Bonus ($)(7) Compensation ($) Options (#) Compensation ($)
- ------------------ -------- ------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Earle H. "Kim"
LeMasters, III(1)...... $109,154 -- 2,500,000 --
Chairman and Chief
Executive Officer
Anthony J. Wood(2)...... 144,250 -- 275,000 --
President, Products
Layne L. Britton(3)..... 140,000 -- 1,120,000 --
Executive Vice
President, ReplayTV
Service
Craig W. Dougherty(4)... 41,667 $25,000 600,000 --
Executive Vice
President, Finance and
Chief Financial Officer
Alexander Gray(5)....... 41,667 -- 600,000 --
Executive Vice
President, Business
Operations
Bruce L. Kaplan(6)...... 40,000 $12,000 30,000 500,000 --
Executive Vice
President, Sales and
Marketing
</TABLE>
- --------
(1) Mr. LeMasters commenced employment with us in September 1999. On an annual
basis, Mr. LeMasters' salary for the fiscal year ended December 31, 1999
would have been $360,000 plus reimbursement of expenses up to $50,000.
(2) Mr. Wood served as Chief Executive Officer until August 1999. In
September 1999, he was appointed President, Products. The amount excludes
deferred compensation of $84,500 which Mr. Wood earned during the fiscal
year ended December 31, 1998 but which was paid to him during the fiscal
year ending December 31, 1999. Effective January 1, 2000, the board of
directors approved raising Mr. Wood's annual salary to $250,000.
(3) Mr. Britton commenced employment with us in July 1999. On an annual
basis, Mr. Britton's salary for the fiscal year ended December 31, 1999
would have been $240,000, plus reimbursement of up to $50,000 of
relocation expenses.
(4) Mr. Dougherty commenced employment with us in November 1999. On an annual
basis, Mr. Dougherty's salary for the fiscal year ended December 31, 1999
would have been $250,000. Mr. Dougherty is entitled to a signing bonus of
$50,000 to $100,000, the actual amount of which has not yet been
determined by the board of directors. Mr. Dougherty must repay 100% of
this bonus in the event he resigns or is terminated with cause within 12
months following his start date and 50% of this bonus in the event he
resigns or is terminated with cause between 12 and 24 months following his
start date. The $25,000 of other annual compensation represents a
relocation allowance.
(5) Mr. Gray commenced employment with us in November 1999. On an annual
basis, Mr. Gray's salary for the fiscal year ended December 31, 1999
would have been $250,000.
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<PAGE>
(6) Mr. Kaplan commenced employment with us in November 1999. On an annual
basis, Mr. Kaplan's salary for the fiscal year ended December 31, 1999
would have been $240,000. The $30,000 of other annual compensation
represents a relocation allowance.
(7) Other than Mr. Kaplan, who received a guaranteed bonus, each officer is
eligible to receive a bonus for the year ended December 31, 1999, the
amounts of which have not yet been determined by the board of directors.
Option Grants
The following table provides summary information regarding stock options
granted to the two individuals who served as Chief Executive Officer during
the year ended December 31, 1999 and the four other most highly compensated
executive officers during the year ended December 31, 1999. No stock
appreciation rights were granted to these individuals during the year. The
options were granted pursuant to the 1997 stock option plan and the 1999 stock
plan.
Options granted to Messrs. LeMasters, Dougherty, Gray and Britton are
exercisable for all option shares; however, any shares purchased upon exercise
of these options are subject to repurchase by us at the original exercise
price per share upon the termination of the optionee's employment with us.
This right of repurchase lapses over time, with the shares issuable upon
exercise of options held by each of Messrs. LeMasters, Dougherty and Gray
vesting as to 1/8th of the shares on the six month anniversary of the vesting
commencement date specified in the respective option agreement, or March 13,
2000 in the case of Mr. LeMasters and May 1, 2000 in the cases of Mr.
Dougherty and Mr. Gray, and with 1/48th of the shares in each case vesting
each month thereafter. Shares purchased by Mr. Britton pursuant to his
exercise of options are similarly subject to our repurchase; however, these
shares vest at the rate of 1/48th per month beginning June 30, 1999.
Additionally, the option granted to Mr. Wood becomes exercisable at the rate
of 1/12th of the total number of shares on September 1, 2000 and 1/12th of the
total number of shares each month thereafter, and the option granted to
Mr. Kaplan becomes exercisable at the rate of 1/8th of the total number of
shares on May 1, 2000 and 1/48th of the total number of shares each month
thereafter.
The percentages below are based on a total of 10,882,500 shares subject to
options granted by us during the year ended December 31, 1999 to all of our
employees and consultants, including the executive officers named in the
table. The exercise price per share of each option was equal to the fair
market value of the common stock as determined by the board of directors on
the date of grant. The potential realizable value is calculated assuming the
fair market value on the date of grant appreciates at the indicated rate for
the entire term of the option and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price. All
options have a term of ten years. Stock price appreciation of 5% and 10% is
assumed pursuant to the rules of the Securities and Exchange Commission. There
can be no assurance that the actual stock price will appreciate over the ten-
year option term at the assumed rates of 5% and 10% or at any other defined
rate. Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the below named
executive officers.
Option Grants in 1999
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Price Appreciation For
Underlying Granted in Exercise Option Term
Options Fiscal Price Expiration ----------------------
Name Granted (#) 1999 ($/Share) Date 5% 10%
- ---- ----------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Earle H. "Kim"
LeMasters, III......... 2,500,000 22.97% $4.00 9/13/09 $6,288,946 $15,937,425
Anthony J. Wood......... 275,000 2.53 0.275 4/27/09 47,560 120,527
Layne L. Britton........ 1,120,000 10.29 0.625 5/31/09 440,226 1,115,620
Craig W. Dougherty...... 600,000 5.51 5.00 10/31/09 1,886,684 4,781,227
Alexander Gray.......... 600,000 5.51 5.00 10/31/09 1,886,684 4,781,227
Bruce L. Kaplan......... 500,000 4.59 5.00 10/31/09 1,572,237 3,984,356
</TABLE>
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<PAGE>
Option Exercises and Holdings
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by the two
individuals who served as Chief Executive Officer during the year ended
December 31, 1999 and the four other most highly compensated executive
officers during the year ended December 31, 1999. Since there was no public
trading market for our common stock as of December 31, 1999, the values
realized and the values of unexercised options at December 31, 1999 are based
on the fair market value of our common stock of $8.00 per share as determined
by our board of directors on December 29, 1999. Therefore, these values are
calculated based on the value of $8.00 per share, less the applicable exercise
price per share, multiplied by the number of shares underlying these options.
Aggregated Option Exercises in 1999 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options
Acquired December 31, 1999 at December 31, 1999
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earle H. "Kim"
LeMasters, III......... 250,000 $1,000,000 2,250,000 -- $9,000,000 --
Anthony J. Wood......... -- -- -- 275,000 -- $2,124,375
Layne L. Britton........ 1,120,000 8,260,000 -- -- -- --
Craig W. Dougherty...... 200,000 600,000 400,000 -- 1,200,000 --
Alexander Gray.......... 100,000 300,000 500,000 -- 1,500,000 --
Bruce L. Kaplan......... -- -- -- 500,000 -- 1,500,000
</TABLE>
Change of Control Agreements
We entered into an Offer Letter with Earle H. "Kim" LeMasters, III which
entitles Mr. LeMasters to 12 months accelerated vesting of his options and
restricted stock in the event there is a change of control within 18 months
following his commencement of employment with us and acceleration of 75% of
the then unvested options and restricted stock held by him in the event there
is a change of control after 18 months following his commencement of
employment. In addition, Mr. LeMasters is entitled to 12 months severance and
an additional 12 months accelerated vesting of his unvested options or
restricted stock in the event he is terminated without cause or resigns with
good reason following a change of control.
We entered into Offer Letters with Craig W. Dougherty and Bruce L. Kaplan
which entitle each such officer to six months severance and accelerated
vesting equal to the greater of 12 months or 50% of the then unvested stock
options or restricted stock held by him in the event he is terminated without
cause or resigns for good reason within 12 months following a change of
control transaction.
We entered into Offer Letters with Layne L. Britton and Alexander Gray
which entitle each such officer to accelerated vesting equal to the greater of
12 months or 50% of the then unvested stock options or restricted stock held
by him in the event he is terminated without cause or resigns for good reason
within 12 months following a change of control.
Stock Plans
1999 Stock Plan. Our 1999 stock plan provides for the grant of incentive
stock options to employees, including employee directors, and of nonstatutory
stock options and stock purchase rights to employees, directors and
consultants. The purposes of the 1999 stock plan are to attract and retain the
best available personnel, to provide additional incentives to our employees
and consultants and to promote the success of our business. The
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<PAGE>
1999 stock plan was originally adopted by our board of directors and approved
by our stockholders in August 1999. As of December 31, 1999, an aggregate of
4,230,000 shares were reserved for issuance under the 1999 stock plan, options
to purchase 3,680,000 shares of common stock were outstanding under the 1999
stock plan at a weighted average exercise price of $4.38 per share, 550,000
shares had been issued upon exercise of options or pursuant to restricted
stock purchase rights at a weighted average purchase price of $4.55 per share
and no shares remained available for future grant. In January 2000, the board
of directors amended the 1999 stock plan to increase the total number of
shares reserved for issuance under the plan by 5,470,000 shares, so that an
aggregate of 9,700,000 shares are reserved as of the date of this offering,
and to provide for an automatic annual increase on the first day of each of
our fiscal years beginning in 2001 through 2009 equal to the greater of
4,000,000 shares or 6% of our outstanding common stock on the last day of the
immediately preceding fiscal year. In addition, the 1999 stock plan was
amended to provide that up to 7,600,000 shares of common stock that either
return to our 1997 stock option plan upon cancellation of options issued under
that plan or are shares of stock issued under our 1997 stock option plan that
we repurchase when the holder terminates his or her employment or consulting
relationship with us shall become available for issuance under the 1999 stock
plan. As currently structured, the maximum aggregate number of shares that are
approved for issuance over the ten-year term of our 1999 stock plan is
62,300,000 (including the maximum number of shares that may become available
for issuance under the plan as a result of award cancellations and repurchases
under our 1997 stock option plan). These amendments to the 1999 stock plan
will be submitted for approval by our stockholders prior to the completion of
this offering. Unless terminated earlier by the board of directors, the 1999
stock plan will terminate in August 2009.
The 1999 stock plan may be administered by the board of directors or a
committee of the board, each known as the administrator. The administrator
determines the terms of options and stock purchase rights granted under the
1999 stock plan, including the number of shares subject to the award, the
exercise or purchase price, and the vesting and/or exercisability of the award
and any other conditions to which the award is subject. No employee may
receive awards for more than 5,000,000 shares under the 1999 stock plan in any
fiscal year. Incentive stock options granted under the 1999 stock plan must
have an exercise price of at least 100% of the fair market value of the common
stock on the date of grant. The plan does not impose restrictions on the
exercise or purchase price applicable to nonstatutory stock options and stock
purchase rights, although we expect that nonstatutory stock options and stock
purchase rights granted to our Chief Executive Officer and our four other most
highly compensated officers will generally equal at least 100% of the grant
date fair market value. Payment of the exercise or purchase price may be made
in cash or any other consideration allowed by the administrator.
With respect to options granted under the 1999 stock plan, the
administrator determines the term of options, which may not exceed ten years
(or five years in the case of an incentive stock option granted to a holder of
more than 10% of the total voting power of all classes of our stock).
Generally, an option is nontransferable other than by will or the laws of
descent and distribution, and may be exercised during the lifetime of the
optionee only by such optionee. In certain circumstances, the administrator
has the discretion to grant nonstatutory stock options with limited
transferability rights. Stock options are generally subject to vesting,
meaning that the optionee earns the right to exercise the option over a
specified period of time only if he or she continues to provide services to
ReplayTV over that period. Stock issued pursuant to stock purchase rights
granted under the 1999 stock plan is generally subject to a repurchase right
exercisable by ReplayTV upon the termination of the holder's employment or
consulting relationship with us for any reason (including death or
disability). This repurchase right will lapse in accordance with the terms of
the stock purchase right determined by the administrator at the time of grant.
If we are acquired by another corporation, each outstanding option and
stock purchase right may be assumed or an equivalent award substituted by our
acquiror. If our acquiror did not agree to assume or substitute outstanding
awards, those awards would terminate to the extent they had not been exercised
prior to consummation of the transaction. Outstanding awards, the number of
shares remaining available for issuance under the plan, the number of shares
added to the plan each year under the plan's evergreen provision and the
annual per-employee share limit will each adjust in the event of a stock
split, stock dividend or other similar
53
<PAGE>
change in our capital. The administrator has the authority to amend or
terminate the 1999 stock plan, but no action may be taken that materially and
adversely impairs the rights of any holder of an outstanding option or stock
purchase right without the holder's consent. In addition, we must obtain
stockholder approval of amendments to the plan as required by applicable law.
1997 Stock Option Plan. Our 1997 stock option plan was adopted by our board
of directors in August 1997 and approved by our stockholders in November 1997.
The 1997 stock option plan provides for the grant of incentive stock options
to employees (including employee directors) of incentive stock options and the
grant of nonstatutory stock options to employees, consultants and directors.
As of December 31, 1999 an aggregate of 9,070,000 shares of common stock were
reserved for issuance under the 1997 stock option plan, options to purchase
7,109,637 shares of common stock at a weighted average exercise price of $1.55
per share were outstanding, 1,831,439 shares with a weighted average purchase
price of $0.39 per share had been issued upon exercise of options and 128,924
shares remained available for future grant. In January 2000, the board of
directors amended the 1997 stock option plan to increase the total number of
shares reserved for issuance under the plan by 530,000 shares to an aggregate
of 9,600,000 shares. In addition, at that time, the 1997 stock option plan was
also amended to provide that up to 7,600,000 shares of stock subject to
options issued under the plan that would otherwise become available for grant
under the plan upon cancellation of such options and sold under the plan that
we repurchase upon termination of the holder's employment or consulting
relationship with us shall become available for issuance under our 1999 stock
plan. Unless terminated earlier, the 1997 stock option plan will terminate in
August 2007.
Following this offering, the terms of awards issued under our 1997 stock
option plan are generally the same as those that may be issued under our 1999
stock plan, except with respect to the following features. The 1997 stock
option plan does not provide for the issuance of stock purchase rights, and it
does not impose an annual limitation on the number of shares of stock subject
to options that may be granted to any individual employee during a fiscal
year.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan
was adopted by the board of directors in January 2000 and will be submitted
for approval by our stockholders prior to completion of this offering. An
aggregate of 1,000,000 shares of common stock were reserved for issuance under
the 2000 purchase plan, none of which have been issued as of the date of this
offering. The number of shares reserved for issuance under the 2000 purchase
plan will be subject to an automatic annual increase on the first day of each
of our fiscal years beginning in 2001 through 2009 equal to the lesser of
500,000 shares, 2% of our outstanding common stock on the last day of the
immediately preceding fiscal year, or a lesser number of shares as the board
of directors determines. The 2000 purchase plan becomes effective upon the
date of this offering. Unless terminated earlier by the board of directors,
the 2000 purchase plan will terminate in January 2020.
The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, will be implemented by a series of overlapping
offering periods of approximately 24 months' duration, with new offering
periods (other than the first offering period) commencing on May 1 and
November 1 of each year. Each offering period will generally consist of four
consecutive purchase periods of six months' duration, at the end of which an
automatic purchase will be made for participants. The initial offering period
is expected to commence on the date of this offering and end on April 30,
2002; the initial purchase period is expected to begin on the date of this
offering and end on October 31, 2000, with subsequent purchase periods ending
on April 30, 2001, October 31, 2001 and April 30, 2002. The 2000 purchase plan
will be administered by the board of directors or by a committee appointed by
the board. Our employees (including officers and employee directors), or of
any majority-owned subsidiary designated by the board, are eligible to
participate in the 2000 purchase plan if they are employed by us or any such
subsidiary for at least 20 hours per week and more than five months per year.
The 2000 purchase plan permits eligible employees to purchase common stock
through payroll deductions, which in any event may not exceed 15% of an
employee's base salary. The purchase price is equal to the lower of 85% of the
fair market value of the common stock at the beginning of each offering period
or at the end of each purchase period, subject to certain adjustments as
provided in the plan. Employees may end their participation in the 2000
purchase plan at any time during an offering period, and participation ends
automatically on termination of employment.
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<PAGE>
An employee is not eligible to participate in the 2000 purchase plan if
immediately after the grant of an option to purchase stock under the plan such
employee would own stock and/or hold outstanding options to purchase stock
equaling 5% or more of the total voting power or value of all classes of our
stock or stock of our subsidiaries, or if such option would permit an
employee's rights to purchase stock under the 2000 purchase plan at a rate
that exceeds $25,000 of fair market value of such stock for each calendar year
in which the option is outstanding. In addition, no employee may purchase more
than 3,000 shares of common stock under the 2000 purchase plan in any one
purchase period. If the fair market value of the common stock on a purchase
date is less than the fair market value at the beginning of the offering
period, each participant in that offering period shall automatically be
withdrawn from the offering period as of the end of the purchase date and re-
enrolled in the new 24 month offering period beginning on the first business
day following the purchase date.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the 2000
purchase plan will be assumed or an equivalent right substituted by our
acquiror. If our acquiror did not agree to assume or substitute stock purchase
rights, any offering period and purchase period then in progress would be
shortened and a new exercise date occurring prior to the closing of the
transaction would be set. Outstanding awards, the number of shares remaining
available for issuance under the plan, the number of shares added to the plan
each year under the plan's evergreen provision and the maximum number of
shares that may be purchased by a participant during a purchase period will
each adjust in the event of a stock split, stock dividend or other similar
change in our capital. Our board of directors has the power to amend or
terminate the 2000 purchase plan and to change or terminate offering periods
as long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. However, the board of directors may amend or
terminate the 2000 purchase plan or an offering period even if it would
adversely affect outstanding options in order to avoid our incurring adverse
accounting charges.
2000 Directors' Stock Option Plan. The 2000 directors' stock option was
adopted by the board of directors in January 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. It will
become effective upon the date of this offering. An aggregate of 300,000
shares of common stock were reserved for issuance under the 2000 directors'
plan, all of which remain available for future grants. In addition, the 2000
directors' plan provides that as of January 1 of each year beginning in 2001
and ending in 2009, the aggregate number of shares available to be issued
under the plan will automatically be increased by the number of shares
necessary to cause the number of shares then available for issuance under the
plan to be restored to 300,000 shares, provided that the maximum number of
shares that will be available for issuance under the plan over the ten-year
term of the plan will not exceed 3,000,000 shares. The 2000 directors' plan
provides for the grant of nonstatutory stock options to our nonemployee
directors. The 2000 directors' plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the board of directors. To the extent they arise, it is expected
that conflicts of interest will be addressed by abstention of any interested
director from both deliberations and voting regarding matters in which a
director has a personal interest. Unless terminated earlier, the 2000
directors' plan will terminate in January 2010.
The 2000 directors' plan provides that each person who becomes a
nonemployee director after the completion of this offering will be granted a
nonstatutory stock option to purchase 50,000 shares of common stock on the
date on which such individual first becomes a member of our board of
directors. In addition, on the date of each annual stockholders meeting after
completion of this offering, each nonemployee director who will continue
serving on the board following the meeting and who has been a director of
ReplayTV for at least six months prior to the meeting date will be granted an
option to purchase 15,000 shares of common stock.
All options granted under the 2000 directors' plan will have a term of ten
years and an exercise price equal to the fair market value of our common stock
on the date of grant and will generally be nontransferable, except in certain
limited circumstances to family members and family trusts or similar entities.
The options to purchase 50,000 shares granted to directors joining our board
after this offering will vest in installments as to one-third of the
underlying shares on each of the first, second and third anniversaries of the
option grant date. The options to purchase 15,000 shares granted to directors
annually on the date of our stockholders meetings will vest as to all
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<PAGE>
underlying shares on the first anniversary of the option grant date. If a
nonemployee director ceases to serve as a director for any reason other than
death or disability, he or she may, but only within 90 days after the date he
or she ceases to be a director, exercise options granted under the 2000
directors' plan. If he or she does not exercise the option within such 90-day
period, the option shall terminate. If a director's service terminates as a
result of his or her disability or death, or if a director dies within three
months following termination for any reason, the director or his or her estate
will have 12 months after the date of termination or death, as applicable, to
exercise options that were vested as of the date of termination. In addition,
if ReplayTV determines that a director has engaged in fraud, embezzlement or
similar acts against us, or if a director has disclosed information that is
confidential to ReplayTV or engaged in any conduct constituting unfair
competition against us, we have the right to suspend or terminate that
director's right to exercise an option under the 2000 directors' plan.
If we are acquired by another corporation, each option outstanding under
the 2000 directors' plan will be assumed or equivalent options substituted by
our acquiror, unless our acquiror does not agree to such assumption or
substitution, in which case the options will terminate upon consummation of
the transaction to the extent not previously exercised. In connection with any
acquisition, each director holding options under the 2000 directors' plan will
have the right to exercise his or her options immediately before the
consummation of the merger as to all shares underlying the options, including
shares which would not have been vested and exercisable but for the
acquisition. Outstanding awards, the number of shares remaining available for
issuance under the plan, the number of shares to be granted to new directors
and to directors annually on stockholder meeting dates, and the number of
shares automatically added to the plan each year will each adjust in the event
of a stock split, stock dividend or other similar change in capital. Our board
of directors may amend or terminate the 2000 directors' plan as long as such
action does not adversely affect any outstanding option and we obtain
stockholder approval for any amendment to the extent required by applicable
law.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission. Our certificate of
incorporation and bylaws provide that we shall indemnify our directors and
executive officers and may indemnify our other officers and employees and
other agents to the fullest extent permitted by law. We believe that
indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in that capacity,
regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers in addition to the indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for expenses specified in the agreements, including
attorneys' fees, judgments, fines and settlement amounts incurred by a
director or executive officer in any action or proceeding arising out of his
or her services as a director or executive officer of ReplayTV or any
subsidiary of ReplayTV. In addition, we maintain directors' and officers'
insurance. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
56
<PAGE>
RELATED PARTY TRANSACTIONS
Agreements with Management
In March 1999, we entered into a consulting relationship with Kevin L.
Bohren, pursuant to which Mr. Bohren has earned an aggregate of $71,666 as of
December 31, 1999. We have also issued to Mr. Bohren an aggregate of 38,720
shares of restricted stock as of December 31, 1999.
In September 1997, we sold Anthony J. Wood 6,000,000 shares of common stock
at $0.0005 per share pursuant to a Common Stock Purchase Agreement. In March
1999, we entered into a Revised Offer Letter with Mr. Wood which entitles him
to a salary of $150,000 per year, 12 months accelerated vesting of his options
and restricted stock and 12 months severance in the event he is terminated
without cause or resigns with good reason, and full vesting with respect to
the 6,000,000 shares of restricted stock held by Mr. Wood in the event he is
replaced as Chief Executive Officer. Mr. Wood's 6,000,000 shares of restricted
stock vested in September 1999 when Earle H. "Kim" LeMasters, III became Chief
Executive Officer. In April 1999, we granted Mr. Wood an option to purchase
275,000 shares of common stock at $0.275 per share which vests with respect to
1/12th of the total number of shares on August 1, 2000 and 1/12th of the total
number of shares each month thereafter.
In July 1999, we entered into an Offer Letter with Layne L. Britton. The
agreement entitles Mr. Britton to a salary of $240,000 per year and
reimbursement of up to $50,000 of relocation expenses. In the event Mr.
Britton is terminated without cause or resigns for good reason, he is entitled
to nine months accelerated vesting of his restricted stock and severance
benefits equal to six months of salary and 50% of the bonus paid to him during
the prior year. If Mr. Britton is terminated without cause or resigns for good
reason within 12 months following a change of control, he is instead entitled
to the greater of 12 months accelerated vesting or acceleration of 50% of his
then unvested options and restricted stock. In connection with his
commencement of employment, we granted Mr. Britton an option to purchase
1,120,000 shares of common stock at $0.625 per share. The option was exercised
in full but is subject to a right of repurchase at cost in our favor in the
event Mr. Britton ceases employment with us. Our repurchase option lapses at
the rate of 1/48th of the total shares per month.
In September 1999, we entered into an Offer Letter with Earle H. "Kim"
LeMasters, III. The agreement entitles Mr. LeMasters to a salary of $360,000
per year and reimbursement of expenses of up to $50,000 per year. In September
1999, we granted Mr. LeMasters an option to purchase 2,500,000 shares of
common stock at $4.00 per share. The option has been partially exercised, but
the underlying shares are subject to a right of repurchase at cost in our
favor in the event Mr. LeMasters ceases employment with us. Our repurchase
option lapses at the rate of 1/8th of the total number of shares on March 13,
2000 and 1/48th of the total shares per month thereafter. Mr. LeMasters is
entitled to 12 months accelerated vesting of all stock and options held by him
in the event there is a change of control within 18 months following his
commencement of employment with us and acceleration of 75% of his restricted
stock and options in the event there is a change of control after 18 months
following his commencement of employment. In addition, Mr. LeMasters is
entitled to 12 months severance and an additional 12 months accelerated
vesting in the event he is terminated without cause or resigns with good
reason following a change of control.
In October 1999, we entered into an Offer Letter with Craig W. Dougherty.
The agreement entitles Mr. Dougherty to a salary of $250,000 per year, a
relocation bonus of $25,000 and severance benefits equal to six months salary
in the event he is terminated or resigns with good reason. In addition, Mr.
Dougherty is entitled to a signing bonus of between $50,000 and $100,000. He
must repay 100% of this bonus if he resigns or is terminated with cause during
the first year of his employment with us and 50% of this bonus if he resigns
or is terminated with cause during the second year of his employment with us.
In November 1999, we granted Mr. Dougherty an option to purchase 600,000
shares of common stock at $5.00 per share. The option has been partially
exercised, but the underlying shares are subject to a right of repurchase at
cost in our favor in the event Mr. Dougherty ceases employment with us. Our
repurchase option lapses at the rate of 1/8th of the total number of shares on
May 1, 2000 and 1/48th of the total shares per month thereafter. Mr. Dougherty
is entitled to six
57
<PAGE>
months accelerated vesting of his unvested options or restricted stock in the
event he is terminated without cause or resigns with good reason.
Alternatively, Mr. Dougherty is entitled to accelerated vesting equal to the
greater of 12 months or 50% of the then unvested stock options and restricted
stock held by him in the event he is terminated without cause or resigns for
good reason within 12 months following a change of control.
In October 1999, we entered into an Offer Letter with Alexander Gray. The
agreement entitles Mr. Gray to a salary of $250,000 per year. In November
1999, we granted Mr. Gray an option to purchase 600,000 shares of common stock
at $5.00 per share. The option has been partially exercised, but the
underlying shares are subject to a right of repurchase at cost in our favor in
the event Mr. Gray ceases employment with us. Our repurchase option lapses at
the rate of 1/8th of the total number of shares on May 1, 2000 and 1/48th of
the total shares per month thereafter. Mr. Gray is entitled to six months
accelerated vesting and six months severance in the event he is terminated
without cause or resigns with good reason. Alternatively, Mr. Gray is entitled
to accelerated vesting equal to the greater of 12 months or 50% of the then
unvested stock options or restricted stock held by him in the event he is
terminated without cause or resigns for good reason within 12 months following
a change of control.
In October 1999, we entered into an Offer Letter with Bruce L. Kaplan. The
agreement entitles Mr. Kaplan to a salary of $240,000 per year, a guaranteed
first year bonus of $72,000 and a relocation bonus of $30,000. In November
1999, we granted Mr. Kaplan an option to purchase 500,000 shares of common
stock at $5.00 per share which becomes exercisable at the rate of 1/8th of the
total number of shares on May 1, 2000 and 1/48th of the total per month
thereafter. Mr. Kaplan is entitled to six months accelerated vesting and six
months severance in the event he is terminated without cause or resigns with
good reason. Alternatively, Mr. Kaplan is entitled to accelerated vesting
equal to the greater of 12 months or 50% of the then unvested stock options or
restricted stock held by him in the event he is terminated without cause or
resigns for good reason within 12 months following a change of control.
We have entered into indemnification agreements with each of our executive
officers and directors. These indemnification agreements may require us to
indemnify these persons against liabilities that may arise by reason of their
status as officers or directors, other than liabilities arising from willful
misconduct of a culpable nature, and to advance their expenses as a result of
any proceeding against them.
Loans to Management
The following executive officers have issued full recourse promissory notes
in our favor in connection with their early exercise of stock options issued
pursuant to their original stock option agreements under the 1997 stock option
plan and the 1999 stock plan:
<TABLE>
<CAPTION>
Date of Principal Interest
Name Note Amount Date Due Rate
- ---- -------- ---------- -------- --------
<S> <C> <C> <C> <C>
Earle H. "Kim" LeMasters, III............. 9/23/99 $1,000,000 9/22/04 5.98%
Layne L. Britton.......................... 7/1/99 600,000 7/1/04 5.74
Layne L. Britton.......................... 7/1/99 100,000 7/1/04 5.74
Craig W. Dougherty........................ 11/15/99 1,000,000 11/15/04 6.08
Alexander Gray............................ 11/15/99 500,000 11/15/04 6.08
</TABLE>
58
<PAGE>
Private Placement Transactions
The following table summarizes the shares of preferred stock purchased by
executive officers, directors and 5% stockholders and persons and entities
associated with them in private placement transactions. Each share of
preferred stock converts into one share of common stock automatically upon the
closing of this offering. The shares of Series A preferred stock were sold at
$0.11 per share, the shares of Series B preferred stock were sold at $0.31 per
share, the shares of Series C preferred stock were sold at $0.632 per share,
the shares of Series D preferred stock were sold at $0.775 per share and the
shares of Series E preferred stock were sold at $7.50 per share. See
"Principal Stockholders."
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E
Name Preferred Preferred Preferred Preferred Preferred
- ---- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
KPCB Holdings (William R.
Hearst III)(1)............. -- -- -- 7,870,968 133,333
Anthony J. Wood............. 2,040,600 241,934 158,128 103,226 --
Kevin L. Bohren............. -- 645,160 395,324 51,612 --
Sky D. Dayton............... -- -- 790,648 -- 13,333
Layne L. Britton............ -- -- -- -- 8,394
</TABLE>
- --------
(1) All shares are held by KPCB Holdings Inc., as nominee. Mr. Hearst is a
general partner of Kleiner Perkins Caufield & Byers and is a Vice
President of KPCB Holdings, Inc. He disclaims beneficial ownership except
to the extent of his pecuniary interest therein.
59
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of December 31, 1999, as adjusted
to reflect the issuance of 5,627,267 shares of Series F preferred stock in
January 2000 and the sale of common stock offered in this offering, by:
. each person, or group of affiliated persons, known by us to own
beneficially more than 5% of our outstanding common stock,
. each director,
. the two individuals who served as chief executive officer and four other
most highly compensated executive officers during the fiscal year ended
December 31, 1999, and
. all directors and executive officers as a group.
<TABLE>
<CAPTION>
Percent
Beneficially
Owned
-----------------
Number of Before After
Shares Offering Offering
---------- -------- --------
<S> <C> <C> <C>
Anthony J. Wood.................................. 8,457,438 20.65%
KPCB Holdings Inc. .............................. 8,004,301 19.55
KPCB Holdings Inc.
2750 Sand Hill Road
Menlo Park, CA 94025
William R. Hearst III(1)......................... 8,004,301 19.55
KPCB Holdings Inc.
2750 Sand Hill Road
Menlo Park, CA 94025
Earle H. "Kim" LeMasters, III(2)................. 2,500,000 5.79
Kevin L. Bohren(3)............................... 1,194,149 2.91
Layne L. Britton................................. 1,128,394 2.76
Sky D. Dayton.................................... 803,981 1.96
Craig W. Dougherty(4)............................ 600,000 1.45
Alexander Gray(5)................................ 600,000 1.45
Jeffrey Berg..................................... -- * *
Bruce L. Kaplan.................................. -- * *
All directors and executive officers as a group
(10 persons).................................... 23,288,263 52.73% %
</TABLE>
- --------
* Less than one percent of the outstanding shares of common stock.
(1) All shares are held by KPCB Holdings Inc., as nominee. Mr. Hearst is a
general partner of Kleiner Perkins Caufield & Byers and a Vice President
of KPCB Holdings, Inc. He disclaims beneficial ownership except to the
extent of his pecuniary interest therein.
(2) Includes 2,250,000 shares issuable upon exercise of an option which will
be exercisable within 60 days of December 31, 1999 but which are subject
to a right of repurchase at cost in our favor in the event Mr. LeMasters
ceases employment with us.
(3) Includes 63,333 shares issuable upon exercise of an option which will be
exercisable within 60 days of December 31, 1999.
(4) Includes 400,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of December 31, 1999 but which are subject to a
right of repurchase at cost in our favor in the event Mr. Dougherty ceases
employment with us.
(5) Includes 500,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of December 31, 1999 but which are subject to a
right of repurchase at cost in our favor in the event Mr. Gray ceases
employment with us.
Except as otherwise noted, the address of each person listed in the above
table is c/o ReplayTV, Inc., 1945 Charleston Road, Mountain View, CA 94043-
1201. Beneficial ownership is determined in accordance with the
60
<PAGE>
rules of the Securities and Exchange Commission and includes voting or
investment power with respect to shares. To our knowledge, except under
applicable community property laws or as otherwise indicated, the persons
named in the table have sole voting and sole investment control with respect
to all shares beneficially owned. The applicable percentage of ownership for
each stockholder is based on 40,952,916 shares of common stock outstanding as
of December 31, 1999 on a pro forma basis to reflect the issuance of 5,627,267
shares of Series F preferred stock in January 2000 and the automatic
conversion of all shares of preferred stock, including the shares of Series F
preferred stock issued in January 2000, into shares of common stock, and an
assumed shares outstanding after the completion of this offering, in
each case, together with applicable options for that stockholder. Shares of
common stock issuable upon the exercise of options and other rights
beneficially owned that are exercisable within 60 days of December 31, 1999
are deemed outstanding for the purpose of computing the percentage ownership
of the person holding those options and other rights but are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. A portion of the shares issued or issuable upon exercise of
options in the table below is subject to repurchase by us at the original
purchase price in the event of termination of the holder's relationship as an
employee or director of ReplayTV, which repurchase right lapses over time. The
table assumes that the underwriters' over-allotment to purchase up to
shares of common stock is not exercised.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
200,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value. The following description of
our capital stock is intended to be a summary and does not describe all
provisions of our certificate of incorporation or bylaws or Delaware law
applicable to us. For a more thorough understanding of the terms of our
capital stock, you should refer to our certificate of incorporation and
bylaws, which are included as exhibits to the registration statement of which
this prospectus is a part.
Common Stock
As of December 31, 1999, there were 40,952,916 shares of common stock
outstanding on a pro forma basis to reflect the issuance of 5,627,267 shares
of Series F preferred stock in January 2000 held by approximately 95
stockholders, which reflects the conversion of all outstanding shares of
preferred stock, including the shares of Series F preferred stock issued in
January 2000, into common stock. In addition, as of December 31, 1999, there
were options outstanding to purchase 10,789,637 shares of common stock and a
warrant outstanding to purchase 6,666 shares of common stock at an exercise
price of $7.50 per share, which expires on May 31, 2004. Upon completion of
this offering, there will be shares of common stock outstanding,
assuming no exercise of the underwriters' overallotment option or additional
exercise of outstanding options under our stock option plan and warrants.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, holders of common stock are
entitled to receive ratably dividends as may be declared by the board of
directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any outstanding preferred stock. The common
stock has no preemptive or conversion rights, other subscription rights, or
redemption or sinking fund provisions. All outstanding shares of common stock
are fully paid and non-assessable, and the shares of common stock to be issued
upon completion of this offering will be fully paid and non-assessable.
Preferred Stock
Upon the closing of this offering, all outstanding shares of preferred
stock, including the shares of Series F preferred stock issued in January
2000, will be converted on a one-for-one basis into 31,368,852 shares of
common stock and automatically retired. Thereafter, the board of directors
will have the authority, without further action by the stockholders, to issue
up to 5,000,000 shares of preferred stock in one or more series and to
designate the rights, preferences, privileges and restrictions of each series.
The issuance of preferred stock could have the effect of restricting dividends
on the common stock, diluting the voting power of the common stock, impairing
the liquidation rights of the common stock or delaying or preventing our
change in control without further action by the stockholders. We have no
present plans to issue any shares of preferred stock.
Registration Rights
Following conversion of the preferred stock into common stock, the holders
of 31,368,852 shares of common stock and warrants to purchase 6,666 shares of
common stock are entitled to have their shares registered by us under the
Securities Act under the terms of an agreement between us and the holders of
these "registrable securities." Subject to limitations specified in the
agreement, these registration rights include the following:
The holders of at least 50% of the outstanding registrable securities may
require, on two occasions beginning six months after the date of this
prospectus, that we use our best efforts to register the registrable
securities for public resale, provided that the aggregate offering price for
these registrable securities is at least $5,000,000. This right is subject to
the ability of the underwriters to limit the number of shares included in this
offering in view of market conditions.
62
<PAGE>
If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities are
entitled to include their shares of common stock in that registration. This
right is subject to the ability of the underwriters to limit the number of
shares included in this offering in view of market conditions.
The holders of at least 20% of the then outstanding registrable securities
may require us to register all or a portion of their registrable securities on
Form S-3 when use of this form becomes available to us, provided that the
proposed aggregate offering price is at least $500,000. The holders of
registrable securities may not exercise this right if we have already effected
two Form S-3 registrations previously demanded by the holders of registrable
securities during the preceding twelve-month period.
We will bear all registration expenses other than underwriting discounts
and commissions, except in the case of registrations on Form S-3 after the
first two such registrations, in which case the holders will bear the expenses
of registration. All registration rights terminate on the date five years
following the closing of this offering, or, with respect to each holder of
registrable securities, at the time when the holder is entitled to sell all of
its shares in any three month period under Rule 144 of the Securities Act.
Delaware Anti-Takeover Law and Provisions of our Certificate of Incorporation
and Bylaws
Provisions of Delaware law and our certificate of incorporation and bylaws
could make it more difficult for a third party to acquire us or to remove our
incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to acquire control of ReplayTV to first
negotiate with us. We believe that the benefits of increased protection of our
ability to negotiate with the proponent of an unfriendly or unsolicited
acquisition proposal outweigh the disadvantages of discouraging these
proposals because, among other things, negotiation could result in an
improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date
the person became an interested stockholder, unless:
. the board of directors approved the transaction in which the person
became an interested stockholder prior to the date the interested
stockholder attained this status;
. upon consummation of the transaction that resulted in the person's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
. on or after the date of the business combination, it is approved by the
board of directors and authorized at an annual or special meeting of
stockholders.
A business combination generally includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an interested stockholder is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our certificate of incorporation and bylaws do not provide for the right of
stockholders to act by written consent without a meeting or for cumulative
voting in the election of directors. In addition, our certificate of
incorporation permits the board of directors to issue preferred stock with
voting or other rights without any stockholder action. Our certificate of
incorporation provides for the board of directors to be divided into three
classes, with staggered three-year terms, commencing at our first annual
meeting of stockholders following the date on which we have at least 800
stockholders. As a result, only one class of directors will be elected at each
annual meeting of stockholders. Each of the two other classes of directors
will continue to serve for the remainder
63
<PAGE>
of its respective three-year term. These provisions, which require the vote of
stockholders holding at least two thirds of the outstanding common stock to
amend, may have the effect of deterring hostile takeovers or delaying changes
in our management.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
The transfer agent's address and telephone number is .
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this
offering because of contractual restrictions on resale. Sales of substantial
amounts of our common stock in the public market after the restrictions lapse
could adversely affect the prevailing market price and impair our ability to
raise equity capital in the future.
Upon completion of the offering, we will have outstanding
shares of common stock. Of these shares, the shares sold in this
offering, plus any shares issued upon exercise of the underwriters'
overallotment option, will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates" as that term is defined
in Rule 144 under the Securities Act. In general, affiliates include executive
officers, directors or 10% stockholders. Shares purchased by affiliates will
remain subject to the resale limitations of Rule 144.
The remaining 40,952,916 shares outstanding as of December 31, 1999, as
adjusted to reflect the issuance of 5,627,267 shares of Series F preferred
stock in January 2000, are restricted securities within the meaning of Rule
144. Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144, 144(k)
or 701 promulgated under the Securities Act, which are summarized below. Sales
of restricted securities in the public market, or the availability of these
shares for sale, could adversely affect the market price of the common stock.
Our directors, executive officers and certain of our stockholders and
option holders have entered into lock-up agreements in connection with this
offering, as more fully described under "Underwriting," generally providing
that they will not offer, sell, contract to sell or grant any option to
purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them for a
period of 180 days after the date of this prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated. Notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements will not be salable until these agreements
expire or are waived by Morgan Stanley & Co. Incorporated. Taking into account
the lock-up agreements, and assuming Morgan Stanley & Co. Incorporated does
not release stockholders from these agreements, the following shares will be
eligible for sale in the public market at the following times:
. Beginning on the date of this prospectus, only the shares sold
in this offering will be immediately available for sale in the public
market.
. Beginning 180 days after the date of this prospectus, about 9,411,088
shares will be eligible for sale pursuant to Rule 701, of which 7,708,720
are held by affiliates.
. Beginning 180 days after the date of this prospectus, about 1,824,434
shares will be eligible for sale pursuant to Rule 144(k), none of which
are held by affiliates.
. Beginning 180 days after the date of this prospectus, about 20,070,571
shares will be eligible for sale subject to volume, manner of sale and
other limitations under Rule 144, of which 12,366,210 are held by
affiliates.
. The remaining 5,646,823 shares will be eligible for sale pursuant to Rule
144 upon the expiration of various one-year holding periods during the
six months following 180 days after the date of this prospectus, none of
which are held by affiliates.
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding
which will equal about shares immediately after this offering;
or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
65
<PAGE>
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice and the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been our
affiliate at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell his or her shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written
compensatory plan or contract to resell these shares in reliance upon Rule 144
but without compliance with specific restrictions. Rule 701 provides that
affiliates may sell their Rule 701 shares under Rule 144 without complying
with the holding period requirement and that non-affiliates may sell their
shares in reliance on Rule 144 without complying with the holding period,
public information, volume limitation or notice provisions of Rule 144.
In addition, we intend to file registration statements under the Securities
Act as promptly as possible after the effective date to register shares to be
issued pursuant to our employee benefit plans. As a result, any options or
rights exercised under the 1999 stock plan, the 1997 stock option plan, the
2000 employee stock purchase plan, the 2000 directors' stock option plan or
any other benefit plan after the effectiveness of the registration statements
will also be freely tradable in the public market. However, such shares held
by affiliates will still be subject to the volume limitation, manner of sale,
notice and public information requirements of Rule 144 unless otherwise
resalable under Rule 701. As of December 31, 1999 there were outstanding
options for the purchase of 10,789,637 shares of common stock, of which
options to purchase 1,799,526 shares were exercisable.
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc., Deutsche
Bank Securities Inc., Hambrecht & Quist LLC and Wasserstein Perella
Securities, Inc., are acting as representatives, have severally agreed to
purchase and we have agreed to sell to them, the respective number of shares
of common stock set forth opposite the names of these underwriters below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................
Bear, Stearns & Co. Inc..........................................
Deutsche Bank Securities Inc.....................................
Hambrecht & Quist LLC............................................
Wasserstein Perella Securities, Inc..............................
-------
Total........................................................
=======
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus
are subject to the approval of specified legal matters by their counsel and to
other conditions. The underwriters are obligated to take and pay for all of
the shares of common stock offered by this prospectus, except those shares
covered by the over-allotment option described below, if any shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and a portion to some dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. Any underwriter may allow, and these dealers may reallow, a
concession not in excess of $ per share to other underwriters or to other
dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares offered by this
prospectus. To the extent this option is exercised, each underwriter will
become obligated, subject to specified conditions, to purchase about the same
percentage of additional shares as the number set forth next to the
underwriter's name in the preceding table bears to the total number of shares
set forth next to the names of all underwriters in the preceding table. If the
underwriters exercise the over-allotment option in full, the total price to
the public for this offering would be $ , the total underwriting discounts
and commissions would be $ and the total proceeds to ReplayTV would be $
.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
At our request, the underwriters have reserved up to shares of common
stock offered by this prospectus for sale at the initial public offering price
to some of our directors, officers, employees, business associates and related
persons of ReplayTV. The number of shares available for sale to the general
public will be reduced to the extent that these persons purchase these
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares
offered by this prospectus.
ReplayTV has applied to list the common stock on the Nasdaq National Market
under the symbol "RPLY."
67
<PAGE>
ReplayTV, our directors and executive officers and certain of our
stockholders and option holders have each agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, he, she or it will not, during the period ending 180 days after
the date of this prospectus:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
. enter into any swap or other agreement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in the immediately preceding paragraph do not
apply to:
. the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing;
. shares sold by us in this offering; or
. transactions by any person other than ReplayTV relating to shares of
common stock or other securities acquired in open market transactions
after the completion of this offering.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities, and may end any of these activities at any time.
ReplayTV and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
Pricing of this Offering
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price will be determined by
negotiations between us and the representatives of the underwriters. Among the
factors to be considered in determining the initial public offering price will
be:
. the future prospects of ReplayTV and its industry in general;
. earnings and certain other financial and operating information of
ReplayTV in recent periods; and
. the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of ReplayTV.
The estimated initial public offering price range set forth on the cover
page of this prospectus is subject to change as a result of market conditions
and other factors.
68
<PAGE>
LEGAL MATTERS
The validity of the common stock in this offering will be passed upon by
Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo
Park, California 94025. Mark Medearis, a Director of Venture Law Group, is our
Secretary. Legal matters in connection with this offering will be passed upon
for the underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York 10017. As of the date of this prospectus, attorneys of Venture Law
Group and an investment partnership controlled by Venture Law Group
beneficially own an aggregate of 19,412 shares of our common stock.
EXPERTS
The financial statements of ReplayTV, Inc. as of December 31, 1997 and 1998
and for the period from August 27, 1997 (inception) to December 31, 1997 and
the year ended December 31, 1998 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION AVAILABLE TO YOU
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the shares of common stock offered by
this prospectus. This prospectus does not contain all of the information set
forth in the registration statement and its exhibits and schedules. For
further information with respect to us and our common stock being offered, see
the registration statement and its exhibits and schedules. A copy of the
registration statement and its exhibits and schedules may be inspected without
charge at the public reference facilities maintained by the SEC located at
Room 1024, 450 Fifth Street, Washington, D.C. 20549 and at the SEC's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of all or any part of the registration
statement may be obtained from these offices upon the payment of the fees
prescribed by the SEC. Information on the operation of the public reference
room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a
web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the SEC.
69
<PAGE>
REPLAYTV, INC.
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheet.............................................................. F-3
Statement of Operations.................................................... F-4
Statement of Stockholders' Equity (Deficit)................................ F-5
Statement of Cash Flows.................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ReplayTV, Inc.
The reincorporation described in Note 10 to the financial statements has not
been consummated as of January 26, 2000. When the reincorporation has been
completed, we will be in a position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' equity (deficit), and of
cash flows present fairly, in all material respects, the financial
position of ReplayTV, Inc. (a development stage company) at December
31, 1997 and 1998, and the results of its operations and its cash flows
for the period from August 27, 1997 (inception) to December 31, 1997
and the year ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United
States which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
August 31, 1999, except for Note 10,
which is as of January , 2000
F-2
<PAGE>
REPLAYTV, INC.
(a development stage company)
BALANCE SHEET
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
-------------- September 30, September 30,
1997 1998 1999 1999
----- ------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 103 $ 686 $ 14,636
Short-term investments........... -- 25 35,204
Accounts receivable, net of
allowances of $0, $0 and $9..... -- -- 283
Inventory........................ -- -- 988
Prepaid expenses and other
current assets.................. 10 225 334
----- ------- --------
Total current assets............... 113 936 51,445
Property and equipment, net........ 31 132 1,708
Other assets....................... -- -- 253
----- ------- --------
Total assets....................... $ 144 $ 1,068 $ 53,406
===== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable................. $ 15 $ 682 $ 4,100
Accrued liabilities.............. 4 45 1,307
Notes payable to related party... -- 601 --
----- ------- --------
Total current liabilities.......... 19 1,328 5,407
----- ------- --------
Commitments and contingencies (Note
4)
Stockholders' equity (deficit):
Convertible Preferred Stock,
issuable in series, $0.001 par
value, 2,494, 8,237 and 27,137
shares authorized at December
31, 1997, 1998 and September 30,
1999 (unaudited), respectively;
2,494, 7,915 and 25,742 shares
issued and outstanding at
December 31, 1997, 1998 and
September 30, 1999 (unaudited),
respectively; 5,000,000 shares
authorized; no shares issued and
outstanding pro forma
(unaudited)..................... 3 8 26 $ --
Common Stock, $0.001 par value,
20,000, 30,000 and 75,000 shares
authorized at December 31, 1997,
1998 and September 30, 1999
(unaudited), respectively;
7,863, 6,970 and 9,209 shares
issued and outstanding at
December 31, 1997, 1998 and
September 30, 1999 (unaudited),
respectively; 200,000,000 shares
authorized and 34,951 shares
issued and outstanding pro forma
(unaudited)..................... 4 4 6 32
Additional paid-in capital....... 273 3,818 93,501 93,501
Notes receivable................. -- -- (1,700) (1,700)
Unearned stock-based
compensation.................... -- (651) (20,278) (20,278)
Deficit accumulated during
development stage............... (155) (3,439) (23,556) (23,556)
----- ------- -------- --------
Total stockholders' equity
(deficit)......................... 125 (260) 47,999 $ 47,999
----- ------- -------- ========
Total liabilities and stockholders'
equity (deficit).................. $ 144 $ 1,068 $ 53,406
===== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
REPLAYTV, INC.
(a development stage company)
STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Period from Period from
August 27, Nine Months August 27,
1997 Ended September 1997
(inception) to Year Ended 30, (inception) to
December 31, December 31, ----------------- September 30,
1997 1998 1998 1999 1999
-------------- ------------ ------- -------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Costs and expenses:
Research and
development.......... $ 136 $ 1,961 $ 1,003 $ 4,814 $ 6,911
Programming and
content.............. -- -- -- 560 560
Sales and marketing... 10 764 293 8,735 9,509
General and
administrative....... 9 325 159 2,091 2,425
Hardware distribution
costs, net........... -- -- -- 770 770
Stock-based
compensation......... -- 206 100 3,489 3,695
------ ------- ------- -------- --------
Total costs and
expenses........... 155 3,256 1,555 20,459 23,870
------ ------- ------- -------- --------
Operating loss.......... (155) (3,256) (1,555) (20,459) (23,870)
Interest income
(expense), net......... -- (28) (4) 342 314
------ ------- ------- -------- --------
Net loss................ $ (155) $(3,284) $(1,559) $(20,117) $(23,556)
====== ======= ======= ======== ========
Basic and diluted net
loss per share......... $(0.08) $ (0.48) $ (0.23) $ (2.73) $ (3.35)
====== ======= ======= ======== ========
Basic and diluted
weighted average shares
used in computation of
net loss per share..... 2,026 6,889 6,880 7,359 7,037
====== ======= ======= ======== ========
Pro forma basic and
diluted net loss per
share (unaudited)...... $ (0.29) $ (0.84)
======= ========
Pro forma basic and
diluted weighted
average shares
(unaudited)............ 11,282 23,953
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
REPLAYTV, INC.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Convertible Deficit
Preferred Accumulated Total
Stock Common Stock Additional Unearned During Stockholders'
------------- -------------- Paid-In Notes Stock-Based Development Equity
Shares Amount Shares Amount Capital Receivable Compensation Stage (Deficit)
------ ------ ------ ------ ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock
at inception........... -- $ -- 7,863 $ 4 $ -- $ -- $ -- $ -- $ 4
Issuance of Series A
Preferred Stock, net... 2,494 3 -- -- 273 -- -- -- 276
Net loss................ -- -- -- -- -- -- -- (155) (155)
------ ---- ----- --- ------- ------- -------- -------- -------
Balance at December 31,
1997................... 2,494 3 7,863 4 273 -- -- (155) 125
Issuance of Series B
Preferred Stock, net... 2,258 2 -- -- 695 -- -- -- 697
Issuance of Series C
Preferred Stock, net... 3,163 3 -- -- 1,993 -- -- -- 1,996
Exercise of Common Stock
options................ -- -- 90 -- -- -- -- -- --
Repurchase of Common
Stock.................. -- -- (983) -- -- -- -- -- --
Unearned stock-based
compensation........... -- -- -- -- 857 -- (857) -- --
Stock-based
compensation........... -- -- -- -- -- -- 206 -- 206
Net loss................ -- -- -- -- -- -- -- (3,284) (3,284)
------ ---- ----- --- ------- ------- -------- -------- -------
Balance at December 31,
1998................... 7,915 8 6,970 4 3,818 -- (651) (3,439) (260)
Issuance of Series D
Preferred Stock, net
(unaudited)............ 10,194 10 -- -- 7,831 -- -- -- 7,841
Issuance of Series E
Preferred Stock, net
(unaudited)............ 7,633 8 -- -- 56,995 -- -- -- 57,003
Issuance of Common Stock
(unaudited)............ -- -- 2,239 2 1,782 (1,700) -- -- 84
Issuance of stock
options for services
(unaudited)............ -- -- -- -- 444 -- -- -- 444
Issuance of warrants to
purchase Series E
Preferred Stock
(unaudited)............ -- -- -- -- 30 -- -- -- 30
Unearned stock-based
compensation
(unaudited)............ -- -- -- -- 22,601 -- (22,601) -- --
Stock-based compensation
(unaudited)............ -- -- -- -- -- -- 2,974 -- 2,974
Net loss (unaudited).... -- -- -- -- -- -- -- (20,117) (20,117)
------ ---- ----- --- ------- ------- -------- -------- -------
Balance at September 30,
1999 (unaudited)....... 25,742 $ 26 9,209 $ 6 $93,501 $(1,700) $(20,278) $(23,556) $47,999
====== ==== ===== === ======= ======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
REPLAYTV, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period from Period from
August 27, August 27,
1997 Nine Months 1997
(inception) Ended September (inception)
to Year Ended 30, to
December 31, December 31, ----------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------- -------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(155) $(3,284) $(1,559) $(20,117) $(23,556)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization........ 2 23 17 131 156
Stock-based
compensation........ -- 206 100 3,519 3,725
Changes in assets and
liabilities:
Accounts
receivable........ -- -- -- (283) (283)
Inventory.......... -- -- -- (988) (988)
Accounts payable
and other current
liabilities....... 19 739 398 4,649 5,407
Prepaid expenses
and other assets.. (10) (215) (55) (362) (587)
----- ------- ------- -------- --------
Net cash used in
operating
activities...... (144) (2,531) (1,099) (13,451) (16,126)
----- ------- ------- -------- --------
Cash flows from
investing activities:
Purchase of property
and equipment......... (33) (124) (63) (1,707) (1,864)
Purchase of short-term
investments........... -- (25) -- (35,179) (35,204)
----- ------- ------- -------- --------
Net cash used in
investing
activities...... (33) (149) (63) (36,886) (37,068)
----- ------- ------- -------- --------
Cash flows from
financing activities:
Proceeds from the
issuance of Common
Stock................. 4 -- -- 13 17
Proceeds from the sale
of Preferred Stock.... 276 2,693 698 64,844 67,813
Proceeds from
(repayment of) notes
payable............... -- 570 363 (570) --
----- ------- ------- -------- --------
Net cash provided
by financing
activities...... 280 3,263 1,061 64,287 67,830
----- ------- ------- -------- --------
Net increase (decrease)
in cash and cash
equivalents........... 103 583 (101) 13,950 14,636
Cash and cash
equivalents at the
beginning of the
period................ -- 103 103 686 --
----- ------- ------- -------- --------
Cash and cash
equivalents at the end
of the period......... $ 103 $ 686 $ 2 $ 14,636 $ 14,636
===== ======= ======= ======== ========
Supplemental disclosure
of cash flow
information:
Interest paid.......... $ -- $ -- $ -- $ 37 $ 37
===== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 1--The Company and Its Significant Accounting Policies:
ReplayTV, Inc. (the "Company") was incorporated in California in August
1997, and through the first quarter of 1999, the Company's operating
activities consisted primarily of product and service development. The Company
continues to operate as a development stage company and has not yet recognized
any operating revenues from advertising or other sources. In April 1999, the
Company launched the ReplayTV Service and the ReplayTV-enabled personal video
recorder, or PVR, via direct sales from its web site and toll free telephone
number. More recently, the Company's products have become available through
online retailers. The Company has received proceeds from the shipment of
ReplayTV-enabled PVRs; however, these proceeds are considered incidental to
the Company's ongoing business and thus have been reported as a reduction of
the related hardware distribution costs in its statement of operations. The
Company does not intend to manufacture PVRs. Instead, it intends to license
its technology to partners to manufacture PVRs or incorporate ReplayTV's
technology in their consumer electronics products such as VCRs, DVD players
and recorders, set-top boxes or televisions. The Company recently entered into
such an agreement with Matsushita-Kotobuki Electronics Industries, Ltd., a
subsidiary of Matsushita Electric Industrial Co., Ltd. ("MKE"), and intends to
enter into similar relationships with other consumer electronics companies in
the future.
Unaudited interim results
The interim financial statements as of September 30, 1999 and for the nine
months ended September 30, 1998 and 1999 are unaudited. In the opinion of
management, these interim financial statements have been prepared on the same
basis as the audited financial statements and reflect all adjustments,
consisting only of normal, recurring adjustments necessary for the fair
presentation of the results of interim periods. The financial data and other
information disclosed in these notes to the financial statements for the
related periods are unaudited. The results of the interim periods are not
necessarily indicative of the results to be expected for any future periods.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The carrying
amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
Short-term investments
The Company classifies all investments in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" which requires investment
securities to be classified as either held to maturity, trading or available-
for-sale. All of the Company's investments are classified as available-for-
sale and are stated at fair market value which approximates cost.
F-7
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The Company's short-term investments consist of a certificate of deposit of
$25,000 at December 31, 1998 and commercial paper of $35,204,000 at September
30, 1999. Unrealized gains or losses have been insignificant for all periods
presented.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets
of one to five years.
Hardware distribution costs, net
The costs associated with manufacturing and distribution of the PVRs were
$4.2 million for the nine months ended September 30, 1999. Proceeds from sales
of the PVRs totaled $3.4 million during the same period. As the Company plans
to transition the manufacturing and distribution of its PVRs to MKE and other
partners, the sales of PVRs are considered incidental to its business.
Therefore, the Company has reflected the proceeds as a reduction of the
related hardware distribution costs. The Company has agreed to subsidize MKE
in connection with their manufacturing and distribution of ReplayTV-enabled
PVRs in future periods. The Company records a provision for estimated warranty
costs at the time of sale.
Net loss per share
Basic net loss per share is computed by dividing the net loss for the
period by the weighted average number of shares of Common Stock outstanding
during the period. Diluted net loss per share is computed by dividing the net
loss for the period by the weighted average number of common and potential
common equivalent shares outstanding during the period. The calculation of
diluted net loss per share excludes potential common shares if the effect is
antidilutive. Potential common shares are composed of Common Stock subject to
repurchase rights and incremental shares of Common Stock issuable upon the
exercise of stock options and warrants and Common Stock issuable upon
conversion of Preferred Stock.
F-8
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated:
<TABLE>
<CAPTION>
Period from Period from
August 27, Nine Months August 27,
1997 Ended September 1997
(inception) to Year Ended 30, (inception) to
December 31, December 31, ----------------- September 30,
1997 1998 1998 1999 1999
-------------- ------------ ------- -------- --------------
(unaudited) (unaudited)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss.............. $ (155) $(3,284) $(1,559) $(20,117) $(23,556)
------ ------- ------- -------- --------
Denominator:
Weighted average
shares............... 2,315 6,889 6,880 7,735 7,174
Weighted average
shares of Common
Stock subject to
repurchase
agreements........... (289) -- -- (376) (137)
------ ------- ------- -------- --------
Denominator for basic
and diluted
calculation.......... 2,026 6,889 6,880 7,359 7,037
------ ------- ------- -------- --------
Basic and diluted net
loss per share......... $(0.08) $ (0.48) $ (0.23) $ (2.73) $ (3.35)
====== ======= ======= ======== ========
</TABLE>
The following table sets forth the weighted average potential shares of
Common Stock that are not included in the diluted net loss per share
calculation above because to do so would be antidilutive for the periods
indicated:
<TABLE>
<CAPTION>
Period from Nine Months Period from
August 27, Ended August 27,
1997 September 1997
(inception) to Year Ended 30, (inception) to
December 31, December 31, ------------ September 30,
1997 1998 1998 1999 1999
-------------- ------------ ----- ------ --------------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Weighted average effect
of dilutive securities:
Series A Preferred
Stock................ 242 2,494 2,494 2,494 2,197
Series B Preferred
Stock................ -- 1,460 889 2,258 1,507
Series C Preferred
Stock................ -- 439 -- 3,163 1,339
Series D Preferred
Stock................ -- -- -- 7,022 2,545
Series E Preferred
Stock................ -- -- -- 1,657 614
Warrant to purchase
Series E Preferred
Stock................ -- -- -- 1 1
Employee stock
options.............. 31 1,635 1,659 4,677 3,645
Common Stock subject
to repurchase
agreements........... 289 -- -- 376 137
--- ----- ----- ------ ------
562 6,028 5,042 21,648 11,985
=== ===== ===== ====== ======
</TABLE>
Income taxes
Income taxes are accounted for using the asset and liability approach in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under the asset
and liability approach, a current tax liability or asset is
F-9
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
recognized for the estimated taxes payable or refundable on tax returns for
the current year. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and
carryforwards. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any benefits that, based on available evidence,
are not expected to be realized.
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1998 and the
nine months ended September 30, 1999 is computed using the weighted average
number of common shares outstanding, including the conversion of the Company's
Convertible Preferred Stock into shares of the Company's Common Stock
effective upon the closing of the Company's initial public offering, as if
such conversion occurred at January 1, 1998 or at date of original issuance,
if later. The resulting unaudited pro forma adjustment includes an increase in
the weighted average shares used to compute basic and diluted net loss per
share of 4,393,000 and 16,594,000 for the year ended December 31, 1998 and
nine months ended September 30, 1999, respectively. The calculation of pro
forma diluted net loss per share excludes incremental Common Stock issuable
upon the exercise of stock options and warrants as the effect would be
antidilutive.
Comprehensive income
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. During the period from August 27, 1997
(inception) to December 31, 1997, the year ended December 31, 1998 and the
nine months ended September 30, 1998 and 1999 (unaudited) the Company has not
had any significant transactions that are required to be reported in
comprehensive income (loss).
Stock-based compensation
The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and complies with the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Under APB 25, unearned compensation is based on the difference,
if any, on the date of the grant, between the fair value of the Company's
stock and the exercise price. Unearned compensation is amortized and expensed
in accordance with Financial Accounting Standards Board Interpretation No. 28
using the multiple-option approach. The Company accounts for stock-based
compensation issued to non-employees in accordance with the provisions of SFAS
No. 123 and Emerging Issues Task Force No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services."
Concentration of risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of cash equivalents and short-
term investments. Cash equivalents and short-term investments, primarily
composed of investments in money market funds and commercial paper, are
maintained with a single institution, and the composition and maturities are
regularly monitored by management. The carrying value of all financial
instruments approximate their respective fair value.
F-10
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The Company relies on a single third-party contractor to manufacture the
ReplayTV-enabled PVRs. The Company also relies on other third party suppliers
to provide certain components necessary to manufacture the PVRs. The loss of
any manufacturer or supplier could delay or prevent the Company from
commercializing its services and have a material adverse effect on the
Company's business, financial position and results of operations.
Recent accounting pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 is
effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software
developed or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. The adoption of the provisions
of SOP 98-1 during the fiscal year beginning January 1, 1999, did not have a
material effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. In July 1999, the Financial Accounting Standards Board issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133". SFAS No. 137
deferred the effective date until the first fiscal quarter ending on or after
June 30, 2000. The Company will adopt SFAS No. 133 in its quarter ending June
30, 2000. The Company has not engaged in hedging activities or invested in
derivative instruments.
Note 2--Balance Sheet Components:
<TABLE>
<CAPTION>
December 31,
-------------- September 30,
1997 1998 1999
------ ------ -------------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Property and equipment:
Computer equipment and software............. $ 33 $ 138 $1,101
Lab and manufacturing equipment............. -- 11 239
Office furniture and equipment.............. -- 8 524
----- ------ ------
33 157 1,864
Less: accumulated depreciation................ (2) (25) (156)
----- ------ ------
$ 31 $ 132 $1,708
===== ====== ======
Accrued liabilities:
Payroll and related expense................. $ 4 $ 45 $ 201
Warranty reserve............................ -- -- 67
Production costs............................ -- -- 319
Deferred rent............................... -- -- 180
Other....................................... -- -- 540
----- ------ ------
$ 4 $ 45 $1,307
===== ====== ======
</TABLE>
F-11
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 3--Line of Credit:
On June 10, 1999, the Company entered into a loan agreement (the
"Facility") with a bank. The Facility is secured by the Company's assets. The
Facility allows for borrowings of up to $1.25 million bearing interest at a
rate equal to the bank's prime rate plus 0.75% and expires in May 2000. The
Company must comply with certain financial covenants and conditions as
described in the Facility. The Company was in compliance as of September 30,
1999. As of September 30, 1999, no borrowings were outstanding under the
Facility. The Company has an outstanding Letter of Credit of $500,000 under
the loan agreement. Under the terms of the loan agreement, the Company is
prohibited from paying dividends without approval from the bank.
Note 4--Commitments and Contingencies:
Operating leases
The Company leases office space under a noncancelable operating lease which
expires in March 2006. Rent expense totaled $9,000, $120,000, $77,000 and
$973,000 in 1997, 1998 and for the nine months ended September 30, 1998 and
1999 (unaudited), respectively.
Future minimum lease payments under noncancelable leases are as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ending December 31,
-------------------------
<S> <C>
1999................................................................. $ 394
2000................................................................. 2,198
2001................................................................. 2,411
2002................................................................. 2,483
2003................................................................. 2,555
Thereafter........................................................... 6,019
-------
Total minimum lease payments....................................... $16,060
=======
</TABLE>
Contingencies
From time to time, the Company may have certain contingent liabilities,
including intellectual property claims, that arise in the ordinary course of
its business activities. The Company accrues contingent liabilities when it is
probable that future expenditures will be made and such expenditures can be
reasonably estimated. In the opinion of management, there are no pending
claims for which the outcome is expected to result in a material adverse
effect on the financial position or results of operations or cash flows of the
Company.
F-12
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 5--Income Taxes:
The Company incurred net operating losses for the period from August 27,
1997 (inception) to December 31, 1997 and the year ended December 31, 1998 and
accordingly, no provision for income taxes has been recorded. The tax benefit
is reconciled to the amount computed using the federal statutory rate as
follows:
<TABLE>
<CAPTION>
Period from
August 27,
1997
(inception) to Year Ended
December 31, December 31,
1997 1998
-------------- ------------
(in thousands)
<S> <C> <C>
Federal statutory benefit........................ $53 $1,116
State taxes, net of federal benefit.............. 13 263
Future benefits not currently recognized......... (71) (1,365)
Nondeductible compensation....................... -- (82)
Other............................................ 5 68
--- ------
$-- $ --
=== ======
</TABLE>
At December 31, 1998, the Company had approximately $1.9 million of federal
and $1.9 million of state net operating loss carryforwards available to offset
future taxable income which expire at various dates through 2018. Under the
Tax Reform Act of 1986, the amounts of and benefits from net operating loss
carryforwards may be impaired or limited in certain circumstances. Events
which cause limitations in the amount of net operating losses that the Company
may utilize in any one year include, but are not limited to, a cumulative
ownership change of more than 50%, as defined, over a three-year period.
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
---------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 53 $ 744
Accruals and allowances................................... 8 544
Research credits.......................................... 10 148
----- --------
Net deferred tax assets................................. 71 1,436
Valuation allowance....................................... (71) (1,436)
----- --------
$ -- $ --
===== ========
</TABLE>
The Company has incurred losses since inception. Management believes that
based on the history of such losses and other factors, the weight of available
evidence indicates that it is more likely than not that the Company will not
be able to realize its deferred tax assets, and thus a full valuation reserve
has been recorded at December 31, 1997 and 1998.
F-13
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
Note 6--Convertible Preferred Stock:
Convertible Preferred Stock ("Preferred Stock") consists of the following:
<TABLE>
<CAPTION>
Proceeds
Per Net of
Shares Shares Share Liquidation Issuance
Series Authorized Outstanding Amount Amount Costs
------ ---------- ----------- ------ ----------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
A....................... 2,494 2,494 $0.11 $ 276 $ 276
------ ------ ------- -------
Balance at December
31, 1997............. 2,494 2,494 276 276
B....................... 2,580 2,258 0.31 700 697
C....................... 3,163 3,163 0.63 1,999 1,996
------ ------ ------- -------
Balance at December
31, 1998............. 8,237 7,915 2,975 2,969
D (unaudited)........... 10,200 10,194 0.78 7,900 7,841
E (unaudited)........... 8,700 7,633 7.50 57,300 57,003
------ ------ ------- -------
Balance at September
30, 1999,
(unaudited).......... 27,137 25,742 $68,175 $67,813
====== ====== ======= =======
</TABLE>
The above table excludes the Series F Preferred Stock financing which
occurred subsequent to September 30, 1999 (see Note 10).
The holders of the Convertible Preferred Stock have various rights and
preferences as follows:
Dividends
Holders of the Series A, Series B, Series C, Series D and Series E
Preferred Stock are each entitled to receive annual dividends of 8% per share,
when as and if declared by the Board of Directors prior to the declaration of
dividends to holders of Common Stock.
Conversion
Each share of Series A, Series B, Series C, Series D and Series E Preferred
Stock is convertible into shares of Common Stock based on a formula which
currently results in a one-for-one exchange ratio. This formula is subject to
adjustment, as defined, which essentially provides adjustments for holders of
the Preferred Stock in the event of dilutive issuances, stock splits,
combinations or other recapitalizations. Such conversion is automatic upon the
earlier of (i) the effective date of a public offering of Common Stock
resulting in an offering price of not less than $7.50 per share (appropriately
adjusted for any stock split, dividend, combination or other
recapitalizations) or (ii) written notice to the Company by the holders of at
least 66 2/3% of the then outstanding shares of Preferred Stock of their
intent to convert into shares of Common Stock.
Liquidation
In the event of liquidation, holders of the Series A Preferred Stock are
entitled to a per share distribution in preference to holders of Common Stock
equal to the Series A stated value of $0.11 plus any declared but unpaid
dividends. The holders of Series B Preferred Stock are entitled to a per share
distribution preference to holders of Common Stock equal to the Series B
stated value of $0.31 plus any declared but unpaid dividends. The holders
F-14
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
of Series C Preferred Stock are entitled to a per share distribution
preference to holders of Common Stock equal to the Series C stated value of
$0.63 plus any declared but unpaid dividends. The holders of Series D
Preferred Stock are entitled to a per share distribution preference to holders
of Common Stock equal to the Series D stated value of $0.78 plus any declared
but unpaid dividends. The holders of Series E Preferred Stock are entitled to
a per share distribution preference to holders of Common Stock equal to the
Series E stated value of $7.50 plus any declared but unpaid dividends. In the
event funds are sufficient to make a complete distribution to holders of
Series A, Series B, Series C, Series D and Series E as described above, the
remaining assets will be distributed ratably among the holders of Common
Stock.
Redemption
The holders of the Series A, B, C, D and E Preferred Stock have no
redemption rights.
Voting
The holders of the Series A, B, C, D and E Preferred Stock have one vote
for each share of Common Stock into which such Preferred Stock may be
converted.
Warrants for Preferred Stock
In connection with a loan agreement entered into in June 1999, the Company
issued a warrant to purchase 6,666 shares of Series E Preferred Stock to the
lender. The warrant may be exercised at any time between May 1999 and May 2004
at an exercise price of $7.50 per share. The warrant was recorded as a debt
discount at its estimated fair value of $30,000. The Company estimated the
fair value of the warrant using the Black-Scholes option pricing model using
the following assumptions: risk-free interest rate of 5.5%; volatility of 80%;
and an expected life of five years.
Note 7--Common Stock:
At December 31, 1997 and 1998, there were 7,863,000 and 6,970,000 shares
outstanding, respectively, of Common Stock issued to the founders of the
Company, affiliates and other nonrelated parties. At September 30, 1999, there
were 9,209,000 shares of Common Stock outstanding. A portion of the shares
sold are subject to a right of repurchase by the Company subject to vesting.
At December 31, 1997 and 1998 and September 30, 1999, there were approximately
983,000, 0 and 1,370,000 shares, respectively, subject to repurchase. In June
1998, the Company repurchased 983,000 shares of unvested Common Stock from a
founder of the Company at $0.0005 per share.
In July 1999, the Board of Directors approved a two-for-one stock split of
the Company's Common Stock and Preferred Stock with a corresponding adjustment
to outstanding stock options and warrants. All Common and Preferred converted
share and per share data in the accompanying financial statements have been
adjusted retroactively to give effect to the stock split.
In connection with Common Stock issued for services during the third
quarter of 1999, the Company recorded $71,000 of stock-based compensation
expense.
F-15
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The Company has reserved shares of Common Stock as follows:
<TABLE>
<CAPTION>
September 30,
1999
--------------
(unaudited)
(in thousands)
<S> <C>
Conversion of Series A....................................... 2,494
Conversion of Series B....................................... 2,258
Conversion of Series C....................................... 3,163
Conversion of Series D....................................... 10,194
Conversion of Series E....................................... 7,633
Common Stock issued.......................................... 9,209
Exercise of options under the equity incentive plans......... 9,581
Exercise of warrants issued for Series E Preferred Stock..... 7
Undesignated................................................. 30,461
------
75,000
======
</TABLE>
The above shares do not include shares reserved under the 2000 Employee
Stock Purchase Plan and 2000 Directors' Stock Option Plan (See Note 10).
Note 8--Stock Option Plan:
In November 1997, the Board of Directors adopted the 1997 Stock Option Plan
(the "1997 Plan") providing for the issuance of incentive and nonstatutory
stock options to employees, consultants and outside directors of the Company.
As of September 30, 1999, 9,070,000 shares are authorized for issuance under
the 1997 Plan.
In September 1999, the Board of Directors adopted the 1999 Stock Option
Plan (the "1999 Plan") providing for the issuance of incentive and non
statutory stock options to employees, consultants and outside directors of the
Company. As of September 30, 1999, 2,530,000 shares are authorized for
issuance under the 1999 Plan.
Under the 1997 and 1999 Plans, options may be granted at an exercise price
at the date of grant of not less than the fair market value per share for
incentive stock options and not less than 85% of the fair market value per
share for nonstatutory stock options, except for options granted to a person
owning greater than 10% of the total combined voting power of all classes of
stock of the Company, for which the exercise price of the option must be not
less than 110% of the fair market value. The fair market value of the
Company's common stock is determined by the Board of Directors. In determining
the fair market value on each grant date, the Board of Directors considered
among other things, the developmental stage of the Company, the absence of a
public trading market for the Company's securities and the nature of the
Company's business.
Options granted under the 1997 and 1999 Plans generally become exercisable
at a rate of 25% per year over four years and expire no later than ten years
after the grant date.
Under the 1999 Plan, a stock purchase right may be issued, either alone, in
addition to, or in tandem with other awards granted under the 1999 Plan and/or
cash awards made outside of the 1999 Plan. The purchase price of the shares
subject to the stock purchase right are determined by the Board. Shares
purchased using the stock purchase right are subject to the Company's option
to repurchase the shares from the purchaser at the purchaser's original cost
per share upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship for any reason, including death or
disability.
F-16
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The following table summarizes information about stock option transactions
under the 1997 and 1999 Plans:
<TABLE>
<CAPTION>
Period from
August 27, 1997 Nine Months
(inception) to Year Ended Ended
December 31, December 31, September 30,
1997 1998 1999
--------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
(unaudited)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period..................... -- $ -- 260 $0.01 2,567 $0.02
Granted below fair value.... -- 2,616 0.02 7,995 1.78
Granted at fair value....... 260 0.01 -- -- -- --
Exercised................... -- -- (90) 0.01 (1,929) 0.89
Canceled.................... -- -- (219) 0.01 (263) 0.10
--- ----- ------
Outstanding at end of
period..................... 260 0.01 2,567 0.02 8,370 1.50
=== ===== ======
Options vested.............. -- 219 432
=== ===== ======
Weighted average fair value
of options granted during
the period................. $0.01 $0.35 $4.71
===== ===== =====
</TABLE>
At September 30, 1999, the Company had 1,210,924 shares available for
future grant under the 1997 and 1999 Plans.
The following table summarizes the information about stock options
outstanding and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-------------------------------------------------------------------
Weighted
Average
Remaining Weighted
Range of Number Contractual Average
Exercise Outstanding Life (in Exercise
Prices (in thousands) years) Price
----------- -------------- ----------- --------
<S> <C> <C> <C>
$0.011-0.03 217 9.19 $0.015
0.25 2 10.00 0.25
</TABLE>
The following table summarizes the information about stock options
outstanding and exercisable as of September 30, 1999 (unaudited):
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-------------------------------------------------------------------
Weighted
Average
Remaining Weighted
Range of Number Contractual Average
Exercise Outstanding Life (in Exercise
Prices (in thousands) years) Price
----------- -------------- ----------- --------
<S> <C> <C> <C>
$0.011-0.03 358 8.60 $0.028
0.25-0.375 35 9.32 0.25
0.625 30 9.46 0.625
2.00-4.00 9 9.58 2.15
</TABLE>
F-17
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
The weighted average remaining contractual life of stock options
outstanding at December 31, 1998 and September 30, 1999 was 9.48 and 9.41
years, respectively.
Fair value disclosures
The Company applies the measurement principles of APB 25 in accounting for
its stock option plans. Had compensation expense for options granted been
determined based on the fair value at the grant date as prescribed by SFAS No.
123, the Company's net loss and net loss per share would have been decreased
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Period from Period from
August 27, August 27,
1997 Nine Months 1997
(inception) Ended September (inception)
to Year Ended 30, to
December 31, December 31, ----------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------- -------- -------------
(unaudited) (unaudited)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported......................... $ (155) $(3,284) $(1,559) $(20,117) $(23,556)
====== ======= ======= ======== ========
Pro forma........................... $ (155) $(3,166) $(1,496) $(18,464) $(21,785)
====== ======= ======= ======== ========
Basic and diluted net loss per
share:
As reported......................... $(0.08) $ (0.48) $ (0.23) $ (2.73) $ (3.35)
====== ======= ======= ======== ========
Pro forma........................... $(0.08) $ (0.46) $ (0.22) $ (2.51) $ (3.10)
====== ======= ======= ======== ========
</TABLE>
The Company calculated the minimum fair value of each option grant on the
date of grant using the Black-Scholes option pricing model as prescribed by
SFAS No. 123 using the following assumptions:
<TABLE>
<CAPTION>
Period from Period from
August 27, August 27,
1997 Nine Months 1997
(inception) Ended (inception)
to Year Ended September 30, to
December 31, December 31, --------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------ ------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Risk-free interest
rates.................. 5.5% 5.5% 5.5% 5.5% 5.5%
Expected lives (in
years)................. 5 5 5 5 5
Dividend yield.......... 0% 0% 0% 0% 0%
Expected volatility..... 0% 0% 0% 0% 0%
</TABLE>
Because the determination of fair value of all options granted after such
time as the Company becomes a public entity will include an expected
volatility factor in addition to the factors described in the preceding
paragraph, the above results may not be representative of future periods.
Unearned stock-based compensation
In connection with certain stock option grants to employees, during the
year ended December 31, 1998 and the nine months ended September 30, 1999, the
Company recognized unearned stock-based compensation totaling $857,000 and
$22.6 million, respectively, which is being amortized over the vesting periods
of the related options, which is generally four years, using the multiple
option approach. Amortization expense recognized for the year ended December
31, 1998 and the nine months ended September 30, 1999 totaled approximately
$206,000 and $3.0 million, respectively. The Company also recorded
amortization expense of
F-18
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
$444,000 for the nine months ended September 30, 1999 in connection with stock
options issued for services. The Company estimated the fair value of the
options issued for services using the Black-Scholes option pricing model using
the following assumptions; risk-free interest rate of 5.5%; volatility of 80%;
and an expected life of two to five years.
The allocation of stock-based compensation expense by functional area would
be as follows:
<TABLE>
<CAPTION>
Period from
Period from August 27,
August 27, Nine Months 1997
1997 Ended (inception)
(inception) to Year Ended September 30, to
December 31, December 31, ------------- September 30,
1997 1998 1998 1999 1999
-------------- ------------ ------------- -------------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Research and
development............ $ -- $163 $ 88 $ 920 $1,083
Programming and
content................ -- 15 4 1,221 1,236
Sales and marketing..... -- 15 1 407 422
General and
administrative......... -- 13 7 928 941
Hardware distribution
cost, net.............. -- -- -- 13 13
------ ---- ----- ------- ------
Total stock-based $206 $3,695
compensation......... $ -- $ 100 $ 3,489
====== ==== ===== ======= ======
</TABLE>
Note 9--Related Party Transactions:
In September and October 1998 a certain founder of the Company received
convertible promissory notes in exchange for $570,000. The notes bore interest
at 20% per annum. In March 1999, the note and accrued interest of $628,000 was
repaid in full.
In July and September 1999, certain executives of the Company exercised
their stock options prior to vesting by issuance of full recourse promissory
notes to the Company. The aggregate notes of $1.7 million bear interest at a
rate of 5.74% through 5.98% per annum and are due in July and September 2004.
The notes are collateralized by the related 1,370,000 shares of Common Stock
issued, which are subject to the Company's right to repurchase. The net amount
outstanding has been reflected as a separate component of stockholders'
equity.
Note 10--Subsequent Events:
Reincorporation
In January 2000, the Company's Board of Directors authorized the
reincorporation of the Company in the State of Delaware. As a result of the
reincorporation, the Company is authorized to issue 200,000,000 shares of
$0.001 par value Common Stock and 5,000,000 shares of $0.001 par value
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof. The par value and additional
paid-in capital related to the issuance of Preferred Stock and Common Stock
have been retroactively adjusted to reflect the reincorporation.
Stock option grants (unaudited)
During October, November and December 1999, the Company granted options to
purchase 2,401,000 shares of Common Stock to existing and new employees at a
weighted average exercise price of $5.25. In connection with these stock
option grants, the Company will recognize $11.8 million in unearned stock-
based compensation that will be amortized over the related vesting periods.
F-19
<PAGE>
REPLAYTV, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended September 30, 1998 and 1999 is
unaudited)
Promissory notes issued to related parties (unaudited)
In November 1999, certain executives of the Company exercised their stock
options prior to vesting by issuance of full recourse promissory notes to the
Company. The aggregate notes of $1.5 million bear interest at a rate of 6.08%
per annum and are due in November 2004. The notes are collateralized by the
related 300,000 shares of Common Stock issued, which are subject to the
Company's right to repurchase.
MKE Agreement (unaudited)
In December 1999, the Company entered into an agreement (the "Agreement")
with MKE. Under the Agreement, MKE will purchase from the Company ReplayTV-
enabled products currently manufactured by another third party and will
market, sell and distribute those products under the Panasonic brand name
featuring the ReplayTV logo. Also, the Company will work jointly with MKE to
develop ReplayTV-enabled products. During the term of the Agreement, the
Company will subsidize MKE for products that are shipped by or on behalf of
MKE.
Series F Preferred Stock (unaudited)
In January 2000, the Company issued 5,627,267 shares of Series F Preferred
Stock ("Series F") at $11.00 per share resulting in cash proceeds of $61.9
million. Each share of Series F has voting rights equal to the number of
shares of Common Stock into which such share is convertible. Holders of Series
F are entitled to receive annual dividends of $0.88 per share, when and if
declared by the Board of Directors, on a pari passu basis with the holders of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, and prior to the Common
Stock. The Series F is convertible at any time into Common Stock at a one-for-
one exchange ratio. Such conversion is automatic upon the effective date of an
initial public offering provided the public offering price is at least $7.50
per share. In the event of any liquidation, dissolution or winding up of the
Company, the holders of Series F are entitled to receive an amount equal to
$11.00 per share, plus any declared but unpaid dividends, prior and in
preference to any holders of Common Stock. The Series F is redeemable at the
option of the Company on or at any time after February 15, 2004 or upon the
receipt by the Company in writing from the holders of not less than 66 2/3% of
the Preferred Stock of a request for redemption of their Preferred Stock, at a
redemption price equal to $11.00 per share, plus any declared but unpaid
dividends. For the first quarter ending March 31, 2000, the Company will
record a non-cash Preferred Stock dividend to reflect the beneficial
conversion ratio as a result of the difference between the issuance price of
the Series F and the estimated fair value of the Company's Common Stock.
2000 Stock Plans (unaudited)
In January 2000, the Company's Board of Directors approved the 2000
Directors' Stock Option Plan (the "2000 Directors' Plan") and the 2000
Employee Stock Purchase Plan (the "2000 ESPP"), which will become effective
immediately prior to the completion of an initial public offering. Under the
2000 Directors' Plan, a total of 300,000 shares have been reserved for future
issuance to nonemployee directors. The shares reserved under the 2000
Directors' Plan will be automatically reset to 300,000 shares on the first day
of each fiscal year beginning in 2001. Under the 2000 ESPP, a total of
1,000,000 shares have been reserved for future issuance. The shares reserved
will be subject to automatic annual increases on the first day of the fiscal
year beginning in 2001, equal to the lesser of 500,000 shares, 2% of the
outstanding Common Stock on the last day of the immediately preceding fiscal
year, or a lesser number of shares as determined by the board of directors.
F-20
<PAGE>
[REPLAYTV LOGO]
<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 us in connection with the
sale of common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee............................................ $ 39,600
NASD filing fee................................................. 15,500
Nasdaq National Market listing fee.............................. 95,000
Printing and engraving expenses................................. 200,000
Legal fees and expenses......................................... 400,000
Accounting fees and expenses.................................... 300,000
Blue Sky qualification fees and expenses........................ *
Transfer Agent and Registrar fees............................... *
Miscellaneous fees and expenses................................. *
--------
Total......................................................... *
</TABLE>
- --------
* to be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article XIV of our certificate of
incorporation (Exhibit 3.2 hereto) and Article VI of our bylaws (Exhibit 3.4
hereto) provide for indemnification of our directors, officers, employees and
other agents to the maximum extent permitted by Delaware Law. In addition, we
have entered into Indemnification Agreements (Exhibit 10.2 hereto) with our
officers and directors. The Underwriting Agreement (Exhibit 1.1) also provides
for cross-indemnification among ReplayTV and the underwriters with respect to
certain matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since our incorporation in August 1997, we have issued and sold the
following securities:
1. On September 15, 1997, we sold 7,862,770 shares of common stock for
an aggregate purchase price of $3,931 to two investors.
2. On November 26, 1997, we sold 2,494,070 shares of Series A preferred
stock for an aggregate purchase price of $274,348 to two investors.
3. On March 11, 1998, we issued a promissory note in the aggregate
principal amount of $100,000 to one investor.
4. On April 10, 1998, we sold 1,451,610 shares of Series B preferred
stock for an aggregate purchase price of $450,000, including cancellation
of the $100,000 note described in 3 above, to four investors.
5. On June 29, 1998, we sold 806,448 shares of Series B preferred stock
for an aggregate purchase price of $250,000 to four investors.
II-1
<PAGE>
6. On September 11, 1998, September 14, 1998, September 28, 1998,
October 6, 1998, October 15, 1998 and October 27, 1998 we issued six
promissory notes in the aggregate principal amount of $570,000 to one
investor.
7. On November 5, 1998, we sold 1,818,488 shares of Series C preferred
stock for an aggregate purchase price of $1,150,000 to three investors.
8. On November 19, 1998, we sold 1,344,096 shares of Series C preferred
stock for an aggregate purchase price of $850,000 to six investors.
9. On February 12, 1999, February 22, 1999 and March 11, 1999, we issued
three promissory notes in the aggregate principal amount of $1,500,000 to
one investor.
10. On March 24, 1999, we sold 10,193,544 shares of Series D preferred
stock for an aggregate purchase price of $7,900,000, including cancellation
of $80,000 of the notes described in 6 above and cancellation of the notes
described in 9 above, to twelve investors.
11. On May 31, 1999, we issued a warrant to purchase 6,666 shares of
Series E preferred stock to a lender in connection with a line of credit.
12. On July 16, 1999 and July 19, 1999, we issued two promissory notes
in the aggregate principal amount of $600,000 to two investors.
13. On July 30, 1999, we sold 6,886,663 shares of Series E preferred
stock for an aggregate purchase price of $52,249,973, including
cancellation of the notes described in 12 above, to 41 investors.
14. On August 16, 1999, we sold 666,666 shares of Series E preferred
stock for an aggregate purchase price of $5,000,000 to one investor.
15. On January 25, 2000, we sold 5,627,267 shares of Series F preferred
stock for an aggregate price of $61,899,937 to 12 investors.
16. From April 28, 1999 to December 31, 1999, we issued an aggregate of
322,507 shares of common stock to one director and 14 consultants outside
of our stock plans.
17. From November 19, 1997 to December 31, 1999, we issued options to
purchase an aggregate of 9,545,522 shares of common stock to employees,
directors and consultants pursuant to the 1997 stock option plan.
18. From August 26, 1999 to December 31, 1999, we issued options to
purchase an aggregate of 4,230,000 shares of common stock to employees,
directors and consultants pursuant to the 1999 stock plan.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Items 1, 17 and 18 were deemed
exempt from registration under the Securities Act in reliance upon Rule 701
promulgated under the Securities Act. The recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Sixth Amended and Restated Articles of Incorporation of ReplayTV.
3.2 Amended and Restated Certificate of Incorporation of ReplayTV (as
proposed).
3.3 Amended and Restated Bylaws of ReplayTV.
3.4 Amended and Restated Bylaws of ReplayTV (as proposed).
4.1* Specimen Stock Certificate.
4.2 Warrant dated May 31, 1999 issued by the Company to Imperial
Bancorp.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1 Sixth Amended and Restated Investors' Rights Agreement dated January
25, 2000 among ReplayTV and certain investors.
10.2 Form of Indemnification Agreement between ReplayTV and each of its
executive officers and directors.
10.3* 1997 Stock Option Plan (as amended) and forms of Stock Option
Agreements.
10.4* 1999 Stock Plan and forms of Stock Option Agreement and Restricted
Stock Purchase Agreement.
10.5 2000 Employee Stock Purchase Plan and form of Subscription
Agreement.
10.6 2000 Directors' Stock Option Plan and form of Stock Option
Agreement.
10.7 Offer Letter with Earle H. "Kim" LeMasters, III.
10.8 Offer Letter with Anthony J. Wood.
10.9 Offer Letter with Craig W. Dougherty.
10.10 Offer Letter with Bruce L. Kaplan.
10.11 Offer Letter with Alexander Gray.
10.12 Offer Letter with Layne L. Britton.
10.13*+ Master Collaboration Agreement dated December 20, 1999 between
ReplayTV and Matsushita-Kotobuki Electronics Industries, Ltd.
10.14*+ OEM Distribution Agreement dated December 20, 1999 between ReplayTV
and Matsushita-Kotobuki Electronics Industries, Ltd.
10.15*+ Manufacturing Agreement dated November 3, 1998 between ReplayTV and
Flextronics International USA, Inc.
10.16*+ Television Listings Agreement dated June 1, 1998, as amended October
26, 1998, between ReplayTV and Tribune Media Services, Inc.
10.17*+ Agreement dated February 1, 1999 between ReplayTV and Showtime
Networks Inc.
10.18*+ Agreement dated July 30, 1999 between ReplayTV and National
Broadcasting Company, Inc.
10.19*+ Network Service Agreement dated July 30, 1999 between ReplayTV and
Turner Broadcasting System, Inc.
10.20 Common Stock Purchase Agreement dated September 15, 1997 between
ReplayTV and Anthony J. Wood.
10.21 Consulting Agreements between ReplayTV and Kevin Bohren.
10.22* Lease Agreement dated January 27, 1999 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated July 20, 1977 (John
Arrillaga Survivor's Trust) as amended, and Richard T. Perry,
Trustee, or his Successor Trustee, UTA dated July 20, 1977 (Richard
T. Perry Separate Property Trust) as amended, and ReplayTV, as
amended.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
23.1 Independent Auditors' Consent.
23.2* Consent of Attorney (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
+Confidential treatment requested as to certain portions of this Exhibit.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
Item 17. Undertakings
The undersigned 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 the purpose of determining any liability under the Securities
Act of 1933, 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Mountain View, State of
California on January 26, 2000.
REPLAYTV, INC.
By: /s/ Earle H. "Kim" LeMasters,
III
-----------------------------------
Earle H. "Kim" LeMasters, III
Chief Executive Officer and
Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Earle H.
"Kim" LeMasters, III and Craig W. Dougherty and each of them, as his attorney-
in-fact, with full power of substitution, for him in any and all capacities,
to sign any and all amendments to this Registration Statement (including post-
effective amendments), and any and all Registration Statements filed pursuant
to Rule 462 under the Securities Act of 1933, as amended, in connection with
or related to the offering contemplated by this Registration Statement and its
amendments, if any, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorney to any and all amendments to said Registration
Statement.
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/ Earle H. "Kim" LeMasters, III Chief Executive Officer and January 26, 2000
____________________________________ Chairman (Principal
Earle H. "Kim" LeMasters, III Executive Officer)
/s/ Craig W. Dougherty Executive Vice President, January 26, 2000
____________________________________ Finance and Chief Financial
Craig W. Dougherty Officer (Principal
Financial and Accounting
Officer)
/s/ Jeffrey Berg Director January 26, 2000
____________________________________
Jeffrey Berg
/s/ Kevin L. Bohren Director January 26, 2000
____________________________________
Kevin L. Bohren
/s/ Sky D. Dayton Director January 26, 2000
____________________________________
Sky D. Dayton
/s/ William R. Hearst III Director January 26, 2000
____________________________________
William R. Hearst III
/s/ Anthony J. Wood Director January 26, 2000
____________________________________
Anthony J. Wood
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Sixth Amended and Restated Articles of Incorporation of ReplayTV.
3.2 Amended and Restated Certificate of Incorporation of ReplayTV (as
proposed).
3.3 Amended and Restated Bylaws of ReplayTV.
3.4 Amended and Restated Bylaws of ReplayTV (as proposed).
4.1* Specimen Stock Certificate.
4.2 Warrant dated May 31, 1999 issued by the Company to Imperial
Bancorp.
5.1* Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1 Sixth Amended and Restated Investors' Rights Agreement dated January
25, 2000 among ReplayTV and certain investors.
10.2 Form of Indemnification Agreement between ReplayTV and each of its
executive officers and directors.
10.3* 1997 Stock Option Plan (as amended) and forms of Stock Option
Agreements.
10.4* 1999 Stock Plan and forms of Stock Option Agreement and Restricted
Stock Purchase Agreement.
10.5 2000 Employee Stock Purchase Plan and form of Subscription
Agreement.
10.6 2000 Directors' Stock Option Plan and form of Stock Option
Agreement.
10.7 Offer Letter with Earle H. "Kim" LeMasters, III.
10.8 Offer Letter with Anthony J. Wood.
10.9 Offer Letter with Craig W. Dougherty.
10.10 Offer Letter with Bruce L. Kaplan.
10.11 Offer Letter with Alexander Gray.
10.12 Offer Letter with Layne L. Britton.
10.13*+ Master Collaboration Agreement dated December 20, 1999 between
ReplayTV and Matsushita-Kotobuki Electronics Industries, Ltd.
10.14*+ OEM Distribution Agreement dated December 20, 1999 between ReplayTV
and Matsushita-Kotobuki Electronics Industries, Ltd.
10.15*+ Manufacturing Agreement dated November 3, 1998 between ReplayTV and
Flextronics International USA, Inc.
10.16*+ Television Listings Agreement dated June 1, 1998, as amended October
26, 1998, between ReplayTV and Tribune Media Services, Inc.
10.17*+ Agreement dated February 1, 1999 between ReplayTV and Showtime
Networks Inc.
10.18*+ Agreement dated July 30, 1999 between ReplayTV and National
Broadcasting Company, Inc.
10.19*+ Network Service Agreement dated July 30, 1999 between ReplayTV and
Turner Broadcasting System, Inc.
10.20 Common Stock Purchase Agreement dated September 15, 1997 between
ReplayTV and Anthony J. Wood.
10.21 Consulting Agreements between ReplayTV and Kevin Bohren.
10.22* Lease Agreement dated January 27, 1999 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated July 20, 1977 (John
Arrillaga Survivor's Trust) as amended, and Richard T. Perry,
Trustee, or his Successor Trustee, UTA dated July 20, 1977 (Richard
T. Perry Separate Property Trust) as amended, and ReplayTV, as
amended.
23.1 Independent Auditors' Consent.
23.2* Consent of Attorney (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
+Confidential treatment requested as to certain portions of this Exhibit.
<PAGE>
EXHIBIT 3.1
SIXTH AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
REPLAY NETWORKS, INC.
The undersigned, Earl H. LeMasters III and Mark A. Medearis, hereby certify
that:
1. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of Replay Networks, Inc., a California corporation.
2. The Articles of Incorporation of this corporation shall be amended
and restated to read in full as follows:
"ARTICLE I
The name of this corporation is ReplayTV, Inc. (the "Corporation").
-----------
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) Classes of Stock. The 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
110,077,301 shares, each with a par value of $0.001 per share. 75,000,000 shares
shall be Common Stock and 35,077,301 shares shall be Preferred Stock.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
-------------------------------------------------------
Stock authorized by these Sixth Amended and Restated Articles of Incorporation
may be issued from time to time in one or more series. The first series of
Preferred Stock shall be designated "Series A Preferred Stock" and shall consist
------------------------
of 2,494,070 shares. The second series of Preferred Stock shall be designated
"Series B Preferred Stock" and shall consist of 2,580,644 shares. The third
- -------------------------
series of Preferred Stock shall be designated "Series C Preferred Stock" and
------------------------
shall consist of 3,162,592 shares. The fourth series of Preferred Stock shall be
designated "Series D Preferred Stock" and shall consist of 10,200,000 shares.
------------------------
The fifth series of Preferred Stock shall be designated "Series E Preferred
------------------
Stock" and shall consist of 7,639,995 shares. The sixth series of Preferred
- -----
Stock shall be designated "Series F Preferred Stock" and shall consist of
------------------------
9,000,000 shares. The rights, preferences, privileges and restrictions granted
to and imposed on the Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred
<PAGE>
Stock, Series E Preferred Stock and Series F Preferred Stock are as set forth
below in this Article III(B).
1. Dividend Provisions. Subject to the rights of series of
-------------------
Preferred Stock that may from time to time come into existence, the holders of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Corporation) on the Common
Stock of the Corporation, on a pro rata basis at the rate of (i) $0.00884 per
share (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) per annum on each
outstanding share of Series A Preferred Stock, (ii) $0.0248 per share (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) per annum on each outstanding share of
Series B Preferred Stock, (iii) $0.0505915 per share (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) per annum on each outstanding share of Series C Preferred Stock,
(iv) $0.062 per share (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) per annum on
each outstanding share of Series D Preferred Stock, (v) $0.60 per share (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) per annum on each outstanding share of
Series E Preferred Stock and (vi) $0.88 per share (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) per annum on each outstanding share of Series F Preferred Stock,
payable quarterly when, as and if declared by the Board of Directors. No
dividends shall be paid in any calendar year on any share of Common Stock unless
a full dividend pursuant to the above provisions of this Section 1 is paid in
such year with respect to all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock in an amount for each such
share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock together with an amount equal to or greater than the aggregate amount of
such dividends for all shares of Common Stock into which each such share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
could then be converted. Such dividends shall not be cumulative.
2. Liquidation.
-----------
(a) Preference. In the event of any liquidation, dissolution or
----------
winding up of the Corporation, either voluntary or involuntary, subject to the
rights of series of Preferred Stock that may from time to time come into
existence in accordance herewith, the holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to (i) $0.1105 per share (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like
-2-
<PAGE>
with respect to such shares) for each share of Series A Preferred Stock then
held by them, (ii) $0.31 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series B Preferred Stock then held by them, (iii)
$0.6323925 per share (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series C Preferred Stock then held by them, (iv) $0.775 per share (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) for each share of Series D Preferred Stock then
held by them, (v) $7.50 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series E Preferred Stock held by them and (vi) $11.00
per share (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series F Preferred Stock held by them, plus declared but unpaid dividends. If,
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence in accordance
herewith, the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
(b) Remaining Assets. Upon the completion of the distribution
----------------
required by Section 2(a) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence in accordance herewith, if assets remain in the Corporation, the
holders of the Common Stock of the Corporation shall receive all of the
remaining assets of the Corporation pro rata based on the number of shares of
Common Stock held by each.
(c) Certain Acquisitions.
--------------------
(i) Deemed Liquidation. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale, lease, license or other conveyance of all or
substantially all of the assets of the Corporation, unless the Corporation's
------
shareholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration in the acquisition or sale or otherwise) hold at least
50% of the voting power of the surviving or acquiring entity in approximately
the same relative percentages after such acquisition or sale as before such
acquisition or sale.
-3-
<PAGE>
(ii) Valuation of Consideration. In the event of a deemed
--------------------------
liquidation as described in Section 2(c)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three days prior to the closing;
(2) If traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period in which sales actually occur ending
three days prior to the closing; and
(3) If there is no public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 2(c)(ii)(A) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
(iii) Notice of Transaction. The Corporation shall give each
---------------------
holder of record of Preferred Stock written notice of such impending transaction
not later than twenty (20) days prior to the shareholders' meeting called to
approve such transaction, or twenty (20) days prior to the closing of such
transaction, whichever is earlier, and shall also notify such holders in writing
of the final approval of such transaction. The first of such notices shall
describe the material terms and conditions of the impending transaction, the
record date for determining shareholders entitled to vote (if applicable) and
the provisions of this Section 2, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no event
take place sooner than twenty (20) days after the Corporation has given the
first notice provided for herein or sooner than ten (10) days after the
Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Preferred Stock that are entitled to such notice rights and
that represent at least a majority of the voting power of all then outstanding
shares of such Preferred Stock.
(iv) Effect of Noncompliance. In the event the requirements of
-----------------------
this Section 2(c) are not complied with, the Corporation shall forthwith either
cause the closing of the transaction to be postponed until such requirements
have been complied with, or cancel
-4-
<PAGE>
such transaction, in which event the rights, preferences and privileges of the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock shall revert to and be the same as such rights, preferences and
privileges existing immediately prior to the date of the first notice referred
to in Section 2(c)(iii) hereof.
3. Redemption.
----------
(a) Date and Amount. On or at any time after (i) February 15,
---------------
2004, or (ii) the receipt by the Corporation in writing from the holders of not
less than 66 2/3% of the Preferred Stock then outstanding of their consent to
redemption hereunder, the Corporation may at any time it may lawfully do so, at
the option of the Board of Directors, redeem in whole or in part the Preferred
Stock by paying in cash therefor (i) $0.1105 per share for each share of Series
A Preferred Stock then outstanding (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), (ii) $0.31 per share for each share of Series B Preferred Stock then
outstanding (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), (iii) $0.6323925
per share for each share of Series C Preferred Stock then outstanding (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares), (iv) $0.775 per share for each share of
Series D Preferred Stock then outstanding (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), (v) $7.50 per share for each share of Series E Preferred Stock then
outstanding (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) and (vi) $11.00 per
share for each share of Series F Preferred Stock then outstanding (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares), plus in each case an amount equal to all declared
but unpaid dividends on the outstanding shares of such Preferred Stock (such
total amount per share is hereinafter referred to as the "Redemption Price").
----------------
(b) Partial Redemption. In the event of any redemption of only
------------------
a part of the then outstanding shares of the Preferred Stock, the Corporation
shall effect such redemption pro rata among all the holders of Preferred Stock
(as to the number of shares, series by series, held on the date of notice of
redemption).
(c) Notice and Procedure. At least 45 days prior to the date
--------------------
fixed for any redemption of the Preferred Stock (hereinafter referred to as the
"Redemption Date"), written notice shall be mailed, postage prepaid, to each
- ----------------
holder of record of the Preferred Stock, at the holder's post office address
last shown on the records of the Corporation (provided, however, that in the
-------- -------
case of non-domestic investors, written notice shall instead be delivered by
confirmed fax at the holder's fax number last shown on the records of the
Corporation within the same time period), notifying such holder of the election
of the Corporation to redeem such shares, specifying the Redemption Date and the
date on which such holder's Conversion Rights (as hereinafter defined) as to
such shares terminate, which date shall be no earlier than five business days
prior to the Redemption Date, and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, the holder's certificate
or certificates representing the shares to be redeemed (such notice is
hereinafter referred to as the "Redemption Notice"). On or
-----------------
-5-
<PAGE>
prior to the Redemption Date, each holder of the Preferred Stock to be redeemed
shall surrender his or her certificate or certificates representing such shares
to the Corporation, in the manner and at the place designated in the Redemption
Notice, and thereupon the aggregate Redemption Price (the Redemption Price per
share to be redeemed multiplied by the number of shares to be redeemed) for the
shares to be redeemed shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. In calculating the aggregate
Redemption Price, the number of shares shall be reduced by the number of shares
which have been converted pursuant to Section 4 hereof between the date of
notice of redemption and the date on which Conversion Rights to such shares
terminate. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after the Redemption Date, unless there shall have
been a default in payment of the aggregate Redemption Price for shares to be
redeemed (whether because there is no source of funds legally available for such
redemption or because such funds shall not be paid or made available for
payment), all rights of the holders of the Preferred Stock designated for
redemption in the Redemption Notice as holders of such series of the Preferred
Stock of the Corporation (except the right to receive the aggregate Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
(d) Payment. On or prior to the Redemption Date, the
-------
Corporation shall deposit the aggregate Redemption Price of all shares of
Preferred Stock designated for redemption in the Redemption Notice and not yet
redeemed with a bank or trust company having aggregate capital and surplus in
excess of $100,000,000 as a trust fund for the benefit of the respective holders
of the shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust company to pay the Redemption
Price for such shares to their respective holders on or after the Redemption
Date upon receipt of notification from the Corporation that such holder has
surrendered his or her share certificate to the Corporation pursuant to Section
3(c) above. Such instructions shall also provide that any monies deposited by
the Corporation pursuant to this Section 3(d) for the redemption of shares
thereafter converted into shares of the Corporation's Common Stock pursuant to
Section 4 hereof no later than the fifth day preceding the Redemption Date shall
be returned to the Corporation forthwith upon such conversion. The balance of
any monies deposited by the Corporation pursuant to this Section 3(d) remaining
unclaimed at the expiration of two years following the Redemption Date shall
thereafter be returned to the Corporation upon its request expressed in a
resolution of its Board of Directors.
4. Conversion. The holders of the Series A Preferred Stock, Series
----------
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
-----------------
(a) Right to Convert. Subject to Section 4(d), each share of
----------------
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
-6-
<PAGE>
Common Stock as is determined by dividing (i) $0.1105 in the case of the Series
A Preferred Stock, (ii) $0.31 in the case of the Series B Preferred Stock, (iii)
$0.6323925 in the case of the Series C Preferred Stock, (iv) $0.775 in the case
of the Series D Preferred Stock, (v) $7.50 in the case of the Series E Preferred
Stock and (vi) $11.00 in the case of the Series F Preferred Stock by the
Conversion Price applicable to such share, determined as hereinafter provided,
in effect on the date the certificate is surrendered for conversion. The
initial "Conversion Price" per share shall be $0.1105 for shares of Series A
----------------
Preferred Stock, $0.31 for shares of Series B Preferred Stock, $0.6323925 for
shares of Series C Preferred Stock, $0.775 for shares of Series D Preferred
Stock, $7.50 for shares of Series E Preferred Stock and $11.00 for shares of
Series F Preferred Stock. Such initial Conversion Prices shall be subject to
adjustment as set forth in Section 4(d) below. In the event that all shares of
Preferred Stock are automatically converted pursuant to Section 4(b) in
connection with the Corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), in which the Offering
--------------
Price (as defined below) is less than the Conversion Price of the Series E
Preferred Stock or Series F Preferred Stock then in effect (appropriately
adjusted for any stock split, dividend, combination or other recapitalization),
then the Conversion Price of the Series E Preferred Stock and/or Series F
Preferred Stock, as the case may be, shall be adjusted, effective immediately
prior to the closing of such offering, such that the Conversion Price after such
adjustment (and after appropriate adjustments for stock splits, combinations and
the like) shall be equal to the Offering Price. The "Offering Price" is defined
--------------
as the price per share at which shares of the Corporation's Common Stock are
initially sold by the Corporation to the public in such offering.
(b) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such share immediately upon the earlier of (i) except
as provided below in Section 4(c), the Corporation's sale of its Common Stock in
a firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act, the public offering price of which is not
less than $7.50 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) or (ii) as to any particular series of
Preferred Stock, the date specified by written consent or agreement of the
holders of at least 66 2/3% of the then outstanding shares of such series of
Preferred Stock, voting together as a class.
(c) Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Series F Preferred Stock shall be entitled
to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such series of Preferred Stock, and
shall give written notice to the Corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of such series of Preferred
Stock to be converted, and the person or persons entitled to receive the
-7-
<PAGE>
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date. If the conversion is in connection with an underwritten offering of
securities registered pursuant to the Securities Act the conversion may, at the
option of any holder tendering such Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive
Common Stock upon conversion of such Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Prices of the
- -------------------------------------------
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
shall be subject to adjustment from time to time as follows:
(i) Issuance of Additional Stock below Purchase Price. If the
--------------------------------------------------
Corporation shall issue, after the date upon which any shares of Series F
Preferred Stock were first issued (the "Purchase Date"), any Additional Stock
-------------
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(d)(i), unless otherwise provided in this Section
4(d)(i).
(A) Adjustment Formula. Whenever the Conversion Price is
------------------
adjusted pursuant to this Section 4(d)(i), the new Conversion Price for any
series shall be a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the shares of
such series sold pursuant to the agreement pursuant to which shares of such
series were first issued (the "Series Purchase Price" with respect to such
---------------------
series), plus
(2) the aggregate consideration, if any, received
by the Corporation for all Additional Stock issued on or after the Purchase
Date;
(y) an amount equal to the sum of :
(1) the Series Purchase Price for such series
divided by the initial Conversion Price for such series (or such higher or lower
Conversion Price as results from the application of Sections 4(d)(ii) and (iii)
hereof), plus
(2) the number of shares of Additional Stock issued
on or after the Purchase Date (as adjusted pursuant to Sections 4(d)(ii) and
(iii) hereof, if applicable).
-8-
<PAGE>
(B) Definition of "Additional Stock". For purposes of this
--------------------------------
Section 4(d)(i), "Additional Stock" shall mean any shares of Common Stock or
----------------
capital stock, securities, options, warrants to purchase or other instruments of
similar effect convertible into or exchangeable for Common Stock issued (or
deemed to have been issued pursuant to Section 4(d)(i)(E)) by the Corporation
after the Purchase Date other than
(1) Common Stock issued pursuant to a transaction
described in Section 4(d)(ii) hereof,
(2) Shares of Common Stock issuable or issued to
employees, consultants or directors of the Corporation directly or pursuant to a
stock option plan or restricted stock plan or agreement approved by the Board of
Directors of the Corporation,
(3) Up to 100,000 shares of Common Stock issuable
or issued to vendors of the Corporation,
(4) Capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions, the terms of which are approved by the Board of Directors of the
Corporation,
(5) Capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions, mergers
or similar transactions, the terms of which are approved by the Board of
Directors of the Corporation,
(6) Shares of Common Stock issued or issuable upon
conversion of the Preferred Stock authorized for issuance as of the date hereof,
and
(7) Shares of Common Stock issued or issuable in a
public offering prior to or in connection with which all outstanding shares of
Preferred Stock will be converted to Common Stock.
(C) No Fractional Adjustments. No adjustment of the
-------------------------
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three years from the date of the event giving rise to the adjustment
being carried forward.
(D) Determination of Consideration. In the case of the
------------------------------
issuance of Common Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefor before deducting any reasonable and actual
discounts, commissions, compensations or concessions allowed, paid or incurred
by the Corporation for any underwriting in connection with the issuance and sale
thereof but without deduction of any expenses paid by the Corporation. In the
case of the issuance of Common Stock for a consideration in whole or in
-9-
<PAGE>
part other than cash, the consideration other than cash shall be deemed to be
the fair value thereof as determined in good faith by the Board of Directors
irrespective of any accounting treatment.
(E) Deemed Issuances of Common Stock. In the case of
--------------------------------
the issuance (whether before, on or after the Purchase Date) of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Section 4(d)(i):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
Section 4(d)(i)(D)), if any, received by the Corporation upon the issuance of
such options or rights plus the minimum exercise price provided in such options
or rights (without taking into account potential antidilution adjustments) for
the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Section
4(d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of each of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
-10-
<PAGE>
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of each of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
4(d)(i)(E)(1) and 4(d)(i)(E)(2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either Section
4(d)(i)(E)(3) or 4(d)(i)(E)(4).
(F) No Increased Conversion Price. Notwithstanding
-----------------------------
any other provisions of this Section (4)(d)(i), except to the limited extent
provided for in Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the
Conversion Price pursuant to this Section 4(d)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(ii) Stock Splits and Dividends. In the event the
--------------------------
Corporation should at any time or from time to time after the Purchase Date fix
a record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
------------------------
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of each of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of the
aggregate of shares of Common Stock outstanding and those issuable with respect
to such Common Stock Equivalents with the number of shares issuable with respect
to Common Stock Equivalents determined from time to time in the manner provided
for deemed issuances in Section 4(d)(i)(E).
(iii) Reverse Stock Splits. If the number of shares of
--------------------
Common Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for each of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock and the
-11-
<PAGE>
Series F Preferred Stock shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(ii), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the Corporation into
which their shares of Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization, reclassification, combination, subdivision,
merger, transfer, exchange, sale or other disposition of assets, stock split,
stock dividend, reverse stock split or other distribution in respect of the
Common Stock (other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 4 or in Section 2) provision
shall be made so that the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock shall thereafter be entitled to
receive upon conversion of such Preferred Stock the number of shares of stock or
other securities or property of the Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
recapitalization. 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 such Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of such
Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of
-------------
its Articles of Incorporation 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
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment and dilution consistent with the
terms hereof.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share
-12-
<PAGE>
(with one-half being rounded upward). The number of shares issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock
the holder is at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock pursuant to this Section 4, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of such Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for such series of
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation 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 (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or
Series F Preferred Stock, at least ten (10) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, 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 such series of Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of such series of
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to these articles.
-13-
<PAGE>
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock shall be in writing and
shall be deemed sufficient upon delivery, when delivered personally or by
overnight courier or sent by telegram or fax, or, in the case of domestic
recipients, five (5) business days after being deposited in the United States
mail as certified or registered mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
(l) Taxes. The Corporation 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
the Preferred Stock, 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 the converted Preferred Stock
were registered.
5. Voting Rights. The holders of the Preferred Stock shall have
-------------
voting rights as follows:
(a) In General. Subject to subsection (b) hereof, the holder of
----------
each share of Preferred Stock shall have the right to one vote for each share of
Common Stock into which such Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote, together with holders of Common Stock, with respect to any question
upon which holders of Common Stock have the right to vote. Fractional votes
shall not, however, be permitted and any fractional voting rights available on
an as-converted basis (after aggregating all shares into which shares of
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
(b) Voting for Board of Directors. The holders of shares of
-----------------------------
Series D Preferred Stock, voting together as a single class, shall elect one
member of the Board of Directors of the Corporation. Additional members of the
Board of Directors, if any, shall be elected by the holders of shares of Common
Stock and Preferred Stock, voting together as a single class and on an as-
converted basis.
6. Protective Provisions.
---------------------
(a) So long as any shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series E Preferred Stock or Series F
Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock, voting together as a class:
-14-
<PAGE>
(i) effect (A) the acquisition of the Corporation by
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation, but
excluding any merger effected exclusively for the purpose of changing the
domicile of the Corporation); or (B) a sale, lease, license or other conveyance
of all or substantially all of the assets of the Corporation, unless the
------
Corporation's shareholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by virtue
of securities issued as consideration in the acquisition or sale or otherwise)
hold at least 50% of the voting power of the surviving or acquiring entity in
approximately the same relative percentages after such acquisition or sale as
before such acquisition or sale;
(ii) alter or change the rights, preferences or privileges
of the shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series E Preferred Stock or Series F Preferred Stock so as to
affect adversely the shares of such series;
(iii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock;
(iv) authorize, issue or reclassify, or obligate itself to
issue or reclassify, any other equity security, including any other security
convertible into or exercisable for any equity security having a preference
over, or being on a parity with, the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock with respect to voting, dividends,
conversion rights or upon liquidation;
(v) redeem, purchase or otherwise acquire (or pay into or
set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
-------- -------
not apply to the redemption of shares of Preferred Stock pursuant to Section 3
hereof or to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Company or
any subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at fair market value upon the occurrence of
certain events, such as the termination of employment or a proposed transfer of
such shares; or
(vi) consummate a transaction subject to Section 305 of the
Internal Revenue Code of 1986, as amended.
(b) Subject to the rights of series of Preferred Stock which may
from time to time come into existence in accordance herewith, so long as any
shares of Series D Preferred Stock are outstanding, the Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least a majority of the then outstanding shares of
Series D Preferred Stock, voting as a separate class:
-15-
<PAGE>
(i) effect (A) the acquisition of the Corporation by
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation, but
excluding any merger effected exclusively for the purpose of changing the
domicile of the Corporation); or (B) a sale, lease, license or other conveyance
of all or substantially all of the assets of the Corporation, unless the
------
Corporation's shareholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by virtue
of securities issued as consideration in the acquisition or sale or otherwise)
hold at least 50% of the voting power of the surviving or acquiring entity in
approximately the same relative percentages after such acquisition or sale as
before such acquisition or sale;
(ii) alter or change the rights, preferences or privileges
of the shares of Series D Preferred so as to affect adversely the shares of such
series;
(iii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series D Preferred;
(iv) authorize, issue or reclassify, or obligate itself to
issue or reclassify, any other equity security, including any other security
convertible into or exercisable for any equity security having a preference
over, or being on a parity with, the Series D Preferred Stock with respect to
voting, dividends, conversion rights or upon liquidation;
(v) redeem, purchase or otherwise acquire (or pay into or
set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
-------- -------
not apply to the redemption of shares of Preferred Stock pursuant to Section 3
hereof or to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Company or
any subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at fair market value upon the occurrence of
certain events, such as the termination of employment or a proposed transfer of
such shares;
(vi) amend or repeal any provision of, or add any provision
to, the Corporation's Articles of Incorporation or Bylaws if such action would
alter or change the rights, preferences, privileges or restrictions of the
shares of Series D Preferred Stock so as to affect adversely the shares of such
series; or
(vii) consummate a transaction subject to Section 305 of the
Internal Revenue Code of 1986, as amended.
(c) Notwithstanding the foregoing, with respect to any series of
Preferred Stock, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of such series of Preferred Stock,
voting as a separate class, amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action
adversely
-16-
<PAGE>
affects such series in a different manner than other series of Preferred Stock.
7. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the Corporation. The Articles of
Incorporation of the Corporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.
8. Repurchase of Shares. In connection with repurchases by the
--------------------
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
(C) Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
(A) The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(B) The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) to the fullest
extent permissible under California law.
(C) Any amendment or repeal or modification of the foregoing provisions of
this Article IV by the shareholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification."
* * *
-17-
<PAGE>
3. The foregoing amendment has been approved by the Board of Directors of
this corporation.
4. The foregoing amendment was approved by the holders of the requisite
number of shares of this corporation in accordance with Sections 902 and 903 of
the California General Corporation Law. The total number of outstanding shares
entitled to vote with respect to the foregoing amendment was 9,582,064 shares of
Common Stock, 2,494,070 shares of Series A Preferred Stock, 2,258,058 shares of
Series B Preferred Stock, 3,162,584 shares of Series C Preferred Stock,
10,193,544 shares of Series D Preferred Stock and 7,633,329 shares of Series E
Preferred Stock. The number of shares voting in favor of the foregoing amendment
equaled or exceeded the vote required. The percentage vote required was (i) a
majority of the outstanding shares of Common Stock, (ii) a majority of the
outstanding shares of Preferred Stock, (iii) a majority of the outstanding
shares of Series A, Series B, Series C and Series E, voting together as a single
class, (iv) a majority of the Series D Preferred Stock voting as a single class,
and (v) a majority of the outstanding shares of Common Stock and Preferred
Stock, voting together as a class.
-18-
<PAGE>
The undersigned certify under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at Mountain View, California, on January 14, 2000.
/s/ Earl H. LeMasters III
---------------------------------
Earl H. LeMasters III,
Chief Executive Officer
/s/ Mark A. Medearis
---------------------------------
Mark A. Medearis, Secretary
-19-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REPLAYTV, INC.
Earle H. LeMasters, III and Mark A. Medearis hereby certify that:
1. The date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is
January ____, 2000.
2. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of ReplayTV, Inc., a Delaware corporation.
3. The Certificate of Incorporation of this corporation is hereby amended
and restated to read as follows:
ARTICLE I
"The name of this corporation is ReplayTV, Inc. (the "Corporation").
-----------
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The 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
205,000,000 shares, each with a par value of $0.001 per share. 200,000,000
of such shares shall be Common Stock, and 5,000,000 of such shares shall be
Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
<PAGE>
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 so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a Bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
"Listing Event" as used in this Amended and Restated Certificate of
-------------
Incorporation shall mean the first annual meeting of stockholders following such
time as the Corporation meets the criteria set forth in subdivisions (1), (2) or
(3) of Section 2115(c) the California Corporations Code as of the record date of
such meeting.
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, its directors and its stockholders or any class
thereof, as the case may be, it is further provided that, effective upon the
occurrence of the Listing Event:
(i) The number of directors which shall constitute the entire Board
of Directors, and the number of directors in each class, shall be fixed
exclusively by one or more resolutions adopted from time to time by the Board of
Directors. The Board of 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. Until changed by a resolution of the Board of
Directors, Class I shall consist of three directors, each of whom shall be
designated by the Board of Directors; Class II shall consist of three directors,
each of whom shall be designated by the Board of Directors; and Class III shall
consist of three directors, each of whom shall be designated by the Board of
Directors.
At the first annual meeting of stockholders or any special
meeting in lieu thereof following the Listing Event, the terms 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 first annual meeting of stockholders following
the Listing Event, 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
second annual meeting of stockholders following the Listing Event, 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.
-2-
<PAGE>
Notwithstanding the foregoing provisions of this Article VI,
each director shall serve until his or her successor is duly elected and
qualified or until his or her death, resignation, or removal. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) the affirmative vote of the holders of a majority of the voting power
of the then-outstanding shares of voting stock of the corporation entitled to
vote generally in the election of directors (the "Voting Stock") voting together
------------
as a single class; or (ii) by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Newly created directorships resulting from any increase in the
number of directors shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote 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 class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
In addition to the requirements of law and any other provisions
hereof (and notwithstanding the fact that approval by a lesser vote may be
permitted by law or any other provision hereof), the affirmative vote of the
holders of at least 66-2/3% of the Voting Stock, voting together as a single
class, shall be required to amend, alter, repeal, or adopt any provision
inconsistent with this Section (i) of this Article VI.
(ii) There shall be no right with respect to shares of stock of the
Corporation to cumulate votes in the election of directors.
(iii) Any director, or the entire Board of Directors, may be removed
from office at any time (i) with cause by the affirmative vote of the holders of
at least a majority of the voting power of the then-outstanding shares of the
Voting Stock, voting together as a single class; or (ii) without cause by the
affirmative vote of the holders of at least 66-2/3% of the voting power of the
then-outstanding shares of the Voting Stock.
ARTICLE VII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE VIII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Bylaws of the Corporation, and no action
shall be taken by the stockholders by written consent.
-3-
<PAGE>
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE X
(A) The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal Bylaws.
(B) The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
(C) Advance notice of stockholder nominations for the election of
directors or of business to be brought by the stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XII
The Corporation shall have perpetual existence.
ARTICLE XIII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. If
the General Corporation Law of Delaware is hereafter amended to authorize, with
the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XIII shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
-4-
<PAGE>
ARTICLE XIV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) though Bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIV shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification."
* * *
-5-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Mountain View, California, on ____________________, 1999.
________________________________
Earle H. LeMasters, III
Chief Executive Officer
________________________________
Mark A. Medearis
Secretary
<PAGE>
Exhibit 3.3
BYLAWS
OF
REPLAYTV, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES............................................. 1
1.1 Principal Office.................................................. 1
1.2 Other Offices..................................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS..................................... 1
2.1 Place of Meetings................................................. 1
2.2 Annual Meeting.................................................... 1
2.3 Special Meeting................................................... 1
2.4 Notice of Shareholders' Meetings.................................. 2
2.5 Manner of Giving Notice; Affidavit of Notice...................... 2
2.6 Quorum............................................................ 3
2.7 Adjourned Meeting; Notice......................................... 3
2.8 Voting............................................................ 4
2.9 Validation of Meetings; Waiver of Notice; Consent................. 4
2.10 Shareholder Action by Written Consent without a Meeting.......... 5
2.11 Record Date for Shareholder Notice, Voting or Giving Consents.... 6
2.12 Proxies.......................................................... 6
2.13 Inspectors of Election........................................... 7
ARTICLE III DIRECTORS................................................... 7
3.1 Powers............................................................ 7
3.2 Number of Directors............................................... 8
3.3 Election and Term of Office of Directors.......................... 8
3.5 Place of Meetings; Meetings by Telephone.......................... 9
3.6 Regular Meetings.................................................. 9
3.7 Special Meetings; Notice.......................................... 9
3.8 Quorum............................................................ 10
3.9 Waiver of Notice.................................................. 10
3.10 Adjournment...................................................... 10
3.11 Notice of Adjournment............................................ 10
3.12 Board Action by Written Consent without a Meeting................ 11
3.13 Fees and Compensation of Directors............................... 11
3.14 Approval of Loans to Officers.................................... 11
ARTICLE IV COMMITTEES................................................... 11
4.1 Committees of Directors........................................... 11
4.2 Meetings and Action of Committees................................. 12
ARTICLE V OFFICERS...................................................... 12
5.1 Officers.......................................................... 12
5.2 Election of Officers.............................................. 13
5.3 Subordinate Officers.............................................. 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.4 Removal and Resignation of Officers............................... 13
5.5 Vacancies in Offices.............................................. 13
5.6 Chairman of the Board............................................. 13
5.7 President......................................................... 13
5.8 Vice Presidents................................................... 14
5.9 Secretary......................................................... 14
5.10 Chief Financial Officer.......................................... 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.................................................... 15
6.1 Indemnification of Directors and Officers......................... 15
6.2 Indemnification of Others......................................... 15
6.3 Payment of Expenses in Advance.................................... 16
6.4 Indemnity Not Exclusive........................................... 16
6.5 Insurance Indemnification......................................... 16
6.6 Conflicts......................................................... 16
ARTICLE VII RECORDS AND REPORTS......................................... 17
7.1 Maintenance and Inspection of Share Register...................... 17
7.2 Maintenance and Inspection of Bylaws.............................. 17
7.3 Maintenance and Inspection of Other Corporate Records............. 18
7.4 Inspection by Directors........................................... 18
7.5 Annual Report to Shareholders; Waiver............................. 18
7.6 Financial Statements.............................................. 18
7.7 Representation of Shares of Other Corporations.................... 19
ARTICLE VIII GENERAL MATTERS............................................ 19
8.1 Record Date for Purposes other than Notice and Voting............. 19
8.2 Checks; Drafts; Evidences of Indebtedness......................... 20
8.3 Corporate Contracts and Instruments; How Executed................ 20
8.4 Certificates for Shares........................................... 20
8.5 Lost Certificates................................................. 20
8.6 Construction; Definitions......................................... 21
ARTICLE IX AMENDMENTS................................................... 21
9.1 Amendment by Shareholders......................................... 21
9.2 Amendment by Directors............................................ 21
</TABLE>
(ii)
<PAGE>
BYLAWS
OF
REPLAYTV, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Principal Office.
----------------
The Board of Directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the Board
of Directors shall fix and designate a principal business office in the State of
California.
1.2 Other Offices.
--------------
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
2.1 Place of Meetings.
------------------
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the Board of Directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 Annual Meeting.
---------------
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the first
Wednesday of May of each year. However, if such day falls on a legal holiday,
then the meeting shall be held at the same time and place on the next succeeding
full business day. At the meeting, directors shall be elected, and any other
proper business may be transacted.
2.3 Special Meeting.
---------------
A special meeting of the shareholders may be called at any time by the
Board of Directors, or by the chairman of the board, or by the president, or by
one or more shareholders
<PAGE>
holding shares in the aggregate entitled to cast not less than ten percent (10%)
of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and 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, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the Board of Directors may be held.
2.4 Notice of Shareholders' Meetings.
--------------------------------
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) (or,
if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty
(30)) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date and hour of the meeting and (a) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (b) in
the case of the annual meeting, those matters which the Board of Directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (a) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (b) an amendment of the articles of incorporation, pursuant to Section
----
902 of the Code, (c) a reorganization of the corporation, pursuant to Section
1201 of the Code, (d) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (e) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 Manner of Giving Notice; Affidavit of Notice.
--------------------------------------------
Written notice of any meeting of shareholders shall be given either
(a) personally or (b) by first-class mail or (c) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in
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Section 605 of the Code) on the record date for the shareholders' meeting, or
(d) by telegraphic or other written communication. Notices not personally
delivered shall be sent charges prepaid and shall be addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 Quorum.
------
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 Adjourned Meeting; Notice.
-------------------------
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At
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any adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
2.8 Voting.
------
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the articles of incorporation, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote of the shareholders. Any shareholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the shareholder fails to
specify the number of shares which the shareholder is voting affirmatively, it
will be conclusively presumed that the shareholder's approving vote is with
respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (a) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (b) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of affirmative votes, up to the
number of directors to be elected, shall be elected; votes against any candidate
and votes withheld shall have no legal effect.
2.9 Validation of Meetings; Waiver of Notice; Consent.
-------------------------------------------------
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though taken at a meeting duly held
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after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each person entitled to vote,
who was not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. The
waiver of notice or consent or approval need not specify either the business to
be transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4 of these bylaws,
the waiver of notice or consent or approval shall state the general nature of
the proposal. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 Shareholder Action by Written Consent without a Meeting.
-------------------------------------------------------
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to fill any vacancy on the Board of Directors, provided that it was not
created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (a) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (b) indemnification of a corporate "agent," pursuant to
Section 317 of the Code, (c) a reorganization of the corporation, pursuant to
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Section 1201 of the Code, or (d) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
2.11 Record Date for Shareholder Notice, Voting or Giving Consents.
-------------------------------------------------------------
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the Board of Directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 Proxies.
-------
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's attorney-in-
fact. A validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (a) the person who executed the
proxy revokes it prior to the time of voting by delivering a writing to the
corporation stating that the proxy is revoked or by executing a subsequent proxy
and presenting it to the meeting or by voting in person at the meeting, or (b)
written notice of the death or incapacity of the maker of that proxy is received
by the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless
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otherwise provided in the proxy. The dates contained on the forms of proxy
presumptively determine the order of execution, regardless of the postmark dates
on the envelopes in which they are mailed. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the Code.
2.13 Inspectors of Election.
----------------------
Before any meeting of shareholders, the Board of Directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more shareholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to actions required to be
approved by the shareholders or
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by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors.
3.2 Number of Directors.
-------------------
The number of directors of the corporation shall be not less than five
(5) nor more than nine (9). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the Board of Directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 Election and Term of Office of Directors.
----------------------------------------
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 Resignation and Vacancies.
-------------------------
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
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A vacancy or vacancies in the Board of Directors shall be deemed to
exist (a) in the event of the death, resignation or removal of any director, (b)
if the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (c) if the authorized number of directors is increased, or (d) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 Place of Meetings; Meetings by Telephone.
----------------------------------------
Regular meetings of the Board of Directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
if the times of such meetings are fixed by the Board of Directors.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone (including a voice messaging system or other system
or technology designed to record and communicate messages), facsimile,
electronic mail, or other electronic means, to each director or sent by first-
class mail or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telegram, facsimile, electronic mail or
other electronic means, it shall be delivered at least forty-eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone, facsimile or
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electronic mail may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.8 Quorum.
------
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver of Notice.
----------------
Notice of a meeting need not be given to any director (a) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (b) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.10 Adjournment.
-----------
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 Notice of Adjournment.
---------------------
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
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3.12 Board Action by Written Consent without a Meeting.
-------------------------------------------------
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 Fees and Compensation of Directors.
----------------------------------
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 Approval of Loans to Officers.
-----------------------------
The corporation may, upon the approval of the Board of Directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (a) the Board of Directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation, (b)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the Board of Directors, and (c) the approval of the Board of Directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
----------
4.1 Committees of Directors.
-----------------------
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two (2) or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
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(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the Board of
Directors; or
(g) the appointment of any other committees of the Board of Directors
or the members of such committees.
4.2 Meetings and Action of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a president, a secretary and
a chief financial officer. The corporation may also have, at the discretion of
the Board of Directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
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5.2 Election of Officers.
--------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the Board of Directors.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in these bylaws or as the Board of Directors may
from time to time determine.
5.4 Removal and Resignation of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
Board of Directors at any regular or special meeting of the board or, except in
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Offices.
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 Chairman of the Board.
---------------------
The chairman of the board, if such an officer is elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if there is such an officer,
the president shall be the chief
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executive officer of the corporation and shall, subject to the control of the
Board of Directors, have general supervision, direction and control of the
business and the officers of the corporation. He or she shall preside at all
meetings of the shareholders and, in the absence or nonexistence of a chairman
of the board, at all meetings of the Board of Directors. The President shall
have the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these bylaws,
the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if any, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts,
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<PAGE>
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all of his or her transactions as chief financial officer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors or
these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
-------------------------------------------------
AND OTHER AGENTS
----------------
6.1 Indemnification of Directors and Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Article VI, a "director" or "officer" of the corporation
-------- -------
includes any person (a) who is or was a director or officer of the corporation,
(b) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (c) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 Indemnification of Others.
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
-------- -----
corporation (other than a director or officer) includes any person (a) who is or
was an employee or agent of the corporation, (b) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
-15-
<PAGE>
6.3 Payment of Expenses in Advance.
------------------------------
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the articles of
incorporation.
6.5 Insurance Indemnification.
-------------------------
The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in such capacity or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of this Article VI.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the articles of
incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
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<PAGE>
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance and Inspection of Share Register.
--------------------------------------------
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either is appointed), as
determined by resolution of the Board of Directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and have
filed a Schedule 14A with the Securities and Exchange Commission relating to the
election of directors, may (a) inspect and copy the records of shareholders'
names, addresses and shareholdings during usual business hours on five (5) days'
prior written demand on the corporation, (b) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 Maintenance and Inspection of Bylaws.
------------------------------------
The corporation shall keep at its principal executive office or, if
its principal executive office is not in the State of California, at its
principal business office in California, the original or a copy of these bylaws
as amended to date, which bylaws shall be open to inspection by the shareholders
at all reasonable times during office hours. If the principal executive office
of the corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
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<PAGE>
7.3 Maintenance and Inspection of Other Corporate Records.
-----------------------------------------------------
The accounting books and records and the minutes of proceedings of the
shareholders, of the Board of Directors and of any committee or committees of
the Board of Directors shall be kept at such place or places as are designated
by the Board of Directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and make extracts.
Such rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.4 Inspection by Directors.
-----------------------
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 Annual Report to Shareholders; Waiver.
-------------------------------------
The Board of Directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (a) a balance sheet as of the end of
the fiscal year, (b) an income statement, (c) a statement of changes in
financial position for the fiscal year, and (d) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 Financial Statements.
--------------------
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred
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<PAGE>
twenty (120) days after the close of such fiscal year, deliver or mail to the
person making the request, within thirty (30) days thereafter, a copy of 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.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause such statement or statements to be prepared, if
not already prepared, and shall deliver personally or mail such statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the shareholders its
annual report for the last fiscal year, the statements referred to in the first
paragraph of this Section 7.6 shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 Representation of Shares of Other Corporations.
----------------------------------------------
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the Board of Directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by the person having such authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Record Date for Purposes other than Notice and Voting.
-----------------------------------------------------
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
-19-
<PAGE>
If the Board of Directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 Checks; Drafts; Evidences of Indebtedness.
-----------------------------------------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 Corporate Contracts and Instruments; How Executed.
--------------------------------------------------
The Board of Directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 Certificates for Shares.
-----------------------
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The Board of
Directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
an assistant secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; in such
case, the
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<PAGE>
board may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
----------
9.1 Amendment by Shareholders.
-------------------------
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors of
the corporation, then the authorized number of directors may be changed only by
an amendment of the articles of incorporation.
9.2 Amendment by Directors.
----------------------
Subject to the rights of the shareholders as provided in Section 9.1
of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors), may
be adopted, amended or repealed by the Board of Directors.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
REPLAYTV, INC.
ADOPTION BY INCORPORATOR
------------------------
The undersigned person appointed in the articles of incorporation to act as
the Incorporator of ReplayTV, Inc. hereby adopts the foregoing Bylaws,
comprising twenty-one (21) pages, as the Bylaws of the corporation.
Executed this 28th day of August, 1997.
/s/ Laura A. Gordon
------------------------------
Laura A. Gordon, Incorporator
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
----------------------------------------------------
The undersigned hereby certifies that the undersigned is the duly elected,
qualified, and acting Secretary of ReplayTV, Inc., and that the foregoing
Bylaws, comprising twenty-one (21) pages, were adopted as the Bylaws of the
corporation on August 27, 1997, by the person appointed in the articles of
incorporation to act as the Incorporator of the corporation.
Executed this 28th day of August, 1997.
/s/ Mark A. Medearis
---------------------------
Mark A. Medearis, Secretary
<PAGE>
Exhibit 3.3A
CERTIFICATE OF AMENDMENT OF BYLAWS
of
REPLAY NETWORKS, INC.
The undersigned, Mark Medearis, hereby certifies that:
1. He is the duly elected and incumbent Secretary of Replay Networks,
Inc. (the "Company").
2. By written consent of the Shareholders effective July 19, 1999, Article
III, Section 2 of the Bylaws of the Company is hereby amended to read in full as
follows:
"The number of directors of the corporation shall be not less than five
(5) nor more than nine (9). The exact number of directors shall be five
(5) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the Board of Directors or by
the shareholders. The indefinite number of directors may be changed, or
a definite number may be fixed without provision for an indefinite
number, by a duly adopted amendment to the articles of incorporation or
by an amendment to this bylaw duly adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to
vote; provided, however, that an amendment reducing the fixed number or
the minimum number of directors to a number less than five (5) cannot
be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are
equal to more than sixteen and two-thirds percent (16-2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change
the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one
(1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires."
3. The matters set forth in this certificate are true and correct of my
own knowledge.
Date: July 20, 1999
/s/ Mark A. Medearis
---------------------
Mark Medearis, Secretary
<PAGE>
Exhibit 3.3B
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Mark A. Medearis, hereby certifies that:
1. He is the duly elected and incumbent Secretary of ReplayTV, Inc. (the
"Company").
2. At a meeting of the Board of Directors held January 21, 2000 and by an
Action by Written Consent of the Shareholders, Article III, Section 3.2 of the
Bylaws of the Company was amended to read in its entirety as follows:
"The number of the corporation's directors shall be not less than six
(6) nor more than eleven (11), with the exact number of directors to be fixed
within the limits specified by a resolution adopted by a majority of the Board.
Such minimum and maximum number of directors may be changed by amendment to this
Section 2.2 duly adopted by the shareholders, provided that no amendment to this
Section reducing the number of directors to a number below five (5) shall be
enacted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to more than 16-
2/3 percent of the outstanding shares entitled to vote."
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires."
3. The matters set forth in this certificate are true and correct of my
own knowledge.
Date: January 21, 2000
/s/ Mark A. Medearis
---------------------
Mark A. Medearis, Secretary
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
REPLAYTV, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES............................................................... 3
1.1 Registered Office............................................................. 3
1.2 Other Offices................................................................. 3
ARTICLE II - MEETINGS OF STOCKHOLDERS....................................................... 3
2.1 Place Of Meetings............................................................. 3
2.2 Annual Meeting................................................................ 1
2.3 Special Meeting............................................................... 3
2.4 Notice of Shareholder's Meeting; Affidavit Of Notice.......................... 3
2.5 Advance Notice of Stockholder Nominees........................................ 3
2.6 Quorum........................................................................ 4
2.7 Adjourned Meeting; Notice..................................................... 4
2.8 Conduct Of Business........................................................... 4
2.9 Voting........................................................................ 5
2.10 Waiver Of Notice.............................................................. 5
2.11 Record Date For Stockholder Notice; Voting.................................... 5
2.12 Proxies....................................................................... 6
ARTICLE III - DIRECTOR...................................................................... 6
3.1 Powers........................................................................ 6
3.2 Number Of Directors........................................................... 6
3.3 Election, Qualification And Term Of Office Of Directors....................... 6
3.4 Resignation And Vacancies..................................................... 6
3.5 Place Of Meetings; Meetings By Telephone...................................... 7
3.6 Regular Meetings.............................................................. 8
3.7 Special Meetings; Notice...................................................... 8
3.8 Quorum........................................................................ 8
3.9 Waiver Of Notice.............................................................. 8
3.10 Board Action By Written Consent Without A Meeting............................. 9
3.11 Fees And Compensation Of Directors............................................ 9
3.12 Approval Of Loans To Officers................................................. 9
3.13 Removal Of Directors.......................................................... 9
3.14 Chairman Of The Board Of Directors............................................ 10
ARTICLE IV - COMMITTEES..................................................................... 10
4.1 Committees Of Directors....................................................... 10
4.2 Committee Minutes............................................................. 10
4.3 Meetings And Action Of Committees............................................. 11
ARTICLE V - OFFICERS........................................................................ 13
5.1 Officers...................................................................... 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.2 Appointment Of Officers....................................................... 13
5.3 Subordinate Officers.......................................................... 13
5.4 Removal And Resignation Of Officers........................................... 14
5.5 Vacancies In Offices.......................................................... 12
5.6 Chief Executive Officer....................................................... 14
5.7 President..................................................................... 14
5.8 Vice Presidents............................................................... 13
5.9 Secretary..................................................................... 13
5.10 Chief Financial Officer....................................................... 15
5.11 Representation Of Shares Of Other Corporations................................ 16
5.12 Authority And Duties Of Officers.............................................. 16
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS............ 16
6.1 Indemnification Of Directors And Officers..................................... 16
6.2 Indemnification Of Others..................................................... 16
6.3 Payment Of Expenses In Advance................................................ 17
6.4 Indemnity Not Exclusive....................................................... 17
6.5 Insurance..................................................................... 17
6.6 Conflicts..................................................................... 17
ARTICLE VII - RECORDS AND REPORTS........................................................... 18
7.1 Maintenance And Inspection Of Records......................................... 18
7.2 Inspection By Directors....................................................... 18
7.3 Annual Statement To Stockholders.............................................. 18
ARTICLE VIII - GENERAL MATTERS.............................................................. 19
8.1 Checks........................................................................ 19
8.2 Execution Of Corporate Contracts And Instruments.............................. 19
8.3 Stock Certificates; Partly Paid Shares........................................ 19
8.4 Special Designation On Certificates........................................... 20
8.5 Lost Certificates............................................................. 20
8.6 Construction; Definitions..................................................... 20
8.7 Dividends..................................................................... 20
8.8 Fiscal Year................................................................... 21
8.9 Seal.......................................................................... 21
8.10 Transfer Of Stock............................................................. 21
8.11 Stock Transfer Agreements..................................................... 21
8.12 Registered Stockholders....................................................... 21
ARTICLE IX - AMENDMENTS..................................................................... 21
</TABLE>
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<PAGE>
BYLAWS
OF
REPLAYTV, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware, County of New Castle, 19805.
The name of its registered agent at such address is Corporation Service Company.
1.2 Other Offices.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place Of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 Annual Meeting.
--------------
(a) The annual meeting of stockholders shall be held each year on a
date and at a time designated by the Board of Directors. At the meeting,
directors shall be elected and any other proper business may be transacted.
(b) Nominations of persons for election to the Board of Directors of
the corporation and the proposal of business to be transacted by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 2.2, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 2.2.
(c) In addition to the requirements of Section 2.5, for nominations
or other business to be properly brought before an annual meeting by a
stockholder pursuant to clause
<PAGE>
(iii) of paragraph (b) of this Section 2.2, the stockholder must have given
timely notice thereof in writing to the secretary of the corporation and such
business must be a proper matter for stockholder action under the General
Corporation Law of Delaware. To be timely, a stockholder's notice shall be
delivered to the secretary at the principal executive offices of the corporation
not less than twenty (20) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is more than
thirty (30) days prior to or more than sixty (60) days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the ninetieth (90th) day prior to such annual meeting and not later than
the close of business on the later of the twentieth (20th) day prior to such
annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes 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, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of such business, 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
(iii) as to the stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (A) the name and address of
such stockholder, as they appear on the corporation's books, and of such
beneficial owner and (B) the class and number of shares of the corporation which
are owned beneficially and of record by such stockholder and such beneficial
owner.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.2. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service.
(f) Nothing in this Section 2.2 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 Special Meeting.
---------------
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(a) A special meeting of the stockholders may be called at any time
by the Board of Directors, or by the chairman of the board, or by the president.
(b) 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 such 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 of notice provided for in Section
2.5, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in Section 2.5.
2.4 Notice of Stockholder's Meetings; Affidavit Of Notice.
-----------------------------------------------------
All notices of meetings of stockholders shall be in writing and shall
be sent or otherwise given in accordance with this Section 2.4 of these Bylaws
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 (or such longer or
shorter time as is required by Section 2.5 of these Bylaws, if applicable). The
notice shall specify the place, date, and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.5 Advance Notice of Stockholder Nominees.
--------------------------------------
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than sixty (60) days nor more than ninety
(90) days prior to the meeting; provided, however, that in the event that less
than sixty (60) days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for election or re-
election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise
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required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including, without limitation, such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); and (b) as to the stockholder giving the notice (i) the
name and address, as they appear on the corporation's books, of such stockholder
and (ii) the class and number of shares of the corporation which are
beneficially owned by such stockholder. At the request of the Board of Directors
any person nominated by the Board of Directors for election as a director shall
furnish to the secretary of the corporation that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee. No
person shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section 2.5. The
Chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by the Bylaws, and if he or she should so determine, he or she shall
so declare to the meeting and the defective nomination shall be disregarded.
2.6 Quorum.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 Conduct Of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
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2.9 Voting.
------
(a) The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person 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. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 Record Date For Stockholder Notice; Voting.
------------------------------------------
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 or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If the Board
of Directors does not so fix a record date:
(a) 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.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
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.
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2.12 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 Number Of Directors.
-------------------
The number of directors constituting the entire Board of Directors
shall be six(6) until changed by a bylaw amending this Section 3.2, duly
adopted by the Board of Directors or by the stockholders.
3.3 Election, Qualification And Term Of Office Of Directors.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation And Vacancies.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is 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
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such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the filling of other
vacancies. A vacancy created by the removal of a director by the vote of the
stockholders or by court order may be filled only by the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively also constitute a majority
of the quorum. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Place Of Meetings; Meetings By Telephone.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference
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telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting, or on such shorter notice as the person or persons
calling such meeting may deem necessary and appropriate in the circumstances.
Any oral notice given personally or by telephone may be communicated either to
the director or to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director.
The notice need not specify the purpose or the place of the meeting, if the
meeting is to be held at the principal executive office of the corporation.
3.8 Quorum.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver Of Notice.
----------------
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Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person 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. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 Board Action By Written Consent Without A 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 or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board of Directors or committee. Written consents representing actions taken
by the board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 Fees And Compensation Of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
3.12 Approval Of Loans To Officers.
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 Removal Of Directors.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors;
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provided, however, that if the stockholders of the corporation are entitled to
cumulative voting, if less than the entire Board of Directors is to be removed,
no director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire Board of Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman Of The Board Of Directors.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 Committees Of Directors.
-----------------------
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members 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. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the corporation, 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 that may require it; but
no such committee shall have the power or authority to (a) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (d) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the corporation; and, unless the board
resolution establishing the committee, the Bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the
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issuance of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of Delaware.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a chief executive officer, a
president, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the Board of Directors, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment Of Officers.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such
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duties as are provided in these Bylaws or as the Board of Directors may from
time to time determine.
5.4 Removal And Resignation Of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take effect
at the date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the corporation under any contract
to which the officer is a party.
5.5 Vacancies In Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 Vice Presidents.
---------------
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In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the
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financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the Board of Directors or the Bylaws.
5.11 Representation Of Shares Of Other Corporations.
----------------------------------------------
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by the person
having such authority.
5.12 Authority And Duties Of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
--------------------------------------------------------------------
6.1 Indemnification Of Directors And Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification Of Others.
-------------------------
The corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
corporation.
-16-
<PAGE>
For purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (a) who is or was an
employee or agent of the corporation, (b) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (c) who was an employee or agent of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 Payment Of Expenses In Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 Insurance.
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
-17-
<PAGE>
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance And Inspection Of Records.
-------------------------------------
The corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection By Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Statement To Stockholders.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
-18-
<PAGE>
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Checks.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or vice-
president, and by the chief financial officer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the number
of shares registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
has ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon
-19-
<PAGE>
partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.4 Special Designation On Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 Dividends.
---------
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
-20-
<PAGE>
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
8.9 Seal.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 Transfer Of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 Stock Transfer Agreements.
-------------------------
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 Registered Stockholders.
-----------------------
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact
-21-
<PAGE>
that such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
Bylaws.
-22-
<PAGE>
EXHIBIT 4.2
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Replay Networks, Inc., a California corporation
Number of Shares: 11,000 (subject to Section 1.9)
Class of Stock: Common (subject to Section 1.9)
Initial Exercise Price: $7.50 per share (subject to Section 1.9)
Issue Date: May 31, 1999
Expiration Date: May 31, 2004 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANCORP or registered
assignee ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
------------------
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
1.3 Omitted.
-------
1.4 Omitted.
-------
<PAGE>
1.5 Fair Market Value. If the Shares are traded regularly in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.6 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.7 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.8.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.8.2. Assumption of Warrant. If upon the closing of any Acquisition
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.8.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
<PAGE>
1.9 Adjustment in Underlying Stock Price and Exercise Price. If on or
-------------------------------------------------------
before July 31, 1999, the Company sells and issues to any investors, preferred
stock with aggregate gross proceeds to the Company of at least $8,000,000, this
Warrant shall concurrent with the issuance of such shares of preferred stock
automatically be adjusted to instead be exercisable for shares of the same
series and class and bearing the same rights, preferences, and privileges, of
such shares of stock, with the Warrant Price hereunder adjusted to equal the per
share purchase price of such stock, and the number of such shares subject to
this Warrant adjusted to equal (i) Fifty Thousand Dollars ($50,000), divided by
(ii) such modified per share Warrant Price.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities or
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock purser to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of shares purchasable upon exorcise of this warrant shall be proportionately
decreased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
----------------------------------
of Shares issuable upon exercise of this Warrant shall be subject to adjustment,
from time to time, in the manner set forth on Exhibit B, in the event (i) the
Warrant is adjusted to be exercisable for preferred stock as specified in
Section 1.9 above in combination with (ii) the occurrence of Diluting Issuances
(as defined on Exhibit B).
<PAGE>
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of arty liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws or created by the Holder.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a, record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case
<PAGE>
of the matter referred to in (e) above, the same notice as is given to the
holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the, shareholders of the Company, (b)
within one hundred twenty (120) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit C.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE, TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(e), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the
<PAGE>
transferee(s) (and Holder, if applicable). Unless the Company is filing
financial, information with the SEC pursuant to the Securities Exchange Act of
1934. the Company shall have the right to refuse to transfer any portion of this
Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
Replay Networks, Inc.
By: /s/ Anthony Wood By: /s/ Illegible
----------------------------------- ---------------------------------
Name: Anthony Wood Name:
--------------------------------- -------------------------------
Title: CEO Title:
-------------------------------- ------------------------------
<PAGE>
APPENDIX I
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _________ shares of the
________Stock of Replay Networks, Inc. pursuant to the terms of the attached
Warrant. and tenders herewith payment of the purchase price of such shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to ________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Chief Financial Officer
Controllers Department
Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
Or Registered Assignee
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANCORP or Registered Assignee
__________________________________
(Signature)
________________
(Date)
<PAGE>
EXHIBIT A
---------
Omitted
-------
<PAGE>
EXHIBIT B
---------
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE>
EXHIBIT C
---------
Registration Rights
-------------------
The Shares shall be deemed "registrable securities" or otherwise entitled
to "piggy back", registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
Replay Networks, Inc. Fourth Amended and Restated Investors Rights
Agreement
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit C is
attached, Holder shall not be deemed to be a party to the Agreement, but solely
entitled to the registration rights created thereby.
If no amended Agreement is entered into, then the Replay Networks, Inc.
Third Amended and Restated Investors Rights Agreement dated March 24, 1999 shall
be the applicable document for this provision.
<PAGE>
EXHIBIT 10.1
REPLAYTV, INC.
SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
January 25, 2000
<PAGE>
REPLAYTV, INC.
SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------------
This Sixth Amended and Restated Investors' Rights Agreement (the
"Agreement") is entered into as of the 25th day of January, 2000, by and among
---------
ReplayTV, Inc., a California corporation (the "Company"), persons holding at
-------
least a majority of the Registrable Securities under the Fifth Amended and
Restated Investors' Rights Agreement dated November 29, 1999 (the "Existing
--------
Rights Agreement") (as "Registrable Securities" is defined under the Existing
- ---------------- ----------------------
Rights Agreement) (the "Prior Holders") and the Purchasers under the Series F
-------------
Preferred Stock Purchase Agreement (the "Series F Agreement") of even date
------------------
herewith (the "Series F Purchasers" and collectively with the Prior Holders, the
-------------------
"Investors").
---------
RECITALS
WHEREAS, the Company wishes to raise additional capital by issuing Series F
Preferred Stock with the rights, privileges and preferences set forth in the
Sixth Amended and Restated Articles of Incorporation attached to the Series F
Agreement.
WHEREAS, pursuant to Section 3.7 of the Existing Rights Agreement, the
Existing Rights Agreement may be amended by written consent of the holders of a
majority of the outstanding shares of the Registrable Securities and the
Company; and
WHEREAS, a condition to the Series F Purchasers' obligations under the
Series F Agreement is that the Company and the Investors enter into this
Agreement in order to provide the Series F Purchasers with (i) certain rights to
register shares of the Company's Common Stock issuable upon conversion of the
Series F Preferred Stock purchased by the Series F Purchasers, (ii) certain
rights to receive or inspect information pertaining to the Company, and (iii) a
right of first offer with respect to certain issuances by the Company of its
securities. The Company and the Investors each desire to induce the Series F
Purchasers to purchase shares of Series F Preferred Stock pursuant to the Series
F Agreement by agreeing to the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree that the Existing Rights Agreement
is amended and restated in its entirety as follows:
AGREEMENT
---------
1. Registration Rights. The Company and the Investors covenant and agree
-------------------
as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration"
-------- ---------- ------------
refer to a registration effected by preparing and filing a registration
statement or similar document in
<PAGE>
compliance with the Securities Act of 1933, as amended (the "Act"), and the
---
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i) the shares
----------------------
of Common Stock issuable or issued upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock (including any such shares of Series E Preferred
Stock that may be issued upon exercise of outstanding warrants to purchase
Series E Preferred Stock held by Imperial Barcorp (the "Warrant Stock")) and
-------------
Series F Preferred Stock (such shares of Common Stock are collectively referred
to hereinafter as the "Stock"); provided, however, that, for the purposes of
----- -------- -------
Sections 1.2, 1.4 or 1.13 hereof, the Warrant Stock (and the Common Stock
issuable upon conversion thereof) shall not be deemed Registrable Securities or
Stock and a holder of Warrant Stock shall not be deemed a Holder, and (ii) any
other shares of 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, the Stock; provided, however, that the foregoing definition
-------- -------
shall exclude in all cases any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned.
Notwithstanding the foregoing, Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Act under Section 4(1)
thereof so that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then
---------------------------
outstanding" shall be determined by the number of shares of Common Stock
- -----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or having the
------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof;
(e) The term "Form S-3" means such form under the Act as in
--------
effect on the date hereof or any successor form under the Act; and
(f) The term "SEC" means the Securities and Exchange
---
Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the
earlier of (i) February 1, 2003, or (ii) six (6) months after the effective date
of the first registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or an SEC Rule 145 transaction pursuant to which the
Company's
-2-
<PAGE>
securities are not listed on a national exchange or an over-the-counter market),
a written request from Holders of not less than 35% of the Registrable
Securities then outstanding that the Company file a registration statement under
the Act covering the registration of Registrable Securities with an anticipated
aggregate offering price, net of underwriting discounts and commissions, of not
less than $5,000,000, then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 1.2(b), use its best efforts to effect
as soon as practicable, and in any event within sixty (60) days of the receipt
of such request, the registration under the Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("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 1.2 and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by a majority in interest of
the Initiating Holders and shall be reasonably acceptable to the Company. In
such event, the right of any Holder to include his or her 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 through such underwriting shall
(together with the Company as provided in subsection 1.5(e)) 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. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
requested for inclusion in the registration by each Holder; provided, however,
-------- -------
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
In the event that the underwriter informs the Initiating
Holders that marketing factors require a reduction in the number of shares to be
underwritten of greater than 50% of the aggregate number of shares requested for
inclusion by the Initiating Holders, then a majority in interest of the
Initiating Holders may notify the Company and the underwriters in writing that
they elect to withdraw their request for registration, provided that such notice
--------
is given no later than 10 business days following the underwriter's written
notice of the reduction in the number of shares to be registered. In the event
of such withdrawal, the request for registration shall not be considered as a
request for registration for purposes of Sections 1.2(d) and 1.7(a).
-3-
<PAGE>
(c) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
-------- -------
right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two (2)
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the date thirty
(30) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities, all of which may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 1.4 below.
1.3 Company Registration. If (but without any obligation to do
--------------------
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock under the Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan or a transaction covered by
Rule 145 under the Act, a registration in which the only stock being registered
is Common Stock issuable upon conversion of debt securities which are also being
registered, or any registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 1.8, cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered. If shares are withdrawn from the registration, the
Company shall then offer to all persons who have retained the right to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among the persons requesting additional
inclusion in accordance with Section 1.8 hereof.
-4-
<PAGE>
1.4 Form S-3 Registration. In case the Company shall receive
---------------------
from any Holder or Holders of not less than 20% of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3 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;
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 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 1.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) 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
$500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than ninety (90)
days after receipt of the request of the Holder or Holders under this Section
1.4; provided, however, that the Company shall not utilize this right more than
once in any twelve month period; (4) 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 1.4; or (5)
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
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 but not more than sixty (60) days after the
receipt of such request. Registrations effected pursuant to this Section 1.4
shall not be counted as demands for registration or registrations effected
pursuant to Sections 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this
--------------------------
Section 1 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 its best efforts to cause
such registration statement
-5-
<PAGE>
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 one hundred twenty (120) days, provided, however, that (1)
such 120-day period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such registration at
the request of the underwriter or the Company; (2) such 120-day period shall be
extended to the extent reasonably necessary to respond to or incorporate
comments provided by counsel to the Holders, as set forth below, and (3) in the
case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis. Prior to filing such registration statement or any amendment
thereto, if requested in writing by the Holders, the Company shall also deliver
copies of the registration statement to one special counsel designated by the
Holders and permit a reasonable opportunity for such counsel to provide comments
prior to filing.
(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 Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
The Company shall also make available to the Holders copies of the registration
statement and any amendments thereto.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(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 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 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.
-6-
<PAGE>
(g) Cause all such Registrable Securities registered
pursuant hereto to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereto and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, 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 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, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated 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.
1.6 Furnish Information. It shall be a condition precedent to
-------------------
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of any Holder or Holders failing to provide the information set
forth in the preceding sentence, 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 subsection 1.2(a) or subsection
1.4(b)(2), whichever is applicable.
1.7 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses other than stock
-------------------
transfer taxes and underwriting discounts and commissions incurred in connection
with registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one (1) counsel for the selling Holders
selected by them with the approval of the Company, which approval shall not be
unreasonably withheld, shall be borne by the Company; provided, however, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a
-7-
<PAGE>
majority of the Registrable Securities to be registered (in which case all
withdrawing Holders shall bear such expenses), unless (i) the Holders of a
majority of the Registrable Securities agree to forfeit their right to one (1)
demand registration pursuant to Section 1.2 (ii) the withdrawal is due to the
occurrence of a material adverse effect regarding the Company or its business
which was not known by the Initiating Holders prior to their request for
registration, (iii) the withdrawal is due to the Company exercising its right to
defer the registration pursuant to Section 1.2(c), Section 1.2(d)(ii) or Section
1.4(b)(3), or (iv) the Initiating Holders withdraw the registration following a
limitation by the underwriter in the number of shares to be underwritten
pursuant to Section 1.2(b).
(b) Company Registration. The Company shall bear and pay
--------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements of one (1) counsel for the
selling Holders selected by them with the approval of the Company, which
approval shall not be unreasonably withheld, but excluding stock transfer taxes
and underwriting discounts and commissions relating to Registrable Securities.
(c) Registration on Form S-3. All expenses incurred in
------------------------
connection with a registration requested pursuant to Section 1.4, including
(without limitation) all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders selected by them with the approval of the Company,
which approval shall not be unreasonably withheld, and counsel for the Company,
and any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne, for the first two registrations pursuant to Section
1.4, by the Company, and for any registrations pursuant to Section 1.4
thereafter, pro rata by the Holder or Holders participating in the Form S-3
Registration.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities and shares of Common Stock of the
Company with registration rights (if any), requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other
-8-
<PAGE>
proportions as shall mutually be agreed to by such selling shareholders) but in
no event shall (i) the amount of securities of the selling Holders included in
the offering be reduced below twenty-five percent (25%) of the total amount of
securities included in such offering, unless such offering is the initial public
offering of the Company's securities in which case the selling shareholders may
be excluded if the underwriters make the determination described above and no
other shareholder's securities are included or (ii) notwithstanding (i) above,
any shares being sold by a shareholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding provision concerning apportionment, for any selling
shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro-rata reduction with
-------------------
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence. With
further regard to allocation, if any Holder or other selling shareholder does
not request inclusion of the maximum number of shares of Registrable Securities
and other shares of Common Stock with registration rights allocated to him
pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Holders and other selling
shareholders whose allocation did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and other shares of
Common Stock with registration rights which would be held by such Holders and
other selling shareholders, assuming conversion, and this procedure shall be
repeated until all of the shares of Registrable Securities and other shares of
Common Stock with registration rights which may be included in the registration
on behalf of the Holders and other selling shareholders have been so allocated.
1.9 Delay of Registration. 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 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, each of such Holder's officers,
directors, partners and agents, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages or liabilities (joint or
------------
several) to which they may become subject under the 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"): (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
-9-
<PAGE>
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 Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Act, the
Exchange Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating, defending
and settling any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(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 any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, its agents, each person, if
any, who controls the Company within the meaning of the Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the 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 expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b) in connection with
investigating, defending and settling any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(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, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the net proceeds from the offering received by such Holder, except in the
case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action) or the receipt of actual knowledge of any claim as to which
indemnity may be sought, such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying party
under this Section 1.10, 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 (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate
-10-
<PAGE>
counsel, with the reasonable 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 prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, 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 1.10.
(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense 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 statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by a Holder
under this subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
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.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view
---------------------------------------------
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times following the
effective date of the first
-11-
<PAGE>
registration statement under the Act filed by the Company for the offering of
its securities to the general public;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the Exchange Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for
the offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time following the effective date of the first registration statement filed
by the Company), the Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to (i) any partner
or retired partner of any Holder that is a partnership, (ii) any member or
former member of any Holder that is a limited liability company, (iii) any
family member or trust or other entity primarily for the benefit of any
individual Holder (iv) any transferee or assignee that controls, is controlled
by or is under common control with any Holder that is a corporation or a limited
liability company (with "control" defined for the purposes of this Section 1.12
as beneficial ownership of voting securities that constitute at least 50% of the
voting power of the entity), or (v) a transferee or assignee of at least 100,000
shares (as appropriately adjusted for stock splits, stock dividends,
combinations and the like) of such securities, provided the Company is, within a
reasonable time after such transfer, furnished with 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 provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. The provisions of Section 3.9 of this Agreement shall
govern for the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under Section 1.
-12-
<PAGE>
1.13 Limitations on Subsequent Registration Rights. From and
---------------------------------------------
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
1.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his or her securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees
----------------------------
that, during the period of duration (up to, but not exceeding, 180 days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all one-
percent (1%) securityholders are bound by and have entered into similar
agreements; and
(c) to the extent that the Company and the underwriter of
the Company's Common Stock or other securities of the Company releases any
Registrable Securities from the obligations of this Section 1.14, such release
shall apply on a pro-rata basis such that each Holder is entitled to release
from the restrictions imposed by this Section 1.14 that number of Registrable
Securities obtained by multiplying (i) the proportion of Registrable Securities
held by such Holder to the total number of Registrable Securities then
outstanding by (ii) the aggregate number of Registrable Securities released.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.14.
-13-
<PAGE>
Notwithstanding the foregoing, the obligations described in this
Section 1.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.15 Termination of Registration Rights. No Holder shall be
----------------------------------
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public, or (ii) such time as Rule 144 or another
similar exemption under the Act is available for the sale of all of such
Holder's shares during a three (3)-month period without registration.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver
--------------------------------
to each Investor holding not less than 200,000 shares of Registrable Securities
(as determined in accordance with Section 3.9 of this Agreement and as adjusted
for recapitalizations, stock splits, stock dividends and the like):
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
----
and audited and certified by an independent public accounting firm of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-
five (45) days after the end of each of the first three (3) quarters of each
fiscal year of the Company, an unaudited profit or loss statement, a statement
of cash flows for such fiscal quarter and an unaudited balance sheet as of the
end of such fiscal quarter; and
(c) with respect to the financial statements called for in
subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operations for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so.
2.2 Additional Information. As long as an Investor holds not
----------------------
less than 200,000 shares of Registrable Securities (as determined in accordance
with Section 3.9 of
-14-
<PAGE>
this Agreement), as adjusted for recapitalizations, stock splits, stock
dividends and the like, upon request, the Company will deliver the following
reports to such Investor:
(a) as soon as practicable after the end of each fiscal
month, and in any event within thirty (30) days thereafter, an unaudited
consolidated balance sheet of the Company as at the end of such month, and
unaudited consolidated statements of income and unaudited consolidated
statements of cash flows for such month and for the current fiscal year to date.
Such financial statements shall be prepared in accordance with generally
accepted accounting principles consistently applied (other than accompanying
notes), all in reasonable detail and shall include a comparison against plan;
(b) as soon as practicable, but in any event prior to the
end of each fiscal year, a budget for the next fiscal year, prepared on a
monthly basis, including balance sheets, income statements and statements of
cash flows for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(c) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor or any assignee of the Investor may from time to time reasonably
request (including, without limitation, making available copies of registration
statements on Form S-1 filed by the Company), provided, however, that the
Company shall not be obligated under this subsection (c) to provide information
which it deems in good faith to be a trade secret or similar confidential
information.
2.3 Inspection. The Company shall permit each Investor who
----------
holds not less than 200,000 shares of Registrable Securities (as determined in
accordance with Section 3.9 of this Agreement and as adjusted for
recapitalizations, stock splits, stock dividends and the like), at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.4 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Sections 2.1, 2.2 and 2.3 shall terminate as to Investors
and be of no further force or effect upon the earlier of (i) the consummation
of the Company's sale of its Common Stock in an underwritten public offering
pursuant to an effective registration statement filed under the Securities Act
or (ii) the registration by the Company of a class of its equity securities
under Section 12(b) or 12(g) of the Exchange Act.
2.5 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this Section 2.5, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 2.5, a "Major Investor" shall mean any person who holds at least 200,000
--------------
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred
Stock
-15-
<PAGE>
(or the Common Stock issued upon conversion thereof) (as determined in
accordance with Section 3.9 of this Agreement and as adjusted for
recapitalizations, stock splits, stock dividends and the like). A Major Investor
who chooses to exercise the right of first offer may designate as purchasers
under such right itself or its partners or affiliates in such proportions as it
deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
------
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by confirmed fax or
by overnight courier ("Notice") to the Major Investors stating (i) its bona fide
------
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms, if any, upon which it proposes to offer such
Shares.
(b) Within twenty (20) calendar days after delivery of the
Notice, the Major Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Major Investor that purchases all the shares available to it (each,
a "Fully-Exercising Investor") of any other Major Investor's failure to do
-------------------------
likewise. During the ten (10)-day period commencing after receipt of such
information, each Fully-Exercising Investor shall be entitled to obtain that
portion of the Shares for which Major Investors were entitled to subscribe but
which were not subscribed for by the Major Investors that is equal to the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock then held by all Fully-Exercising Investors
(assuming full conversion and exercise of all convertible or exercisable
securities).
(c) The Company may, during the 45-day period following the
expiration of the period provided in subsection 2.5(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within sixty (60) days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered unless first
reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.5 shall
not be applicable (i) to the issuance or sale of securities (or options
therefor) to employees, consultants or directors pursuant to plans or agreements
approved by the Board of Directors for the primary
-16-
<PAGE>
purpose of soliciting or retaining their services, (ii) to the issuance of up to
100,000 shares of Common Stock to vendors of the Company, (iii) to the issuance
of securities in connection with strategic partnering arrangements approved by
the Board of Directors (iv) to or after consummation of a bona fide, firmly
underwritten public offering of shares of Common Stock registered under the Act
pursuant to a registration statement, (v) to the issuance of securities pursuant
to the conversion or exercise of convertible or exercisable securities
previously subject to, or exempt from, this Section 2.5, (vi) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, the terms of which are approved by the Board of Directors of
the Company, (vii) to the issuance of securities to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings
or similar transactions, the terms of which are approved by the Board of
Directors of the Company, (viii) to the issuance or sale of the Series F
Preferred Stock or Common Stock issued upon conversion of the Preferred Stock,
(ix) to the issuance of securities that, with unanimous approval of the Board of
Directors of the Company (including a director elected by the holders of Series
D Preferred Stock), are not offered to any existing shareholder of the Company,
or (x) to stock splits, stock dividends or like transactions.
2.6. Lock-Up Agreements. The Company covenants that it
------------------
will, subsequent to the Closing (as defined in the Series F Agreement), use its
best efforts to have all officers and directors of the Company, and all one-
percent (1%) securityholders, enter into lock-up agreements with Morgan Stanley
& Co. Incorporated, substantially in the form attached to the Series F Agreement
as Exhibit G.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided
----------------------
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any of the Preferred Stock or any Common Stock issued
upon conversion thereof). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement and all acts and
-------------
transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws.
3.3 Counterparts. This Agreement may be executed in two (2)
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.4 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.
-17-
<PAGE>
3.5 Notices. Unless otherwise provided, any notice required
-------
or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or by overnight courier or
sent by telegram or confirmed fax, or (in the case of domestic recipients) five
business days after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth below or on Exhibit A hereto or as subsequently
---------
modified by written notice.
3.6 Expenses. If any action at law or in equity is
--------
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 Entire Agreement; Amendments and Waivers. This
----------------------------------------
Agreement (including the Exhibits hereto) constitutes the full and entire
understanding and agreement between the parties with respect to the subjects
hereof and thereof. Any term of this Agreement may be amended and the observance
of any term of this Agreement 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 a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities and the
Company, but in no event shall the obligations or rights of any Holder hereunder
be materially increased or decreased, as applicable, in a manner different from
all other Holders, except upon written consent of such Holder.
3.8 Severability. If one or more provisions of this
------------
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (x) such provision shall be excluded from this Agreement, (y)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (z) the balance of the Agreement shall be enforceable in accordance
with its terms.
3.9 Aggregation of Stock. For the purpose of determining
--------------------
the availability of any rights under this Agreement, the number of shares of
Preferred Stock or Registrable Securities held by (i) affiliated entities or
persons, (ii) any partner or retired partner of any Holder or Investor that is a
partnership, (iii) any member or former member of any Holder or Investor that is
a limited liability company, or (iv) any family member or trust or other entity
primarily for the benefit of any individual Holder or Investor, shall be
aggregated together.
3.10 Indemnification. The Company will indemnify members of
---------------
the Board of Directors to the broadest extent permitted by applicable law and
will indemnify each Investor for any claims brought against such Investor by any
third party (including any other shareholder of the Company) as a result of the
Company's Series E Preferred Stock financing or Series F Preferred Stock
financing.
-18-
<PAGE>
3.11 Waiver of Right of First Offer. By execution of this
------------------------------
Agreement below, the holders of the Company's Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, and each of them, hereby consent to the issuance of the shares
of Series F Preferred Stock to the Series F Purchasers as contemplated by the
Series F Agreement and waive any rights to notice or to acquire shares of Series
F Preferred Stock to which they may be entitled, including but not limited to
those provided in Section 2.5 of the Existing Rights Agreement (such waiver
intended to apply to all holders of Registrable Securities under the Existing
Rights Agreement).
3.12 Waiver of Registration Rights for Proposed Initial
--------------------------------------------------
Public Offering. By execution of this Agreement below, the Holders and each of
- ---------------
them, hereby acknowledge that the Company is considering an underwritten initial
public offering of its Common Stock, which would involve the registration of a
certain number of shares of such Common Stock with the SEC (the "Proposed
--------
Offering"), and hereby agree and consent (such agreement and consent intended to
- --------
apply to all holders of Registrable Securities under this Agreement), provided
that the Proposed Offering is completed prior to June 30, 2000, to each of the
following matters:
(a) The Holder hereby elects not to register or sell
any of Holder's shares of Common Stock of the Company in connection with the
Proposed Offering;
(b) The Holder hereby agrees to waive any registration
rights and any notice requirements under Section 1.3 of this Agreement with
respect to, or arising out of the sale of, the shares of Common Stock proposed
to be offered by the Company in the Proposed Offering; and
(c) The Holder hereby agrees to waive any rights of
first offer and any notice requirements under Section 2.5 of this Agreement with
respect to, or arising out of the sale of, the shares of Common Stock proposed
to be offered by the Company in the Proposed Offering.
[Signature Page Follows]
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<PAGE>
The parties have executed this Sixth Amended and Restated Investors'
Rights Agreement as of the date first above written.
COMPANY: INVESTORS:
REPLAYTV, INC. _______________________________
(Investor)
By: /s/ Earle H. LeMasters By: ___________________________
---------------------------------
Earle H. LeMasters III,
Chief Executive Officer Name:__________________________
(print name of signatory)
Address:
Title:_________________________
1945 Charleston Road
Mountain View, CA 94043-1201
[INDIVIDUAL INVESTOR SIGNATURE
BLOCKS OMITTED]
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<PAGE>
EXHIBIT A
---------
(omitted)
<PAGE>
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement (the "Agreement") is made as of
---------
_______________, by and between ReplayTV, Inc., a Delaware corporation (the
"Company"), and _____________ (the "Indemnitee").
------- ----------
RECITALS
--------
The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers and key employees, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and Indemnitee and agents of the Company may not be
willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
---------
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was 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 (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in
-2-
<PAGE>
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
--------------------
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel
-3-
<PAGE>
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement,
-----
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise.
-4-
<PAGE>
For example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
---
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
-5-
<PAGE>
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) Claims under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" 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
if Indemnitee 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, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
-----------------
shall include employee benefit plans; references to "fines" shall include any
-----
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
-------------------------------------
service as a director, officer, employee or agent of the Company 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 if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
---
opposed to the best interests of the Company" as referred to in this Agreement.
- --------------------------------------------
11. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee
-6-
<PAGE>
with respect to such action, unless as a part of such action, the court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
12. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) Notices. Any notice, demand or request required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, and addressed to the party to be notified at such party's
address as set forth below or as subsequently modified by written notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of
-7-
<PAGE>
Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.
[Signature Page Follows]
-8-
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
REPLAYTV, INC.
By:_____________________________________
Title:__________________________________
Address: 1945 Charleston Road
Mountain View, CA 94043-1201
AGREED TO AND ACCEPTED:
____________________
_____________________________________
(Signature)
Address:_____________________________
_____________________________________
-9-
<PAGE>
EXHIBIT 10.5
REPLAYTV, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of ReplayTV, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means ReplayTV, Inc., a Delaware corporation.
-------
(e) "Compensation" means all regular straight time gross earnings and
------------
shall not include commissions or payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Company,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiaries" means the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided however that the Board shall only have the
discretion to designate Subsidiaries if
<PAGE>
the issuance of options to such Subsidiary's Employees pursuant to the Plan
would not cause the Company to incur adverse accounting charges.
(j) "Employee" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Offering Date" means the first business day of each Offering
-------------
Period of the Plan.
(m) "Offering Period" means a period of twenty-four (24) months
---------------
commencing on May 1 and November 1 of each year, except for the first Offering
Period as set forth in Section 4(a).
(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" means this Employee Stock Purchase Plan.
----
(p) "Purchase Date" means the last day of each Purchase Period of the
-------------
Plan.
(q) "Purchase Period" means a period of six (6) months within an
---------------
Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(r) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 7(b) below) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan as a result of a stockholder-
approved amendment to the Plan, and (ii) all or a portion of such additional
Shares are to be issued with respect to one or more Offering Periods that are
underway at the time of such increase ("Additional Shares"), and (iii) the Fair
-----------------
Market Value of a Share of Common Stock on the date of such increase (the
"Approval Date Fair Market Value") is higher than the Fair Market Value on the
- --------------------------------
Offering Date for any such Offering Period, then in such instance the Purchase
Price with respect to Additional Shares shall be 85% of the Approval Date Fair
Market Value or the Fair Market Value of a Share of Common Stock on the Purchase
Date, whichever is lower.
(s) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 19 of the Plan.
(t) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
-2-
<PAGE>
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided that eligible Employees may not
participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase 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 subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
-------------------------------------
(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods of approximately twenty-four (24) months' duration, with new
Offering Periods commencing on or about May 1 and November 1 of each year (or at
such other time or times as may be determined by the Board of Directors). The
first Offering Period shall commence on the beginning of the effective date of
the Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until April 30, 2002. The
--------
Plan shall continue until terminated in accordance with Section 20 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
(b) Purchase Periods. Each Offering Period shall consist of four (4)
----------------
consecutive purchase periods of approximately six (6) months' duration. The
last day of each Purchase Period shall be the "Purchase Date" for such Purchase
-------------
Period. A Purchase Period commencing on May 1 shall end on the next October 31.
A Purchase Period commencing on November 1 shall end on the next April 30. The
first Purchase Period shall commence on the IPO Date and shall end on October
31, 2000. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
----------------------------------
(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than ten percent (10%) (or such greater percentage as the Board may
establish from time to time before an Offering Date, which percentage shall not
exceed fifteen percent (15%)) of such participant's Compensation on each payday
during the Offering Period. All payroll deductions made by a participant shall
be credited to his or her account under the Plan. A participant may not make any
additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the Offering Period
may increase and on one occasion only during the Offering Period may decrease
the rate of his or her Contributions with respect to the Offering Period by
completing and filing with the Company a new subscription agreement authorizing
a change in the payroll deduction rate. The change in rate shall be effective as
of the beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b), a participant's payroll
deductions may be decreased by the Company to 0% at any time during a Purchase
Period. Payroll deductions shall re-commence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10. In addition, a
participant's payroll deductions may be decreased by the Company to 0% at any
time during a Purchase Period in order to avoid unnecessary payroll
contributions as a result of application of the maximum share limit set forth in
Section 7(a), in which case payroll deductions shall re-commence at the rate
provided in such participant's subscription agreement at the beginning of the
next Purchase Period, unless terminated by the participant as provided in
Section 10.
-4-
<PAGE>
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the applicable Purchase Price; provided that the maximum number of Shares an
Employee may purchase during each Purchase Period shall be 3,000 Shares and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
-----------------
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
-----------------------
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option. Any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full Share shall be retained in the
participant's account for the subsequent Purchase Period or Offering Period,
subject to earlier withdrawal by the participant as provided in Section 10
below. Any other amounts left over in a participant's account after a Purchase
Date shall be returned to the participant.
-5-
<PAGE>
10. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee during the Offering Period in which the employee is a participant,
he or she will be deemed to have elected to withdraw from the Plan and the
Contributions credited to his or her account will be returned to him or her and
his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the Fair Market Value of the Shares on any
--------------------
Purchase Date of an Offering Period is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. Participants shall automatically be
withdrawn as of April 20, 2000 from the Offering Period beginning on the IPO
Date and re-enrolled in the Offering Period beginning on May 1, 2000 if the Fair
Market Value of the Shares on the IPO Date is greater than the Fair Market Value
of the Shares on April 30, 2000, unless a participant notifies the Administrator
prior to April 30, 2000 that he or she does not wish to be withdrawn and re-
enrolled.
12. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
1,000,000 Shares plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2001 through 2009 equal to the lesser of (i)
500,000 Shares, (ii) two percent (2%) of the Shares outstanding on the last day
of the immediately preceding fiscal year, or (iii) such lesser number of Shares
as is
-6-
<PAGE>
determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
(b) If the Board determines that, on a given Purchase Date, the number
of Shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Offering Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Purchase Date, the Board may in
its sole discretion provide (x) that the Company shall make a pro rata
allocation of the Shares of Common Stock available for purchase on such Offering
Date or Purchase Date, as applicable, in as uniform a manner as shall be
practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Purchase Date, and continue all Offering Periods then in effect, or (y) that the
Company shall make a pro rata allocation of the shares available for purchase on
such Offering Date or Purchase Date, as applicable, in as uniform a manner as
shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on
such Purchase Date, and terminate any or all Offering Periods then in effect
pursuant to Section 20 below. The Company may make pro rata allocation of the
Shares available on the Offering Date of any applicable Offering Period pursuant
to the preceding sentence, notwithstanding any authorization of additional
Shares for issuance under the Plan by the Company's stockholders subsequent to
such Offering Date.
(c) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(d) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period. If
a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant
-7-
<PAGE>
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall deliver such
Shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
Shares and/or cash to the spouse or to any one or more dependents or relatives
of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
16. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
--------
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 13(a)(i) above, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
-8-
<PAGE>
(b) Corporate Transactions. In the event of a dissolution or
----------------------
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which date any Purchase Period and
-----------------
Offering Period then in progress will terminate. The New Purchase Date shall be
on or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that the Purchase Date for his or her option has been changed to
the New Purchase Date and that his or her option will be exercised automatically
on the New Purchase Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in Section 10. For purposes of this Section 19,
an option granted under the Plan shall be deemed to be assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon
a Corporate Transaction, each holder of an option under the Plan would be
entitled to receive upon exercise of the option the same number and kind of
shares of stock or the same amount of property, cash or securities as such
holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to the transaction, the
holder of the number of Shares of Common Stock covered by the option at such
time (after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 19); provided however that if the
consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the
transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
20. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 19, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the stockholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse
-9-
<PAGE>
accounting charges as a result of a change after the effective date of the Plan
in the generally accepted accounting rules applicable to the Plan. Except as
provided in Section 19 and in this Section 20, no amendment to the Plan shall
make any change in any option previously granted which adversely affects the
rights of any participant. In addition, to the extent necessary to comply with
Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any
successor rule or provision or any applicable law or regulation), the Company
shall obtain stockholder approval in such a manner and to such a degree as so
required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
-10-
<PAGE>
REPLAYTV, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
ReplayTV, Inc. 2000 Employee Stock Purchase Plan (the "Plan") for the Offering
----
Period ______________, ____ to _______________, ____, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Offering Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "ReplayTV, Inc. 2000 Employee Stock Purchase
Plan." I understand that my participation in the Plan is in all respects
subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
________________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within 1 year after the Purchase
Date, I will be treated for federal income tax purposes as having received
ordinary compensation income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares on the Purchase Date over
the price which I paid for the shares, regardless of whether I disposed of the
shares at a price less than their fair market value at the Purchase Date. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any such disposition, and I will make adequate provision for federal,
- -----------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
- ------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. In connection with the initial public offering of the Company's
securities and upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, I agree not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any securities of the Company, however or whenever I acquired them, without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the public offering.
11. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE: __________________________
SOCIAL SECURITY #: __________________
DATE:________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
_____________________________________
(Signature)
_____________________________________
(Print name)
-3-
<PAGE>
REPLAYTV, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the ReplayTV, Inc. 2000 Employee Stock Purchase Plan (the "Plan") for the
----
Offering Period that began on _________ ___, _____. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ _______________________________________
Signature of Employee
_______________________________________
Social Security Number
<PAGE>
Exhibit 10.6
REPLAYTV, INC.
2000 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means ReplayTV, Inc., a Delaware corporation.
-------
(f) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "Corporate Transaction" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "Director" means a member of the Board.
--------
(i) "Employee" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
<PAGE>
(k) "Option" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means an Outside Director who receives an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 2000 Directors' Stock Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the number of Shares that are available to be sold under the Plan is
300,000 Shares of Common Stock. As of January 1 of each year beginning in 2001
and ending in 2009, the aggregate number of Shares available to be sold under
the Plan shall automatically be increased by the number of Shares necessary to
cause the number of Shares then available for sale to be restored to 300,000
Shares. Notwithstanding the above, the maximum aggregate number of Shares that
may be sold over the term of the Plan shall be 3,000,000. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
-2-
<PAGE>
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who becomes an Outside Director after
the effective date of this Plan shall be automatically granted an Option to
purchase 50,000 Shares (the "First Option") on the date on which such person
------------
first becomes an Outside Director, whether through election by the stockholders
of the Company or appointment by the Board to fill a vacancy.
(iii) Each Outside Director shall thereafter be automatically
granted an Option to purchase 15,000 Shares (a "Annual Option") on the date of
-------------
each Annual Meeting of the Company's stockholders immediately following which
such Outside Director is serving on the Board, provided that, on such date, he
or she shall have served on the Board for at least six (6) months prior to the
date of such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
the automatic grant date. Any further grants shall then be deferred until such
time, if any, as additional Shares become available for grant under the Plan
through action of the stockholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained stockholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of each First Option granted hereunder shall be as
follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
-3-
<PAGE>
(3) the First Option shall become vested and exercisable in
installments as to one-third of the Shares subject to the First Option on each
of the first, second and third anniversaries of the date of grant of the Option.
(vii) The terms of each Annual Option granted hereunder shall be
as follows:
(1) the Annual Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Annual Option, determined in
accordance with Section 8 hereof; and
(3) the Annual Option shall become vested and exercisable as
to 100% of the Shares subject to the Annual Option on the first anniversary of
the date of grant of the Option.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such
-4-
<PAGE>
misconduct) shall act fairly and shall give the Optionee an opportunity to
appear and present evidence on Optionee's behalf at a hearing before the Board
or a committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value as of any date shall be
-----------------
determined by the Board; provided however that in the event the Common Stock is
traded on the Nasdaq National Market or listed on a stock exchange, the fair
market value per Share shall be the closing sales price on such system or
exchange on the date of grant of the Option (or, in the event that the Common
Stock is not traded on such date, on the immediately preceding trading date), as
reported in The Wall Street Journal, or if there is a public market for the
-----------------------
Common Stock but the Common Stock is not traded on the Nasdaq National Market or
listed on a stock exchange, the fair market value per Share shall be the mean of
the bid and asked prices of the Common Stock in the over-the-counter market on
the date of grant, as reported in The Wall Street Journal (or, if not so
------------------------
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("Nasdaq") System).
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held more than six months), delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect exercise of the Option and prompt delivery
to the Company of the sale or loan proceeds
-5-
<PAGE>
required to pay the exercise price, or any combination of such methods of
payment and/or any other consideration or method of payment as shall be
permitted under applicable corporate law.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the
-6-
<PAGE>
date of termination, or if he or she does not exercise such Option (to the
extent he or she was entitled to exercise) within the time specified above, the
Option shall terminate and the Shares underlying the unexercised portion of the
Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee (i)
-----------------
during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (ii) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the
Plan.
10. Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than (a)
by will or by the laws of descent or distribution; (b) pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder); (c)
by gift to the Optionee's Family; or (d) by gift or in exchange for an interest
in such entity to (i) a trust in which Optionee and/or Optionee's Family have
more than fifty percent of the beneficial interest, (ii) a foundation in which
Optionee and/or Optionee's Family control the management of assets, or (iii) any
other entity in which Optionee and/or Optionee's Family own more than fifty
percent of the voting interests. For purposes of this Section 10, Optionee's
"Family" shall include any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, and any person sharing the employee's
household (other than a tenant or employee). The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised
during the lifetime of an Optionee only by the Optionee or a transferee
permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock (including any such change
-7-
<PAGE>
in the number of Shares of Common Stock effected in connection with a change in
domicile of the Company) or any other increase or decrease in the number of
issued Shares of Common Stock effected without receipt of consideration by the
Company; provided however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Corporate Transactions. In the event of a Corporate Transaction,
----------------------
each outstanding Option shall be assumed or an equivalent option shall be
substituted by the successor corporation or a Parent or Subsidiary of such
successor corporation, unless the successor corporation does not agree to assume
the outstanding Options or to substitute equivalent options, in which case the
Options shall terminate upon the consummation of the transaction; provided
however that in the event of any transaction that qualifies as a Change of
Control and notwithstanding whether or not outstanding Options are assumed,
substituted for or terminated in connection with the transaction, the vesting of
each outstanding Option shall accelerate in full such that each Optionee shall
have the right to exercise his or her Option as to all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable,
immediately prior to consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction, each Optionee would be entitled
to receive upon exercise of an Option the same number and kind of shares of
stock or the same amount of property, cash or securities as the Optionee would
have been entitled to receive upon the occurrence of such transaction if the
Optionee had been, immediately prior to such transaction, the holder of the
number of Shares of Common Stock covered by the Option at such time (after
giving effect to any adjustments in the number of Shares covered by the Option
as provided for in this Section 11); provided however that if such consideration
received in the transaction was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the
-8-
<PAGE>
determination shall be given to each Outside Director to whom an Option is so
granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the
---------------
Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company.
Such stockholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
-9-
<PAGE>
REPLAYTV, INC.
2000 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
((Optionee))
You have been granted an option to purchase Common Stock of ReplayTV, Inc.
(the "Company") as follows:
-------
Date of Grant ((GrantDate))
Vesting Commencement Date ((VestingStartDate))
Exercise Price per Share ((ExercisePrice))
Total Number of Shares Granted ((SharesGranted))
Total Exercise Price ((TotalExercisePrice))
Expiration Date ((ExpirDate))
Vesting Schedule This Option shall vest and become
exercisable according to the following
schedule: [for First Options: one-third of
the Shares subject to the Option shall vest
and become exercisable on each of the first,
second and third anniversaries of the date
of grant of the Option]; [for Annual
Options: 100% of the Shares subject to the
Option shall vest and become exercisable on
the first anniversary of the date of grant
of the Option.]
Termination Period This Option may be exercised for 90 days
after termination of Optionee's Continuous
Status as a Director, or such longer period
as may be applicable upon death or
Disability of Optionee as provided in the
Plan, but in no event later than the
Expiration Date as provided above.
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 2000 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
In addition, you agree and acknowledge that your rights to any Shares
underlying the Option will be earned only as you provide services to the Company
over time and that the grant of the Option is not as consideration for services
you rendered to the Company prior to your Vesting Commencement Date.
OPTIONEE: REPLAYTV, INC.
____________________________ By:_______________________
((Optionee))
Title:____________________
-2-
<PAGE>
REPLAYTV, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
1. Grant of Option. The Board of Directors of the Company hereby grants
---------------
to the Optionee named in the Notice of Stock Option Grant (the "Optionee")
--------
attached to this Agreement an option (the "Option") to purchase a number of
------
Shares, as set forth in the Notice of Stock Option Grant, at the exercise price
per share set forth in the Notice of Stock Option Grant (the "Exercise Price"'),
--------------
subject to the terms and conditions of the 2000 Directors' Stock Option Plan
(the "Plan"), which is incorporated herein by reference. Capitalized terms not
----
defined herein shall have the meanings ascribed to such terms in the Plan. In
the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Nonstatutory Stock Option Agreement, the terms and
conditions of the Plan shall prevail.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement. In the event of Optionee's death, disability or other termination of
Optionee's service as a Director, the exercisability of the Option is governed
by the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
--------- ---------------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
----------------
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
<PAGE>
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred or disposed of in any manner other than (a)
by will or by the laws of descent or distribution; (b) pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder); (c)
by gift to the Optionee's Family (as defined in Section 10 of the Plan); or (d)
by gift or in exchange for an interest in such entity to (i) a trust in which
Optionee and/or Optionee's Family have more than fifty percent of the beneficial
interest, (ii) a foundation in which Optionee and/or Optionee's Family control
the management of assets, or (iii) any other entity in which Optionee and/or
Optionee's Family own more than fifty percent of the voting interests. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section. The terms of the Plan and this
Nonstatutory Stock Option Agreement shall be binding upon the executors,
administrators, heirs, successors, assigns and transferees of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Nonstatutory Stock Option
Agreement.
6. Tax Consequences. Set forth below is a brief summary of certain
----------------
federal and California tax consequences relating to this Option under the law in
effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR
HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option. Since this Option does not qualify as an
---------------------
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) Disposition of Shares. If the Optionee holds the Option Shares
---------------------
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. Long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes at a maximum rate of 20% if the Shares are held
more than one year after exercise.
-2-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
REPLAYTV, INC.
_____________________________ By:_______________________________
((Optionee))
Title:____________________________
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
__________________________________
Spouse of Optionee
-3-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: ReplayTV, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of ReplayTV, Inc.
Common Stock, under and pursuant to the Company's 2000 Directors' Stock Option
Plan and the Nonstatutory Stock Option Agreement dated _______________, as
follows:
Grant Number: _________________________________
Date of Purchase: _________________________________
Number of Shares: _________________________________
Purchase Price: _________________________________
Method of Payment of
Purchase Price: _________________________________
Social Security No.: _________________________________
The shares should be issued as follows:
Name: _________________________________
Address: _________________________________
_________________________________
_________________________________
Signed: _________________________________
Date: _________________________________
<PAGE>
EXHIBIT 10.7
August 20, 1999
Mr. Kim LeMasters
3455 Wonder View Place
Los Angeles, CA 90068
Dear Kim,
I speak for the entire Board in saying how much we have valued the meetings and
conversation we've had with you over the last few weeks. It is clear that your
experience, judgement, and leadership would be of enormous benefit to Replay
Networks. Recognizing that you have other opportunities available to you, we
wish to act decisively to attract your talents to our Company.
On behalf of the Board of Directors, I am pleased to offer you the position of
Chairman of the Board and Chief Executive Officer of Replay Networks.
Accordingly, the terms of our offer are specified as follows:
TITLE & RESPONSIBILITIES
Your title will be Chairman of the Board and Chief Executive Officer. You will
have responsibility for the direction and organization of the Company, all
budget matters, and the supervision of, the assignment of work to, and the
hiring and firing of all employees, contractors and consultants of the Company.
This offer is for a full time position located at offices of the Company, except
as travel to other locations may be necessary to fulfill your responsibilities.
Assuming your acceptance, the Board members, at their next meeting, will vote in
their capacity as directors, in such a manner so as to elect you as Chairman of
the Board. Upon your election, the Board will task you with forming a
Nominating Committee whose function shall be to identify individuals of proven
business experience who might be willing to join the Board. The Company will
continue to nominate you for election as a Board member at each Annual Meeting
of Shareholders so long as you serve as Chief Executive Officer.
In your capacity as CEO, you will report to the Board of Directors of the
Company.
<PAGE>
Mr. Kim LeMasters
August 20, 1999
Page 2
COMPENSATION
Your initial base salary will be $30,000 per month, subject to increase in good
faith by the Board of Directors, payable in accordance with the Company's
customary payroll practice. The Company will reimburse you for all reasonable
expenses incurred by you and related to the performance of your corporate
duties, including all reasonable travel and related expenses, up to $50,000 per
year.
You will also be eligible to participate in the Company's incentive bonus
program. Within 60 days after you commence employment, the Board of Directors
acting through its Compensation Committee will develop jointly with you the
goals and objectives connected with the incentive bonus award. Based on the
approval of the Board and the achievement of both the Company and individual
performance goals, you will be eligible to receive an annual bonus of up to 50%
($180,000 currently) of your base salary.
Upon acceptance of this offer and after satisfaction of the terms herein
incumbent upon you, the Board of Directors will vote to grant you an option to
purchase 2,500,000 shares of the Company's Common Stock representing 6% of the
fully diluted capital stock of the company, including presently reserved shares
under all option plans. The vesting of this stock award will begin with the
date of your commencement of full time employment pursuant to this letter
agreement.
Options become exercisable according to a 48 month exercise schedule which calls
for the initial vesting of 12-1/2% (312,500 shares) of the total after the first
6 months of continuous service, and thereafter an additional 52,083 shares per
month will become exercisable, at the close of each month of employment, over
the remainder of the exercise term. The strike price for these options will be
$4.00 per share, which is the current fair market price of the Company Common
Stock, provided that you commence your employment with the Company on or before
September 13, 1999.
The option will be an incentive stock option to the maximum allowed by the tax
code and will be subject to the terms of the Company's Stock Option Plan and the
Stock Option Agreement between you and the Company. Accordingly, the Board will
allow you to elect which portion of the shares you obtain in the form of: 1)
immediate purchase under Section 83(b) of the Internal Revenue Code, subject to
re-purchase; 2) Incentive Stock Option; 3) Non-Qualified Options. Corporate
counsel at Venture Law Group will be available to assist you in evaluating the
tax benefits of these different stock and option programs. The grant of the
option will be subject to your execution of a mutually acceptable option
agreement.
In connection with the exercise of your option, the Company will provide a loan
of up to $1,000,000. This loan will be evidenced by a full recourse promissory
note, which will be secured by the shares purchased and will provide for
interest at the minimum
<PAGE>
Mr. Kim LeMasters
August 20, 1999
Page 3
Applicable Federal Rate, compounded annually. The term of this Note shall be
five years, and any interest accrued will be due at such time as the principal
is due.
Further, and predicated upon your acceptance, the Board members, at their next
meeting, will vote in their capacity as directors, and also with respect to the
shares of stock for which they exercise voting control, in such a manner so as
to permit you to purchase up to 100,000 shares of Series E Preferred at the same
price ($7.50 per share), and on the same terms, as any other investor in the
Series E Preferred securities.
For the purpose of this agreement a "Change of Control Transaction" is defined
as either: 1) the Company's merger or consolidation with another entity, or a
series of related transactions, as a result of which the shareholders of the
Company immediately prior to the transaction own less than 50% of the voting
power of the entity surviving such transaction; or 2) the sale of all or
substantially all of the Company's assets, business or capital stock, with the
exception that an Initial Public Offering (IPO) shall not be deemed a Change of
Control Transaction. Upon the closing of such a Change of Control Transaction,
any time after 18 months from your commencement of full time employment, 75% of
any unvested options which you then hold will become immediately vested. Should
such a transaction occur within the first 18 months of your tenure, then your
unvested options will be accelerated in their vesting schedule by one year; that
is, the monthly vesting rate shall continue at 52,083 shares per month and the
most distant options shall be accelerated. Further, if, following a Change of
Control Transaction, the Company terminates your employment without cause (as
defined below) or you terminate your employment for "just cause" (as defined
below), the Company will continue to pay your salary and continue your benefits
for 12 months and accelerate the vesting of your options by an additional 12
months, as described below. If, due to the benefits provided under this letter
agreement, you are subject to any excise tax due to characterization of any
amount payable hereunder as excess parachute payments pursuant to Sections 280G
and 4999 of the Internal Revenue Code, Replay will pay the excise taxes
otherwise payable by you under Section 4999 (but not any income or excise taxes
on such payment of taxes by Replay on your behalf) with respect to any amounts
payable to you under this Agreement, up to a maximum of $1,500,000.
OTHER TERMS
Subject to fulfillment of any conditions imposed by this letter agreement, you
will commence the executive position with Replay Networks not later than Monday,
September 13, 1999. It is our understanding that you will be available to
participate in meetings of the Company's Board of Directors immediately.
You will not render commercial or professional services of any nature to any
person or organization, whether or not for compensation, without the prior
written consent of the Company's Board of Directors. And you will not directly
or indirectly engage or
<PAGE>
Mr. Kim LeMasters
August 20, 1999
Page 4
participate in any business that is competitive in any manner with the business
of the Company. However, the Company acknowledges that you already serve on the
board of both public and private companies and those existing commitments do not
represent a conflict of interest with Replay Networks.
Because of Federal regulations adopted in the Immigration Reform and Control Act
of 1986, you will need to present documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to the Company within 3 business days of your date of hire.
As an employee of Replay Networks, you will have access to certain Company
confidential information and you may, during the course of your employment,
develop certain information or inventions which will be the property of the
Company. To protect the interest of the Company, you will need to sign the
Company's standard "Employee Inventions and Confidentiality Agreement" as a
condition of your employment.
The Company will provide you with their standard benefits package, which
includes medical, dental, vision, life and long term disability. You will be
entitled to three (3) weeks paid vacation in any one (1) calendar year with the
understanding that such vacation benefits, if unused, shall not accumulate.
While we look forward to a long and profitable relationship, should you decide
to accept our offer, the employment relationship is for no specified period and
can be terminated by either of us for any reason, with or without cause, at any
time, and without further obligation or liability. Further, your participation
in any stock option or benefit program is not to be regarded as assuring you of
continuing employment for any particular period of time.
Should the Board terminate you, other than for Cause, the Company will continue
to pay your salary and continue your benefits for 12 months from the date of
such an event; and accelerate the vesting of your options by an additional 12
months (625,000 shares), over and above any options which would have vested by
that time. For purposes of this letter agreement, the term "cause" shall mean:
1) willful and repeated failure to comply with the lawful written directions of
the Board of Directors, which failure, if capable of cure, has not been cured
within 30 days of written notice from the Board of Directors; 2) gross
negligence or willful misconduct in the performance of duties to the Company,
which, if capable of cure, has not been cured within 30 days of written notice
from the Board of Directors; 3) commission of any act of fraud with respect to
the Company; or 4) conviction of a felony or a crime causing material harm to
the standing and reputation of the Company, in each case as determined in good
faith by the Board of Directors
<PAGE>
Mr. Kim LeMasters
August 20, 1999
Page 5
You shall have the right, on written notice to the Company, to terminate your
employment if you resign for "just cause," which shall mean a resignation as a
direct result of: (a) a material breach of the Company of its obligations under
this Agreement, provided that if such breach is capable of remedy, a written
notice of such breach shall be provided to the Company within 30 days of such
breach, an opportunity to cure such breach shall be afforded the Company and, in
such event, just cause shall exist if the Company shall fail to cure such breach
with a reasonable period of time after notice but not to exceed 30 days; (b) any
material decrease of your duties or authority or any change in your reporting
relationship, provided, however, that your continuing as Chief Executive Officer
of a business unit, division or subsidiary or Chief Executive Officer of the
Company or a company into which the Company is merged in a Change of Control
Transaction or otherwise acquiring assets or stock of the Company in connection
with a Change of Control Transaction, or a parent of such a company, shall not
in and of itself constitute a material decrease of your duties or authority or a
change in your reporting relationship, absent some other material decrease of
your duties or authority; (c) a material decrease in the benefits provided
pursuant to this Agreement; (d) the relocation of the place of your employment
to a location outside California; or (e) failure of any successor to assume this
Agreement. In the event of your termination of your employment pursuant to just
cause, the Company shall pay your salary and continue your benefits for 12
months from the date of such an event, and accelerate vesting of your options by
an additional 12 months (625,000 shares) over any options that would have vested
by that time.
This offer will expire at 12:00 p.m. on Wednesday, August 25, 1999. However, in
the interim, should you desire access to Company information or documents, or
require more time to make your decision, please let me know.
To indicate your acceptance of the Company's offer, please sign and date this
letter in the space provided below and return it to me. A duplicate original is
enclosed for your records. This letter agreement sets forth the terms of your
employment with Replay Networks, and supersedes any prior representations or
agreements, whether written or oral. This letter agreement may not be modified
or amended except by a written agreement, signed by an officer of the Company
and by you.
<PAGE>
Mr. Kim LeMasters
August 20, 1999
Page 6
Kim, we are enormously excited about the possibility of you joining Replay
Networks. We look forward with high expectations to working with you. I am
confident you will make a great Chief Executive.
Sincerely,
ON BEHALF OF THE BOARD OF DIRECTORS OF REPLAY NETWORKS, INC.
William R. Hearst III, Director
/s/ William R. Hearst III
Agreed and Accepted 8/27/1999
/s/ Kim LeMasters
-------------------------------------------
Kim LeMasters
<PAGE>
EXHIBIT 10.8
March 5, 1999
Anthony J. Wood
11 Somerset Place
Palo Alto, CA 94301
Dear Anthony:
The following sets forth the revised terms of your employment relationship
with Replay Networks, Inc. (the "Company"). This letter agreement replaces and
-------
supercedes in its entirety that certain employment offer letter agreement dated
November 10, 1997 between you and Pacific Digital Media, Inc. (the "Prior Offer
-----------
Letter").
- ------
1. Position.
--------
a. You will continue to serve as the Chairman, President, Chief
Executive Officer and Acting Chief Financial Officer of the Company. You will
report to the Company's Board of Directors.
b. You agree to the best of your ability and experience that you will
at all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and implicit terms
hereof, and to the reasonable satisfaction of the Company. During the term of
your employment, you further agree that you will devote all of your business
time and attention to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work
services and advice, you will not render commercial or professional services of
any nature to any person or organization, whether or not for compensation,
without the prior written consent of the Company's Board of Directors, and you
will not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
letter agreement will prevent you from accepting speaking or presentation
engagements in exchange for honoraria or from serving on boards of charitable
organizations, or from owning no more than one percent (1%) of the outstanding
equity securities of a corporation whose stock is listed on a national stock
exchange.
2. Compensation.
------------
a. Base Salary. You will be paid a monthly salary of $12,500, which
-----------
is equivalent to $150,000 on an annualized basis. Your salary will be payable
in two equal payments per month pursuant to the Company's regular payroll policy
(or in the same manner as other
<PAGE>
March 5, 1999
Page 2
officers of the Company). Pursuant to the Prior Offer Letter, as of January 26,
1998, your annual base salary should have been increased to $100,000 from
$12,000. To the extent such increase was not implemented, you will be entitled
to deferred compensation from January 26, 1998 until such date as the Company
first begins to pay you at the rate of $100,000 or greater per year, equal to
the difference between the base salary actually paid during such period and
$100,000, both on an annualized basis.
b. Annual Review. Your base salary will be reviewed at the end of
-------------
each calendar year as part of the Company's normal salary review process.
3. Stock.
-----
a. Current Position. Pursuant to a Common Stock Purchase Agreement
----------------
dated as of September 15, 1997, you purchased 3,000,000 shares of Common Stock
of the Company (the "Shares"). The Shares are subject to a repurchase option in
------
favor of the Company should your employment with the Company terminate. Such
repurchase option currently lapses at the rate of 1/36th of the total number of
Shares each month from the vesting commencement date of August 1, 1997, and will
be fully released from the Company's repurchase option as of August 1, 2000 (the
"Vesting Schedule").
----------------
b. Acceleration of Vesting. In the event that the Company hires a
-----------------------
new Chief Executive Officer, all of the Shares that have not yet been released
from the Company's repurchase option pursuant to the Vesting Schedule will
immediately be released from the repurchase option and will be fully vested as
of the date of hire of the new Chief Executive Officer.
c. New Option Grant. The Company will recommend that the Board of
----------------
Directors grant you an option to purchase 137,500 shares of the Company's Common
Stock ("Option Shares") with an exercise price equal to the fair market value on
-------------
the date of the grant. These option shares will vest at the rate of 1/12th of
the total number of Option Shares on each monthly anniversary of the vesting
commencement date, which shall be August 1, 2000. Vesting will, of course,
depend on your continued employment with the Company. The option will be an
incentive stock option to the maximum extent allowed by the tax code and will be
subject to the terms of the Company's 1997 Stock Option Plan and the Stock
Option Agreement between you and the Company.
d. Subsequent Option Grants. Subject to the discretion of the
------------------------
Company's Board of Directors, you may be eligible to receive additional grants
of stock options or purchase rights from time to time in the future, on such
terms and subject to such conditions as the Board of Directors shall determine
as of the date of any such grant.
4. Benefits.
--------
a. Insurance Benefits. The Company will provide you with standard
------------------
medical and dental insurance benefits. In addition, the Company currently
indemnifies all officers and
-2-
<PAGE>
March 5, 1999
Page 3
directors to the maximum extent permitted by law, and you have entered into the
Company's standard form of Indemnification Agreement giving you such protection.
Pursuant to the Indemnification Agreement, the Company has agreed to advance any
expenses for which indemnification is available to the extent allowed by
applicable law.
b. Vacation, Sick Leave and Holidays. You will be entitled to three
---------------------------------
weeks paid vacation/sick leave per year, plus seven paid holidays.
5. Severance Agreement.
-------------------
a. If your employment is terminated by the Company or its successor
for any reason other than Cause (as defined below) or you become subject to an
Involuntary Termination (as defined below), you will be entitled to receive
continuation of your base salary and insurance benefits and continued vesting
under all stock options or restricted stock purchases for a period of 12 months
following the date of termination of your employment.
b. "Cause" shall mean (i) gross negligence or willful misconduct in
-----
the performance of your duties to the Company where such gross negligence or
willful misconduct has resulted or is likely to result in substantial and
material damage to the Company or its subsidiaries, (ii) repeated unexplained or
unjustified absence from the Company, (iii) a material and willful violation of
any federal or state law; (iv) commission of any act of fraud with respect to
the Company; or (v) conviction of a felony or a crime involving moral turpitude
causing material harm to the standing and reputation of the Company, in each
case as determined in good faith by the Board of Directors of the Company.
c. "Involuntary Termination" shall include any termination by the
-----------------------
Company other than for Cause and your voluntary termination, upon 30 days prior
written notice to the Company, following (i) a material reduction or change in
job duties, responsibilities and requirements inconsistent with your position
with the Company and your prior duties, responsibilities and requirements, other
than the hiring of a new Chief Executive Officer of the Company; (ii) any
reduction of your base compensation (other than in connection with a general
decrease in base salaries for most similarly situated employees); or (iii) your
refusal to relocate to a location more than 50 miles from the Company's current
location.
6. Confidentiality of Terms. You agree to follow the Company's strict
------------------------
policy that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses or stock purchase or option allocations to any person, including other
employees of the Company; provided, however, that you may discuss such terms
with members of your immediate family and any legal, tax or accounting
specialists who provide you with individual legal, tax or accounting advice.
7. At-Will Employment. Notwithstanding the Company's obligation
------------------
described in Section 5 above, your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason, without further obligation
or liability.
-3-
<PAGE>
March 5, 1999
Page 4
To indicate your acceptance of this offer, please sign and date this letter
in the space provided below and return it to me. This letter, together with the
Confidential Information and Invention Assignment Agreement previously executed
by you, set forth the terms of your employment with the Company and supersede
any prior representations or agreements, whether written or oral. This letter
may not be modified or amended except by a written agreement, signed by the
Company and by you.
Very truly yours,
REPLAY NETWORKS, INC.
By: /s/ Anthony Wood
------------------------------
Title: President
--------------------------
ACCEPTED AND AGREED:
ANTHONY J. WOOD
/s/ Anthony Wood
- ------------------------------
Signature
3/5/99
- ------------------------------
Date
-4-
<PAGE>
EXHIBIT 10.9
October 13, 1999
Mr. Craig W. Dougherty
1885 Sunset Plaza Drive
Los Angeles, CA 90069
Dear Craig,
On behalf of the Board of Directors, I am pleased to offer you the position of
Executive Vice President of Finance and Chief Financial Officer for Replay
Networks, Inc. I have attached the details of your offer in an Appendix to this
letter. This offer expires on October 21, 1999.
Craig, there are many exciting challenges directly ahead and we have high
expectations for the Company. I am confident that with your skills and
experience, you will make a great contribution and will develop your skills at
the same time. We think you'll find this new venture to be a fun and exciting
place to work. You'll be working with a small group of excellent, dedicated
professionals producing an innovative new consumer electronics product and
service. We're looking forward to working with you!
Best regards,
/s/ Kim LeMasters
Kim LeMasters
CEO
<PAGE>
October 13, 1999
Page 2
Appendix
The following sets forth the terms of your employment relationship with Replay
Networks, Inc. (the "Company").
-------
1) Position.
--------
a) You will serve as the Executive Vice President of Finance and Chief
Financial Officer. You will report to the Company's CEO.
b) You agree to the best of your ability and experience that you will at
all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and
implicit terms hereof, and to the reasonable satisfaction of the
Company. During the term of your employment, you further agree that
you will devote all of your business time and attention to the
business of the Company, the Company will be entitled to all of the
benefits and profits arising from or incident to all such work
services and advice, you will not render commercial or professional
services of any nature to any person or organization, whether or not
for compensation, without the prior written consent of the Company's
CEO, and you will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of
the Company.
c) Your start date will be November 1, 1999. ("Start Date").
2) Compensation.
------------
a) Base Salary. You will be paid a monthly salary of $20,833.33, which
-----------
is equivalent to $250,000 on an annualized basis. Your salary will be
payable in two equal payments per month pursuant to the Company's
regular payroll policy (or in the same manner as other officers of the
Company).
You will also be eligible to participate in the Company's incentive
bonus program. The CEO will develop jointly with you the goals and
objectives connected with the incentive bonus award. Based on the
achievement of both the Company and individual performance goals, you
will be eligible to receive an annual bonus of up to 40% of your base
salary.
b) Sign-on/Relocation Bonus. You will be eligible to receive a sign-on
bonus calculated as the lesser of i) $100,000 or ii) the difference
between $200,000 and the amount of the fiscal 1999 bonus you receive
from Union Bank of California, subject to a minimum sign-on bonus of
$50,000. In the event that you voluntarily resign or are terminated
with Cause from your position with the Company prior to the date that
is twelve months from the date your employment commences, you will
repay the Company the full sum of your sign-on bonus. Further, in the
event that you voluntarily resign or are terminated with Cause from
your position with the Company after the date that is twelve months
from the date your employment commences but prior to the date that is
twenty-four months from the date your employment commences, you will
repay the Company 50% of the sign-on bonus. Such payment shall be in
the form of personal check or other negotiable instrument acceptable
by the Company.
You will also receive a $25,000 relocation allowance, payable with
your first paycheck after commencing employment (reduced by applicable
tax withholdings).
c) Annual Review. Your base salary will be reviewed each calendar year
-------------
as part of the Company's normal salary review process.
<PAGE>
October 13, 1999
Page 3
3) Stock.
-----
a) On your Start Date the Board of Directors will grant you an option to
purchase 600,000 shares of the Company Common Stock. The exercise
price for these options will be the fair market value of the Company
Common Stock at the date of grant.
The options will vest according to a 4 year exercise schedule which
calls for the initial vesting of 12.5% of the total number of shares
after the first 6 months of continuous service, and provides for
monthly vesting at the rate of an additional 1/48/th/ of the total
number of shares at the close of each month of employment, over the
remainder of the vesting schedule.
The option will be an incentive stock option to the maximum allowed by
the tax code and will be subject to the terms of the Company's Stock
Option Plan and the Stock Option Agreement between you and the
Company. Accordingly, the Board will allow you to elect which portion
of the shares you obtain in the form of: 1) immediate purchase under
Section 83(b) of the Internal Revenue Code, subject to re-purchase; 2)
Incentive Stock Option; 3) Non-Qualified Options. Corporate counsel at
Venture Law Group will be available to assist you in evaluating the
tax benefits of these different stock and option programs. The grant
of the option will be subject to your execution of a mutually
acceptable option agreement.
In connection with the exercise of your option, the Company will
provide a loan of up to $1,000,000. This loan will be evidenced by a
full recourse promissory note, which will be secured by the shares
purchased and will provide for interest at the minimum Applicable
Federal Rate, compounded annually. The term of this Note shall be five
years, and any interest accrued will be due at such time as the
principal is due.
4) Benefits.
--------
a) Insurance Benefits. The Company will provide you with standard
------------------
medical and dental insurance benefits. In addition, the Company
currently indemnifies all Officers to the maximum extent permitted by
law. Upon entering into the Company's standard form of Indemnification
Agreement, the Company will advance any expenses for which
indemnification is available to the extent allowed by applicable law.
b) Vacation, Sick Leave and Holidays. You will be entitled to three
---------------------------------
weeks paid vacation/sick leave per year, plus eight paid holidays.
c) 401(K). You will be eligible to participate in the Company's standard
------
401(K) plan.
5) Severance Agreement.
-------------------
a) If your employment is terminated by the Company or its successor for
any reason other than Cause (as defined below) or you become subject
to an Involuntary Termination (as defined below), within 12 months of
a Change in Control (as defined below), you will be entitled to
receive continuation of your base salary and insurance benefits for a
period of 6 months and continued vesting under all stock options or
restricted stock purchases for the greater of twelve (12) months or
vesting of fifty (50%) percent of the shares that remain unvested at
the time of such termination.
b) In the event 5a does not apply, and your employment is terminated by
the Company or its successor for any reason other than Cause (as
defined below) or you become subject to an Involuntary Termination (as
defined below), you will be entitled to receive continuation of your
base salary and insurance benefits and continued vesting under all
stock options or restricted stock purchases for a period of 6 months
following the date of termination of your employment.
<PAGE>
October 13, 1999
Page 4
c) "Change in Control" shall mean i) the Company's merger or
-----------------
consolidation with another entity, or a series of related
transactions, as a result of which the shareholders of the Company
immediately prior to the transaction own less than 50% of the voting
power of the entity surviving or ii) the sale of substantially all of
the assets of Replay. Cause" shall mean (I) gross negligence or
-----
willful misconduct in the performance of your duties to the Company
where such gross negligence or willful misconduct has resulted or is
likely to result in substantial and material damage to the Company or
its subsidiaries, (ii) repeated unexplained or unjustified absence
from the Company, (iii) a material and willful violation of any
federal or state law causing material harm to the standing and
reputation of the Company; (iv) commission of any act of fraud with
respect to the Company; (v) your material breach of this agreement if
not cured within 10 days of notification by the Company or a material
breach of your Employee Inventions and Confidentiality Agreement; (vi)
conviction of a felony or a crime involving moral turpitude causing
material harm to the standing and reputation of the Company, in each
case as determined in good faith by the Board of Directors of the
Company.
d) "Involuntary Termination" shall include any termination by the Company
-----------------------
other than for Cause and your voluntary termination, upon 30 days
prior written notice to the Company, following (I) a material
reduction or change in job duties, responsibilities and requirements
inconsistent with your position with the Company and your prior
duties, responsibilities and requirements (taking into account the
difference in job title and duties that may occur following an
acquisition but that do not actually result in a material change in
your job duties, responsibilities, and requirements); (ii) any
reduction of your base compensation (other than in connection with a
general decrease in base salaries for most similarly situated
employees); or (iii) your refusal to relocate to a location more than
50 miles from the Company's current location.
e) If due to the benefits provided under this letter agreement, you are
subject to any excise tax due to characterization of any amount
payable hereunder as excess parachute payments pursuant to Sections
280G and 4999 of the Internal Revenue Code, Replay will pay the excise
taxes otherwise payable by you under Section 4999 (but not any income
or excise taxes on such payment of taxes by Replay on your behalf)
with respect to any amounts payable to you under this agreement, up to
a maximum of $1,000,000.
6) Confidentiality of Terms. You agree to follow the Company's strict policy
------------------------
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding
salary, bonuses or stock purchase or option allocations to any person,
including other employees of the Company; provided, however, that you may
discuss such terms with members of your immediate family and any legal, tax
or accounting specialists who provide you with individual legal, tax or
accounting advice.
7) Employee Inventions and Confidentiality Agreement. As an employee of
-------------------------------------------------
Replay Networks, you will have access to certain Company confidential
information and you may, during the course of your employment, develop
certain information or inventions which will be the property of the
Company. To protect the interest of the Company, you will be required to
sign the Company's standard "Employee Inventions and Confidentiality
Agreement" as a condition of your employment.
8) At-Will Employment. Notwithstanding the Company's obligation described in
------------------
Section 5 above, your employment with the Company will be on an "at will"
basis, meaning that either you or the Company may terminate your employment
at any time for any reason or no reason, without further obligation or
liability.
<PAGE>
October 13, 1999
Page 5
To indicate your acceptance of this offer, please sign and date this letter in
the space provided below and return it to Human Resources, attention: Chris
Copeland. This letter sets forth the terms of your employment with the Company
and supersedes any prior representations or agreements, whether written or oral.
This letter may not be modified or amended except by written agreement, signed
by the Company and by you.
Very truly yours,
REPLAY NETWORKS, INC.
By: /s/ Kim LeMasters
--------------------------------
Name/Title: Kim LeMasters, CEO
------------------------
ACCEPTED AND AGREED:
/s/ Craig W. Dougherty
- ----------------------------------
Craig W. Dougherty
10/21/99
- ----------------------------------
Date
<PAGE>
EXHIBIT 10.10
October 11, 1999
Mr. Buzz Kaplan
134 Northstar Mall
Marina Del Rey, CA 90292
Dear Buzz,
On behalf of the Board of Directors, I am pleased to offer you the position of
Senior Vice President, Sales and Marketing for Replay Networks, Inc. I have
attached the details of your offer in an Appendix to this letter. This offer
expires on October 18, 1999.
Buzz, there are many exciting challenges directly ahead and we have high
expectations for the company. I am confident that with your skills and
experience, you will make a great contribution and will develop your skills at
the same time. We think you'll find this new venture to be a fun and exciting
place to work. You'll be working with a small group of excellent, dedicated
professionals producing an innovative new consumer electronics product and
service. We're looking forward to working with you!
Best regards,
/s/ Kim LeMasters
Kim LeMasters
CEO
<PAGE>
October 11, 1999
Page 2
Appendix
The following sets forth the terms of your employment relationship with Replay
Networks, Inc. (the "Company").
-------
1) Position.
--------
a) You will serve as the Senior Vice President, Sales and Marketing. You
will report to the Company's CEO.
b) You agree to the best of your ability and experience that you will at
all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and
implicit terms hereof, and to the reasonable satisfaction of the
Company. During the term of your employment, you further agree that you
will devote all of your business time and attention to the business of
the Company, the Company will be entitled to all of the benefits and
profits arising from or incident to all such work services and advice,
you will not render commercial or professional services of any nature to
any person or organization, whether or not for compensation, without the
prior written consent of the Company's CEO, and you will not directly or
indirectly engage or participate in any business that is competitive in
any manner with the business of the Company.
c) Your start date will be November 1, 1999 ("Start Date").
2) Compensation.
------------
a) Base Salary. You will be paid a monthly salary of $20,000.00, which is
-----------
equivalent to $240,000 on an annualized basis. Your salary will be
payable in two equal payments per month pursuant to the Company's
regular payroll policy (or in the same manner as other officers of the
Company).
You will also be eligible to participate in the Company's incentive
bonus program. The CEO will develop jointly with you the goals and
objectives connected with the incentive bonus award. Based on the
achievement of both the Company and individual performance goals, you
will be eligible to receive an annual bonus of up to 30% of your base
salary.
b) Annual Review. Your base salary will be reviewed each calendar year
-------------
as part of the Company's normal salary review process.
3) Stock.
-----
a) On your Start Date the Board of Directors will grant you an option to
purchase 500,000 shares of the Company Common Stock. The exercise price
for these options will be the fair market price of the Company Common
Stock at the date of grant.
The options will vest and become exercisable according to a 4 year
exercise schedule which calls for the initial vesting of 12.5% of the
total after the first 6 months of continuous service, and provides for
monthly vesting at the rate of an additional 1/48/th/ of the shares at
the close of each month of employment, over the remainder of the vesting
schedule.
<PAGE>
October 11, 1999
Page 3
4) Benefits.
--------
a) Insurance Benefits. The Company will provide you with standard
------------------
medical and dental insurance benefits. In addition, the Company
currently indemnifies all to the maximum extent permitted by law. Upon
entering into the Company's standard form of Indemnification Agreement,
the Company will advance any expenses for which indemnification is
available to the extent allowed by applicable law.
b) Vacation, Sick Leave and Holidays. You will be entitled to three weeks
---------------------------------
paid vacation/sick leave per year, plus eight paid holidays.
c) 401(K). You will be eligible to participate in the company's standard
---
401(K)plan.
5) Severance Agreement.
-------------------
a) If your employment is terminated by the Company or its successor for
any reason other than Cause (as defined below) or you become subject to
an Involuntary Termination (as defined below), within 12 months of a
Change in Control (as defined below), you will be entitled to receive
continuation of your base salary and insurance benefits for a period of
6 months and continued vesting under all stock options or restricted
stock purchases by the greater of twelve (12) months or vesting of
fifty (50%) percent of the shares that remain unvested at the time of
such termination.
b) In the event 5a does not apply, and your employment is terminated by
the Company or its successor for any reason other than Cause (as
defined below) or you become subject to an Involuntary Termination (as
defined below), you will be entitled to receive continuation of your
base salary and insurance benefits and continued vesting under all
stock options or restricted stock purchases for a period of 6 months
following the date of termination of your employment.
c) "Change in Control" shall mean the Company's merger or consolidation
-----------------
with another entity, or a series of related transactions, as a result
of which the shareholders of the Company immediately prior to the
transaction own less than 50% of the voting power of the entity
surviving.
d) "Cause" shall mean (I) gross negligence or willful misconduct in the
-----
performance of your duties to the Company where such gross negligence
or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company,
(iii) a material and willful violation of any federal or state law;
(iv) commission of any act of fraud with respect to the Company; (v)
your material breach of this agreement or your Employee Inventions and
Confidentiality Agreement; (vi) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by
the Board of Directors of the Company.
<PAGE>
October 11, 1999
Page 4
e) "Involuntary Termination" shall include any termination by the Company
-----------------------
other than for Cause and your voluntary termination, upon 30 days
prior written notice to the Company, following (I) a material
reduction or change in job duties, responsibilities and requirements
inconsistent with your position with the Company and your prior
duties, responsibilities and requirements (taking into account the
difference in job title and duties that may occur following an
acquisition but that do not actually result in a material change in
your job duties, responsibilities, and requirements); (ii) any
reduction of your base compensation (other than in connection with a
general decrease in base salaries for most similarly situated
employees); or (iii) your refusal to relocate to a location more than
50 miles from the Company's current location.
6) Confidentiality of Terms. You agree to follow the Company's strict policy
------------------------
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding
salary, bonuses or stock purchase or option allocations to any person,
including other employees of the Company; provided, however, that you may
discuss such terms with members of your immediate family and any legal, tax
or accounting specialists who provide you with individual legal, tax or
accounting advice.
7) Employee Inventions and Confidentiality Agreement. As an employee of
-------------------------------------------------
ReplayNetworks, you will have access to certain Company confidential
information and you may, during the course of your employment, develop
certain information or inventions which will be the property of the
Company. To protect the interest of the Company, you will need to sign the
Company's standard "Employee Inventions and Confidentiality Agreement" as a
condition of your employment.
8) At-Will Employment. Notwithstanding the Company's obligation described in
------------------
Section 5 above, your employment with the Company will be on an "at will"
basis, meaning that either you or the Company may terminate your employment
at any time for any reason or no reason, without further obligation or
liability.
To indicate your acceptance of this offer, please sign and date this letter in
the space provided below and return it to Human Resources, attention: Chris
Copeland. This letter sets forth the terms of your employment with the Company
and supersedes any prior representations or agreements, whether written or oral.
This letter may not be modified or amended except by written agreement, signed
by the Company and by you.
Very truly yours,
REPLAY NETWORKS, INC.
By: /s/ Kim LeMasters
---------------------------
Title: CEO
-----------------------
ACCEPTED AND AGREED:
Buzz Kaplan
/s/ Buzz Kaplan
- -------------------------
Signature
10/14/99
- -------------------------
Date
<PAGE>
EXHIBIT 10.11
October 7, 1999
Mr. Alexander Gray
28690 Barn Rock Drive
Hayward, CA 94542-2233
Dear Alex,
I speak for the entire Board in saying how much we have valued the meetings and
conversation we've had with you over the last few weeks. It is clear that your
experience, judgement, and leadership would be of enormous benefit to Replay
Networks. Recognizing that you have other opportunities available to you, we
wish to act decisively to attract your talents to our Company.
On behalf of the Board of Directors, I am pleased to offer you the position of
Executive Vice President, Business Operations. I have attached the details of
your offer in an Appendix to this letter. This offer expires on October 14,
1999.
There are many exciting challenges directly ahead and we have high expectations
for the company. I am confident that with your skills and experience, you will
make a great contribution and will develop your skills at the same time. We
think you'll find this new venture to be a fun and exciting place to work.
You'll be working with a small group of excellent, dedicated professionals
producing an innovative new consumer electronics product and service. We're
looking forward to working with you!
Best regards,
/s/ Kim LeMasters
Kim LeMasters
CEO
<PAGE>
October 7, 1999
Page 2
Appendix
The following sets forth the terms of your employment relationship with Replay
Networks, Inc. (the "Company").
-------
1) Position.
--------
a) You will serve as the Executive Vice President, Business Operations.
You will report to the Company's CEO.
b) You agree to the best of your ability and experience that you will at
all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and
implicit terms hereof, and to the reasonable satisfaction of the
Company. During the term of your employment, you further agree that
you will devote all of your business time and attention to the
business of the Company, the Company will be entitled to all of the
benefits and profits arising from or incident to all such work
services and advice, you will not render commercial or professional
services of any nature to any person or organization, whether or not
for compensation, without the prior written consent of the Company's
CEO, and you will not directly or indirectly engage or participate in
any business that is competitive in any manner with the business of
the Company. It is understood, however, that your may continue to
provide incidental consultations to Lucent through December 31, 1999,
as long as such services do not interfere with your responsibilities
at the Company.
c) Your start date will be November 1, 1999 ("Start Date").
2) Compensation.
------------
a) Base Salary. You will be paid a monthly salary of $20,833.33, which
-----------
is equivalent to $250,000 on an annualized basis. Your salary will be
payable in two equal payments per month pursuant to the Company's
regular payroll policy (or in the same manner as other officers of the
Company).
You will also be eligible to participate in the Company's incentive
bonus program. The CEO will develop jointly with you the goals and
objectives connected with the incentive bonus award. Based on the
achievement of both the Company and individual performance goals, you
will be eligible to receive an annual bonus of up to 40% of your base
salary.
b) Annual Review. Your base salary will be reviewed each calendar year
-------------
as part of the Company's normal salary review process.
3) Stock.
-----
a) On your Start Date the Board of Directors will grant you an option to
purchase 600,000 shares of the Company Common Stock. The exercise
price for these options will be the fair market price of the Company
Common Stock at the date of grant.
The options will vest and become exercisable according to a 4 year
exercise schedule which calls for the initial vesting of 12.5% of the
total after the first 6 months of continuous service, and provides for
monthly vesting at the rate of an additional 1/48/th/ of the shares at
the close of each month of employment, over the remainder of the
vesting schedule.
<PAGE>
October 7, 1999
Page 3
Stock, continued.
----------------
The option will be an incentive stock option to the maximum allowed by
the tax code and will be subject to the terms of the Company's Stock
Option Plan and the Stock Option Agreement between you and the
Company. Accordingly, the Board will allow you to elect which portion
of the shares you obtain in the form of: 1) immediate purchase under
Section 83(b) of the Internal Revenue Code, subject to re-purchase; 2)
Incentive Stock Option; 3) Non-Qualified Options. Corporate counsel at
Venture Law Group will be available to assist you in evaluating the
tax benefits of these different stock and option programs. The grant
of the option will be subject to your execution of a mutually
acceptable option agreement.
In connection with the exercise of your option, the Company will
provide a loan of up to $1,000,000. This loan will be evidenced by a
full recourse promissory note, which will be secured by the shares
purchased and will provide for interest at the minimum Applicable
Federal Rate, compounded annually. The term of this Note shall be five
years, and any interest accrued will be due at such time as the
principal is due.
4) Benefits.
--------
a) Insurance Benefits. The Company will provide you with standard
------------------
medical and dental insurance benefits. In addition, the Company
currently indemnifies all to the maximum extent permitted by law, and
you have entered into the Company's standard form of Indemnification
Agreement giving you such protection. Pursuant to the Indemnification
Agreement, the Company has agreed to advance any expenses for which
indemnification is available to the extent allowed by applicable law.
b) Vacation, Sick Leave and Holidays. You will be entitled to three
---------------------------------
weeks paid vacation/sick leave per year, plus eight paid holidays.
c) 401(K). You will be eligible to participate in the company's standard
------
401(K) plan.
5) Severance Agreement.
-------------------
a) If your employment is terminated by the Company or its successor for
any reason other than Cause (as defined below) or you become subject
to an Involuntary Termination (as defined below), within 12 months of
a Change in Control (as defined below), you will be entitled to
receive continuation of your base salary and insurance benefits for a
period of 6 months and continued vesting under all stock options or
restricted stock purchases by the greater of twelve (12) months of
vesting of fifty (50%) percent of the shares that remain unvested at
the time of such termination.
b) In the event 5a does not apply, and your employment is terminated by
the Company or its successor for any reason other than Cause (as
defined below) or you become subject to an Involuntary Termination (as
defined below), you will be entitled to receive continuation of your
base salary and insurance benefits and continued vesting under all
stock options or restricted stock purchases for a period of 6 months
following the date of termination of your employment.
c) "Change in Control" shall mean the Company's merger or consolidation
-----------------
with another entity, or a series of related transactions, as a result
of which the shareholders of the Company immediately prior to the
transaction own less than 50% of the voting power of the entity
surviving.
d) "Cause" shall mean (I) gross negligence or willful misconduct in the
-----
performance of your duties to the Company where such gross negligence
or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company,
(iii) a material and willful violation of any federal or state law;
(iv) commission of any act of fraud with respect to the Company; (v)
your material breach of this agreement or your Employee Inventions and
Confidentiality Agreement; (vi) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by
the Board of Directors of the Company.
<PAGE>
October 7, 1999
Page 4
e) "Involuntary Termination" shall include any termination by the Company
-----------------------
other than for Cause and your voluntary termination, upon 30 days
prior written notice to the Company, following (I) a material
reduction or change in job duties, responsibilities and requirements
inconsistent with your position with the Company and your prior
duties, responsibilities and requirements (taking into account the
difference in job title and duties that may occur following an
acquisition but that do not actually result in a material change in
your job duties, responsibilities, and requirements); (ii) any
reduction of your base compensation (other than in connection with a
general decrease in base salaries for most similarly situated
employees); or (iii) your refusal to relocate to a location more than
50 miles from the Company's current location.
6) Confidentiality of Terms. You agree to follow the Company's strict policy
------------------------
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding
salary, bonuses or stock purchase or option allocations to any person,
including other employees of the Company; provided, however, that you may
discuss such terms with members of your immediate family and any legal, tax
or accounting specialists who provide you with individual legal, tax or
accounting advice.
7) Employee Inventions and Confidentiality Agreement. As an employee of
-------------------------------------------------
Replay Networks, you will have access to certain Company confidential
information and you may, during the course of your employment, develop
certain information of inventions which will be the property of the
Company. To protect the interest of the Company, you will need to sign the
Company's standard "Employee Inventions and Confidentiality Agreement" as a
condition of your employment.
8) At-Will Employment. Notwithstanding the Company's obligation described in
------------------
Section 5 above, your employment with the Company will be on an "at will"
basis, meaning that either you or the Company may terminate your employment
at any time for any reason or no reason, without further obligation or
liability.
To indicate your acceptance of this offer, please sign and date this letter in
the space provided below and return it to Human Resources, attention: Chris
Copeland. This letter sets forth the terms of your employment with the Company
and supersedes any prior representations or agreements, whether written or oral.
This letter may not be modified or amended except by written agreement, signed
by the Company and by you.
Very truly yours,
REPLAY NETWORKS, INC.
By: /s/ Kim LeMasters
--------------------------------
Title: CEO
-----------------------------
ACCEPTED AND AGREED:
ALEXANDER GRAY
/s/ Alex Gray
- -----------------------------
Signature
10/8/99
- -----------------------------
Date
<PAGE>
EXHIBIT 10.12
[Letterhead of Replay Networks, Inc.]
Mr. Layne Leslie Britton
3677 Boise Ave.
Los Angeles, CA 90066
Employment Agreement
--------------------
Dear Layne:
On behalf of the Board of Directors of Replay Networks, Inc. ("Replay"), I
am pleased to offer you the position of Executive Vice President, Replay
Networks on the terms set forth below.
1. Position. You will be employed by Replay as its Executive Vice
--------
President Replay Networks effective on June 1, 1999 (the "Commencement Date").
You will have sole overall responsibility for the management of all of Replay's
network service elements, including but not limited to, Replay's core service
business of media business development, editorial, programming, business
affairs, scheduling, affiliate relations and advertising sales, and you will
report directly and only to the Chief Executive Officer. During your term, you
will be present at all Board of Directors meetings. During your term, you will
be expected to devote your full working time and attention to the business of
Replay. Notwithstanding the foregoing, you may (i) serve on the board of
directors of DEN and on other boards of directors of organizations that are not
competitive with Replay, that do not materially interfere with your duties to
Replay and that are approved by Replay, (ii) serve as a consultant to UPN
through December 31, 1999, so long as such activity does not materially
interfere with your duties to Replay, or (iii) own up to 1% of the outstanding
equity securities of any corporation whose stock is listed on a national stock
exchange. You will also be expected to comply with and be bound by Replay's
operating policies, procedures and practices that are from time to time in
effect during the term of your employment.
2. Base Salary. Your initial base monthly salary will be $20,000, or
-----------
a base annual salary of $240,000, payable in accordance with Replay's normal
payroll practices with such payroll deductions and withholdings as are required
by law. Your base salary will be reviewed on an annual basis by the Compensation
Committee of the Board of Directors and increased from time to time, in the
discretion of the Board of Directors, but in any event such compensation shall
not be reduced below $240,000.
1
<PAGE>
3. Bonus. You will be eligible to receive an annual bonus based on the
-----
evaluation of your performance by the Board of Directors.
4. Equity Compensation.
-------------------
On the Commencement Date, the Compensation Committee of the Board of
Directors shall grant you an option to purchase 560,000 shares of Common Stock
at an exercise price equal to $1.25 per share, which options shall be "incentive
stock options" to the maximum extent permitted under the Internal Revenue Code
of 1986, as amended. These shares will vest ratably on a monthly basis over 48
months commencing with your first day of employment. The option will be
immediately exercisable, subject to repurchase of the unvested shares by Replay
on termination of employment at your original purchase price, which repurchase
option will lapse over the 48 month vesting schedule. You will be permitted to
pay for shares with a full recourse promissory note with interest accruing at
the minimum applicable federal rate and with principal and interest deferred for
five years and payable in a balloon payment on the fifth anniversary of the
grant, subject to acceleration 30 days following termination of employment. You
should consult a tax advisor concerning your income tax consequences before
exercising any of the options. Notwithstanding any other provision of this
Section 4 to the contrary, upon "Involuntary Termination," "Termination without
Cause," or "Termination for Death or Disability," unvested shares shall vest as
provided in Section 8 below, and grant of the option to you shall be subject to
your execution of an option agreement in the form approved by the Company.
5. Other Benefits. You will be entitled to the following additional
--------------
benefits:
(a) You will be eligible for the same vacation, health/dental, vision,
life insurance, 401 (k) and other benefits offered to any other Replay senior
executives of similar rank and status.
(b) Replay will provide you with up to $50,000 reimbursement for your
expenses incurred in connection with your relocation to Northern California
prior to December 31, 1999.
6. At-Will Employment and Termination. Your employment with Replay will
----------------------------------
be at-will and may be terminated by you or by Replay at any time for any reason
as follows:
(a) You may terminate your employment upon written notice to the Board
of Directors at any time for "Good Reason," as defined below (an "Involuntary
Termination");
(b) You may terminate your employment upon written notice to the Board
of Directors at any time in your discretion without Good Reason ("Voluntary
Termination");
(c) Replay at the direction of the Board of Directors may terminate
your employment upon written notice to you at any time for "Cause," as defined
below ("Termination for Cause");
2
<PAGE>
(d) Replay at the direction of the Board of Directors may terminate
your employment upon written notice to you at any time without a determination
that there is Cause for such termination ("Termination without Cause");
(e) Your employment will automatically terminate upon your death or
your disability as determined by the Board of Directors provided that
"disability" shall mean your complete inability to perform your job
responsibilities for a period of 180 consecutive days or 180 days in the
aggregate in any 12-month period ("Termination for Death or Disability").
7. Definitions. As used in this agreement, the following terms have the
-----------
following meanings:
(a) "Good Reason" means (i) a change in your reporting relationship
such that you no longer report only and directly to the Chief Executive Officer
of Replay or, following a Change in Control, the Chief Executive Officer of the
surviving entity or acquiror; (ii) your no longer being Executive Vice
President, Replay Network or, in the case of a Change in Control, an Executive
Vice President of the surviving entity or acquiror that results from any Change
in Control; (iii) a material reduction in your duties or responsibilities,
provided that your continuing as an Executive Vice President of the surviving
entity or acquiror following a Change of Control, shall not constitute a
material reduction in duties or responsibilities; (iv) any reduction in your
base annual salary or material breach by Replay of any of its obligations
hereunder that remains uncured for a period of 30 days following notice thereof;
(v) relocation of your principal office to a facility more than 50 miles from
Replay's current headquarters; or (vi) failure of any successor to assume this
agreement.
(b) "Cause" means (i) willful misconduct in the performance of your
duties to Replay that has resulted or is likely to result in substantial and
material damage to Replay; (ii) commission of any act of fraud with respect to
Replay; (iii) conviction of a felony or a crime involving moral turpitude
causing material harm to the business and affairs of Replay; (iv) your willful
and repeated failure to follow the directions of the Chief Executive Officer of
Replay or, following a Change in Control, the Chief Executive Officer of the
surviving entity or acquiror; or (v) your material breach of this Agreement or
your Employee Confidentiality and Assignment of Inventions Agreement. No act or
failure to act by you shall be considered "willful" if done or omitted by you in
good faith with reasonable belief that your action or omission was in the best
interests of Replay.
(c) "Change in Control" means (i) any person or entity becoming the
beneficial owner, directly or indirectly, of securities of Replay representing
fifty (50%) percent of the total voting power of all its then outstanding voting
securities, (ii) a merger or consolidation of Replay in which its voting
securities immediately prior to the merger or consolidation do not represent, or
are not converted into securities that represent, a majority of the voting power
of all voting securities of the surviving entity immediately after the merger or
consolidation, (iii) a sale of substantially all of the assets of Replay or a
liquidation or dissolution of Replay, or (iv) individuals who, as of the
Commencement Date, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board; provided
3
<PAGE>
that any individual who becomes a director of Replay subsequent to the
Commencement Date, whose election, or nomination for election by Replay
stockholders, was approved by the vote of at least a majority of the directors
then in office shall be deemed a member of the Incumbent Board.
8. Separation and Change in Control Benefits. Upon termination of your
-----------------------------------------
employment with Replay for any reason, you will receive payment of all salary,
bonus and unpaid vacation accrued to the date of your termination of employment.
In addition, you will be entitled to receive the severance benefits as set forth
below.
(a) In the event of your Voluntary Termination or Termination for
Cause, you will be entitled to any accrued but unpaid salary and bonus, but you
will not be entitled to any additional cash severance benefits or additional
vesting of shares.
(b) In the event of your Involuntary Termination or Termination
without Cause, and, subject to your execution of a mutual release of claims
agreement ("Release Agreement") provided to you by the Company and your
resignation from all positions you hold with the Company, you will be entitled
to a lump sum severance payment equal to any accrued but unpaid salary and bonus
and an amount equal to six months of your then current annual base salary and
50% of your prior year's bonus payable within five days after the effective date
of your execution of the Release Agreement and nine (9) months of accelerated
vesting of your unvested shares; provided, however, that if such Involuntary
---------------------------------------------------
Termination or Termination without Cause occurs within one year following a
- ---------------------------------------------------------------------------
Change in Control, the accelerated vesting shall be as set forth in Section 8(d)
- --------------------------------------------------------------------------------
below. All payments hereunder shall be less applicable deductions and
- -----
withholdings. Replay shall reimburse you for all COBRA premiums paid by you for
a period of six months.
(c) In the event of your Termination for Death or Disability, the
vesting of your unvested shares of restricted stock and the vesting of your
shares shall be immediately accelerated by two years.
(d) Notwithstanding anything in this agreement to the contrary, the
vesting of all your options or shares will be immediately accelerated upon your
Involuntary Termination or Termination without Cause within one year following a
Change in Control by the greater of twelve (12) months of vesting or fifty (50%)
percent of the shares that remain unvested at the time of such Change in
Control.
(e) If, due to the benefits provided under this letter agreement, you
are subject to any excise tax due to characterization of any mount payable
hereunder as excess parachute payments pursuant to Sections 280G and 4999 of the
Internal Revenue Code, Replay will pay the excise taxes otherwise payable by you
under Section 4999 (but not any income or excise taxes on such payment of taxes
by Replay on your behalf) with respect to any amounts payable to you under this
Agreement, up to a maximum of $1,000,000. Notwithstanding the foregoing, you
-----------------------------
will in good faith discuss with the Company whether it is appropriate to request
stockholders of the Company to approve payments to you upon a Change of Control
in order to
4
<PAGE>
minimize or eliminate any such excise taxes, provided that you shall not be
required to agree with the Company to request such stockholder approval.
(f) No payments due you hereunder shall be subject to mitigation or
offset.
9. Confidential Information and Invention Assignment Agreement. Upon your
-----------------------------------------------------------
commencement of employment with Replay, you will be required to sign its
standard form of Employee Confidentiality and Assignment of Inventions
Agreement.
10. Dispute Resolution. The parties agree that any dispute regarding the
------------------
interpretation or enforcement of this agreement shall be decided by
confidential, final and binding arbitration conducted by Judicial Arbitration
and Mediation Services ("JAMS") under the then existing JAMS roles rather than
by litigation in court, trial by jury, administrative proceeding or in any other
forum.
If a legal action or other proceeding is brought for enforcement of
this agreement because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorney's fees and costs incurred, both before and after judgment, in addition
to any other relief to which they may be entitled.
11. Miscellaneous.
--------------
(a) Successors. This agreement is binding on and may be enforced by
----------
Replay and its successors and assigns and is binding on and may be enforced by
you and your heirs and legal representatives. Any successor to Replay or
substantially all of its business (whether by purchase, merger, consolidation or
otherwise) will in advance assume in writing and be bound by all of Replay's
obligations under this agreement.
(b) Entire Agreement. This agreement represents the entire agreement
----------------
between us concerning the subject matter of your employment by Replay.
(c) Governing Law. This agreement will be governed by the laws of the
-------------
State of California without reference to conflict of laws provisions.
Layne, we are very pleased to extend this offer of employment to you and
look forward to your joining Replay as its Executive Vice President, Replay
Networks. Please indicate your acceptance of the terms of this agreement by
signing in the place indicated below.
Very truly yours, Accepted July 29, 1999:
REPLAY NETWORKS, INC.
By:/s/ Anthony Wood /s/ Layne Leslie Britton
--------------------- -------------------------
Anthony Wood Layne Leslie Britton
5
<PAGE>
EXHIBIT 10.20
PACIFIC DIGITAL MEDIA, INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement (the "Agreement") is made as of
---------
September 15, 1997 by and between Pacific Digital Media, Inc., a California
corporation (the "Company"), and Anthony J. Wood ("Purchaser").
------- ---------
1. Sale of Stock. Subject to the terms and conditions of this Agreement,
-------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, 3,000,000 shares
of the Company's Common Stock (the "Shares") at a purchase price of $0.001 per
------
Share for a total purchase price of $3,000.00. The term "Shares" refers to the
------
purchased Shares and all securities received in replacement of or in connection
with the Shares pursuant to stock dividends or splits, all securities received
in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement or at such other time and place as the Company and
Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the Company
-------------
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, or (c) by a
combination of the foregoing.
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of sixty (60) days from
-----------------
such date to repurchase all or any portion of the Shares held by Purchaser as of
the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price per Share specified in Section
1 (adjusted for any stock splits, stock dividends and the like); provided,
--------
however, that the Repurchase Option shall continue for a period of up to one
- -------
year from the Termination Date to the extent that the Company reasonably
determines that such an extension of time is necessary to prevent the
<PAGE>
repurchase of Purchaser's Shares from causing other capital stock of the Company
to not qualify as "small business stock" under Section 1202 of the Internal
Revenue Code of 1986, as amended.
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially
be subject to the Repurchase Option. 1/36th of the Shares shall be released from
the Repurchase Option at the end of each month following the Vesting
Commencement Date (as set forth on the signature page of this Agreement), until
all Shares are released from the Repurchase Option (provided in each case that
Purchaser's employment or consulting relationship with the Company has not been
terminated prior to the date of any such release). Fractional shares shall be
rounded to the nearest whole share.
(b) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (A) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("Proposed Transferee"); (C)
-------------------
the number of Shares to be transferred to each Proposed Transferee; and (D) the
terms and conditions of each proposed sale or transfer. The Holder shall offer
the Shares at the same price (the "Offered Price") and upon the same terms (or
-------------
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered
-2-
<PAGE>
Price. If the Offered Price includes consideration other than cash, the cash
equivalent value of the non-cash consideration shall be determined by the Board
of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice and
provided further that any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section 3 shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section 3, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(b)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such
-3-
<PAGE>
Shares shall be provided to the Company for a period of thirty (30) days
following receipt by the Company of written notice by the person acquiring the
Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(c)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares
-----------------------------------
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The right of first refusal granted the
---------------------
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Upon termination of the right of first refusal
--------------
described in Section 3(b) and the expiration or exercise of the Repurchase
Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser
-4-
<PAGE>
hereby acknowledges that the Secretary of the Company, or the Secretary's
designee, is so appointed as the escrow holder with the foregoing authorities as
a material inducement to make this Agreement and that said appointment is
coupled with an interest and is accordingly irrevocable. Purchaser agrees that
said escrow holder shall not be liable to any party hereof (or to any other
party). The escrow holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may resign at any time.
Purchaser agrees that if the Secretary of the Company, or the Secretary's
designee, resigns as escrow holder for any or no reason, the Board of Directors
of the Company shall have the power to appoint a successor to serve as escrow
holder pursuant to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her 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.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
-5-
<PAGE>
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
----
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, "restriction" means the right of the Company to buy back the
-----------
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
--------------
Code with the Internal Revenue Service within
-6-
<PAGE>
thirty (30) days from the date of purchase. Even if the fair market value of the
Shares at the time of the execution of this Agreement equals the amount paid for
the Shares, the election must be made to avoid income under Section 83(a) in the
future. Purchaser understands that failure to file such an election in a timely
manner may result in adverse tax consequences for Purchaser. Purchaser further
understands that an additional copy of such election form should be filed with
his or her federal income tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that the foregoing is only a
summary of the effect of United States federal income taxation with respect to
purchase of the Shares hereunder, and does not purport to be complete. Purchaser
further acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Purchaser may reside, and
the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the
Company with this executed Agreement a copy of the Acknowledgment and Statement
of Decision Regarding Section 83(b) Election (the "Acknowledgment"), attached
--------------
hereto as Exhibit B. Purchaser further agrees that Purchaser will execute and
---------
submit with the Acknowledgment a copy of the 83(b) Election, attached hereto as
Exhibit C, if Purchaser has indicated in the Acknowledgment his or her decision
- ---------
to make such an election.
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith.
-7-
<PAGE>
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded from
this Agreement, (ii) the balance of this Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of this Agreement shall be
enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
-8-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
PACIFIC DIGITAL MEDIA, INC.
By: /s/ Anthony Wood
--------------------------------
Title: Chairman of Board
-----------------------------
Address:
555 Clyde Avenue
Mountain View, CA 94043
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
ANTHONY J. WOOD
/s/ Anthony Wood
-------------------------------
(Signature)
Address:
11 Somerset Place
Palo Alto, CA 94301
Vesting Commencement
Date: August 1, 1997
I, Susan P. Wood, spouse of Anthony J. Wood, have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be irrevocably bound by the Agreement and further agree that any community
property or other such interest shall be similarly bound by the Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
/s/ Susan P. Wood
-------------------------------
Spouse of Anthony J. Wood
-9-
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and Pacific Digital Media, Inc.
---------
(the "Company") dated _______________ (the "Agreement"), Purchaser hereby sells,
------- ---------
assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. _____, and does
hereby irrevocably constitute and appoint ______________________ to transfer
said stock on the books of the Company with full power of substitution in the
premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Anthony J. Wood
------------------------------
Anthony J. Wood
/s/ Susan P. Wood
------------------------------
Spouse of Anthony J. Wood (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered into a stock purchase agreement with Pacific
Digital Media, Inc., a California corporation (the "Company"), pursuant to which
-------
the undersigned is purchasing 3,000,000 shares of Common Stock of the Company
(the "Shares"). In connection with the purchase of the Shares, the undersigned
------
hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) X has consulted, and has been fully advised by, the undersigned's
----
own tax advisor, Laurie Crawford, whose business address is San Jose,
California, regarding the federal, state and local tax consequences of
purchasing the Shares, and particularly regarding the advisability of
making elections pursuant to Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code") and pursuant to the
----
corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) X to make an election pursuant to Section 83(b) of the Code, and is
----
submitting to the Company, together with the undersigned's executed
Common Stock Purchase Agreement, an executed form entitled
"Election Under Section 83(b) of the Internal Revenue Code of
1986"; or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of the Shares or of the making or
failure to make an election pursuant to Section 83(b) of the Code or the
corresponding provisions, if any, of applicable state law.
Date: 9/26/97 /s/ Anthony J. Wood
----------------------- ---------------------------
Anthony J. Wood
Date: 9/26/97 /s/ Susan P. Wood
----------------------- ---------------------------
Spouse of Anthony J. Wood
-2-
<PAGE>
EXHIBIT C
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Anthony J. Wood
NAME OF SPOUSE: Susan D. Wood
ADDRESS: (omitted)
IDENTIFICATION NO. OF TAXPAYER: (omitted)
IDENTIFICATION NO. OF SPOUSE: (omitted)
TAXABLE YEAR: 1997
2. The property with respect to which the election is made is described as
follows:
3,000,000 shares of the Common Stock, $0.001 par value, of Pacific Digital
Media, Inc., a California corporation (the "Company").
3. The date on which the property was transferred is: 9/15/97
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $3,000.
6. The amount (if any) paid for such property: $3,000
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: 9/26/97 /s/ Anthony J. Wood
---------------------- -----------------------------
Taxpayer
Dated: 9/26/97 /s/ Susan P. Wood
---------------------- -----------------------------
Spouse of Taxpayer
<PAGE>
RECEIPT
-------
Pacific Digital Media, Inc. hereby acknowledges receipt of a check in the
amount of $3,000 given by Anthony J. Wood as consideration for Certificate No.
____ for 3,000,000 shares of Common Stock of Pacific Digital Media, Inc.
Dated: 9/26/97
----------------
PACIFIC DIGITAL MEDIA, INC.
By: /s/ Edward M. Kessler
----------------------------
Title: President
-------------------------
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. _____ for 3,000,000 shares of Common Stock of Pacific Digital Media, Inc.
(the "Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
______________________________
Anthony J. Wood
<PAGE>
EXHIBIT 10.21
REPLAY NETWORKS, INC.
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is entered into by and
---------
between Replay Networks, Inc. (the "Company") and Kevin Bohren ("Consultant").
------- ----------
1. Consulting Relationship. During the term of this agreement,
-----------------------
Consultant will provide consulting services (the "Services") to the Company as
--------
described on Exhibit A attached to this Agreement. Consultant shall use
---------
Consultant's best efforts to perform the Services in a manner satisfactory to
the Company.
2. Fees; Support. As consideration for the Services to be provided
-------------
by Consultant and other obligations, the Company will compensate Consultant as
described in Exhibit B to this Agreement. As additional consideration for the
---------
Services, the Company will provide Consultant with such support facilities and
space as may be required in the Company's judgment to enable Consultant to
properly perform the Services.
3. Expenses. Consultant shall not be authorized to incur on behalf
--------
of the Company any expenses without the prior consent of the Company's CEO. As
a condition to receipt of reimbursement, Consultant shall be required to submit
to the Company reasonable evidence that the amount involved was expended and
related to Services provided under this Agreement.
4. Term and Termination. Consultant shall serve as a consultant to
--------------------
the Company for a period commencing on March 1, 1999, and terminating on June
30, 1999 OR the earlier of the date on which Consultant ceases to provide
services to the Company under this Agreement. Either party may terminate this
Agreement at any time upon ten (10) days' written notice.
5. Independent Contractor. Consultant's relationship with the
----------------------
Company will be that of an independent contractor and not that of an employee.
Consultant will not be eligible for any employee benefits, nor will the Company
make deductions from payments made to Consultant for taxes, all of which will be
Consultant's responsibility. Consultant agrees to indemnify and hold the
Company harmless from any liability for, or assessment of, any such taxes
imposed on the Company by relevant taxing authorities. Consultant will have no
authority to enter into contracts that bind the Company or create obligations on
the part of the Company without the prior written authorization of the Company.
6. Supervision of Consultant's Services. All services to be
------------------------------------
performed by Consultant, including but not limited to the Services, will be as
agreed between Consultant and the Company's CEO. Consultant will be required to
report to the CEO concerning the Services performed under this Agreement. The
nature and frequency of these reports will be left to the discretion of the CEO.
7. Consulting or Other Services for Competitors. Consultant
--------------------------------------------
represents and warrants that Consultant will not, during the term of this
Agreement, perform any consulting or
<PAGE>
other services for any company, person or entity whose business or proposed
business in any way involves products or services which could reasonably be
determined to be competitive with the products or services or proposed products
or services of the Company.
8. Confidentiality Agreement. Consultant shall sign, or has signed,
-------------------------
a Confidential Information and Invention Assignment Agreement substantially in
the form attached to this Agreement as Exhibit C (the "Confidentiality
--------- ---------------
Agreement"), prior to or on the date on which Consultant's consulting
- ---------
relationship with the Company commences. In the event that Consultant is an
entity or otherwise will be causing individuals in its employ or under its
supervision to participate in the rendering of the Services, Consultant warrants
that it shall cause each of such individuals to execute a Confidentiality
Agreement in the form attached as Exhibit C.
---------
9. Conflicts with this Agreement. Consultant represents and warrants
-----------------------------
that neither Consultant nor any of Consultant's partners, employees or agents is
under any pre-existing obligation in conflict or in any way inconsistent with
the provisions of this Agreement. Consultant warrants that Consultant has the
right to disclose or use all ideas, processes, techniques and other information,
if any, which Consultant has gained from third parties, and which Consultant
discloses to the Company in the course of performance of this Agreement, without
liability to such third parties. Consultant represents and warrants that
Consultant has not granted any rights or licenses to any intellectual property
or technology that would conflict with Consultant's obligations under this
Agreement. Consultant will not knowingly infringe upon any copyright, patent,
trade secret or other property right of any former client, employer or third
party in the performance of the services required by this Agreement.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties.
(b) Sole Agreement. This Agreement, including the Exhibits
--------------
hereto, constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
(d) Choice of Law. The validity, interpretation, construction
-------------
and performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(e) Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith.
-2-
<PAGE>
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded from
this Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement shall be
enforceable in accordance with its terms.
(f) Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(g) Arbitration. Any dispute or claim arising out of or in
-----------
connection with any provision of this Agreement, excluding Section 7 hereof,
will be finally settled by binding arbitration in Mountain View, California in
accordance with the rules of the American Arbitration Association by one
arbitrator appointed in accordance with said rules. The arbitrator shall apply
California law, without reference to rules of conflicts of law or rules of
statutory arbitration, to the resolution of any dispute. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph, without breach of this
arbitration provision. This Section 10(g) shall not apply to the
Confidentiality Agreement.
(h) Advice of Counsel. EACH PARTY ACKNOWLEDGES THAT, IN
-----------------
EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE
OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY
PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
-3-
<PAGE>
The parties have executed this Agreement on the respective dates set
forth below.
REPLAY NETWORKS, INC.
By: /s/ Anthony Wood
--------------------------------
Title: CEO
-----------------------------
Address: 1945 Charleston Rd.
Mountain View, CA 94043
Date:______________________________
KEVIN BOHREN
/s/ Kevin Bohren
-----------------------------------
Signature
Address:___________________________
Date:______________________________
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF CONSULTING SERVICES
----------------------------------
Description of Services Schedule/Deadline
----------------------- -----------------
Advisory services for sales, marketing and n/a
business development activities (approx 2
days per week)
<PAGE>
EXHIBIT B
---------
EXHIBIT B
COMPENSATION
------------
Check applicable payment terms:
[_] For Services rendered by Consultant under this Agreement, the Company shall
pay Consultant at the rate of $______ per hour, payable monthly within
thirty (30) days following receipt of Consultant's invoice for the work
done during the prior month. Unless otherwise agreed upon in writing by
Company, Company's maximum liability for all Services performed during the
term of this Agreement shall not exceed $____________.
[_] Consultant shall be paid $_________ per month, payable in arrears on the
___ day of each month following the end of the month in which the Services
are rendered. Consultant shall provide Services of at least ___ hours per
week. Unless otherwise agreed upon in writing by Company, Company's
maximum liability for all Services performed during the term of this
Agreement shall not exceed $____________.
[_] Consultant shall be paid $____________ upon the execution of this Agreement
and $____________ upon completion of the Services specified on Exhibit A to
---------
this Agreement.
[_] Consultant will be granted a non-qualified option to purchase _________
shares of the Company's Common Stock, at an exercise price equal to the
fair market value (as determined by the Company's Board of Directors) on
the date of grant (currently estimated to be $ _____ per share). This
option will vest and become exercisable as follows:
___________________________________________________________________________
[_] Consultant is authorized to incur the following expenses:
___________________________________________________________________________
[X] Other:
Consultant will be granted 4,840 shares of Replay common stock for each
month of services performed.
<PAGE>
REPLAY NETWORKS, INC.
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is entered into by and
---------
between Replay Networks, Inc. (the "Company") and Kevin Bohren ("Consultant").
------- ----------
1. Consulting Relationship. During the term of this agreement,
-----------------------
Consultant will provide consulting services (the "Services") to the Company as
--------
described on Exhibit A attached to this Agreement. Consultant shall use
---------
Consultant's best efforts to perform the Services in a manner satisfactory to
the Company.
2. Fees; Support. As consideration for the Services to be provided
-------------
by Consultant and other obligations, the Company will compensate Consultant as
described in Exhibit B to this Agreement. As additional consideration for the
---------
Services, the Company will provide Consultant with such support facilities and
space as may be required in the Company's judgment to enable Consultant to
properly perform the Services.
3. Expenses. Consultant shall not be authorized to incur on behalf
--------
of the Company any expenses without the prior consent of the Company's CEO. As a
condition to receipt of reimbursement, Consultant shall be required to submit to
the Company reasonable evidence that the amount involved was expended and
related to Services provided under this Agreement.
4. Term and Termination. Consultant shall serve as a consultant to
--------------------
the Company for a period commencing on July 1, 1999, and terminating on
September 30, 1999 OR the earlier of the date on which Consultant ceases to
provide services to the Company under this Agreement. Either party may terminate
this Agreement at any time upon ten (10) days' written notice.
5. Independent Contractor. Consultant's relationship with the
----------------------
Company will be that of an independent contractor and not that of an employee.
Consultant will not be eligible for any employee benefits, nor will the Company
make deductions from payments made to Consultant for taxes, all of which will be
Consultant's responsibility. Consultant agrees to indemnify and hold the Company
harmless from any liability for, or assessment of, any such taxes imposed on the
Company by relevant taxing authorities. Consultant will have no authority to
enter into contracts that bind the Company or create obligations on the part of
the Company without the prior written authorization of the Company.
6. Supervision of Consultant's Services. All services to be
------------------------------------
performed by Consultant, including but not limited to the Services, will be as
agreed between Consultant and the Company's CEO. Consultant will be required to
report to the CEO concerning the Services performed under this Agreement. The
nature and frequency of these reports will be left to the discretion of the CEO.
<PAGE>
7. Consulting or Other Services for Competitors. Consultant
--------------------------------------------
represents and warrants that Consultant will not, during the term of this
Agreement, perform any consulting or other services for any company, person or
entity whose business or proposed business in any way involves products or
services which could reasonably be determined to be competitive with the
products or services or proposed products or services of the Company.
8. Confidentiality Agreement. Consultant shall sign, or has signed,
-------------------------
a Confidential Information and Invention Assignment Agreement substantially in
the form attached to this Agreement as Exhibit C (the "Confidentiality
--------- ---------------
Agreement"), prior to or on the date on which Consultant's consulting
- ---------
relationship with the Company commences. In the event that Consultant is an
entity or otherwise will be causing individuals in its employ or under its
supervision to participate in the rendering of the Services, Consultant warrants
that it shall cause each of such individuals to execute a Confidentiality
Agreement in the form attached as Exhibit C.
---------
9. Conflicts with this Agreement. Consultant represents and warrants
-----------------------------
that neither Consultant nor any of Consultant's partners, employees or agents is
under any pre-existing obligation in conflict or in any way inconsistent with
the provisions of this Agreement. Consultant warrants that Consultant has the
right to disclose or use all ideas, processes, techniques and other information,
if any, which Consultant has gained from third parties, and which Consultant
discloses to the Company in the course of performance of this Agreement, without
liability to such third parties. Consultant represents and warrants that
Consultant has not granted any rights or licenses to any intellectual property
or technology that would conflict with Consultant's obligations under this
Agreement. Consultant will not knowingly infringe upon any copyright, patent,
trade secret or other property right of any former client, employer or third
party in the performance of the services required by this Agreement.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties.
(b) Sole Agreement. This Agreement, including the Exhibits
--------------
hereto, constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
(d) Choice of Law. The validity, interpretation, construction
-------------
and performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
-2-
<PAGE>
(e) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(g) Arbitration. Any dispute or claim arising out of or in connection
-----------
with any provision of this Agreement, excluding Section 7 hereof, will be
finally settled by binding arbitration in Mountain View, California in
accordance with the rules of the American Arbitration Association by one
arbitrator appointed in accordance with said rules. The arbitrator shall apply
California law, without reference to rules of conflicts of law or rules of
statutory arbitration, to the resolution of any dispute. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph, without breach of this
arbitration provision. This Section 10(g) shall not apply to the Confidentiality
Agreement.
(h) Advice of Counsel. EACH PARTY ACKNOWLEDGES THAT, IN EXECUTING
-----------------
THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF
INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY
PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
-3-
<PAGE>
The parties have executed this Agreement on the respective dates set forth
below.
REPLAY NETWORKS, INC.
By: /s/ Anthony Wood
---------------------------
Title: CEO
-------------------------
Address: 1945 Charleston Rd.
Mountain View, CA 94043
Date: 7/20/99
--------------------------
KEVIN BOHREN
/s/ Kevin Bohren
------------------------------
Signature
Address: P.O. Box 6632
Avon, CO 81620
Date: 7/23/99
--------------------------
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF CONSULTING SERVICES
----------------------------------
Description of Services Schedule/Deadline
----------------------- -----------------
Advisory services for sales, marketing and n/a
business development activities (approx 2
days per week)
<PAGE>
EXHIBIT B
---------
EXHIBIT B
COMPENSATION
------------
Check applicable payment terms:
[_] For Services rendered by Consultant under this Agreement, the Company shall
pay Consultant at the rate of $______ per hour, payable monthly within
thirty (30) days following receipt of Consultant's invoice for the work
done during the prior month. Unless otherwise agreed upon in writing by
Company, Company's maximum liability for all Services performed during the
term of this Agreement shall not exceed $____________.
[X] Consultant shall be paid $7,500 per month, payable in arrears on the 30th
day of each month following the end of the month in which the Services are
rendered. Consultant shall provide Services of at least 16 hours per week.
Unless otherwise agreed upon in writing by Company, Company's maximum
liability for all Services performed during the term of this Agreement
shall not exceed $22,500.
[_] Consultant shall be paid $____________ upon the execution of this Agreement
and $____________ upon completion of the Services specified on Exhibit A
---------
to this Agreement.
[_] Consultant will be granted a non-qualified option to purchase _________
shares of the Company's Common Stock, at an exercise price equal to the
fair market value (as determined by the Company's Board of Directors) on
the date of grant (currently estimated to be $ _____ per share). This
option will vest and become exercisable as follows:
------------------------------------------------------------------------------
[_] Consultant is authorized to incur the following expenses:
------------------------------------------------------------------------------
[_] Other:
<PAGE>
EXHIBIT C
---------
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
------------------------------
(omitted)
<PAGE>
REPLAY NETWORKS, INC.
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is entered into by and
---------
between Replay Networks, Inc. (the "Company") and Kevin Bohren ("Consultant").
------- ----------
1. Consulting Relationship. During the term of this agreement,
-----------------------
Consultant will provide consulting services (the "Services") to the Company as
--------
described on Exhibit A attached to this Agreement. Consultant shall use
---------
Consultant's best efforts to perform the Services in a manner satisfactory to
the Company.
2. Fees; Support. As consideration for the Services to be provided
-------------
by Consultant and other obligations, the Company will compensate Consultant as
described in Exhibit B to this Agreement. As additional consideration for the
---------
Services, the Company will provide Consultant with such support facilities and
space as may be required in the Company's judgment to enable Consultant to
properly perform the Services.
3. Expenses. Consultant shall not be authorized to incur on behalf
--------
of the Company any expenses without the prior consent of the Company's CEO. As
a condition to receipt of reimbursement, Consultant shall be required to submit
to the Company reasonable evidence that the amount involved was expended and
related to Services provided under this Agreement.
4. Term and Termination. Consultant shall serve as a consultant to
--------------------
the Company for a period commencing on October 1, 1999, and terminating on March
31, 2000 OR the earlier of the date on which Consultant ceases to provide
services to the Company under this Agreement. Either party may terminate this
Agreement at any time upon ten (10) days' written notice.
5. Independent Contractor. Consultant's relationship with the
----------------------
Company will be that of an independent contractor and not that of an employee.
Consultant will not be eligible for any employee benefits, nor will the Company
make deductions from payments made to Consultant for taxes, all of which will be
Consultant's responsibility. Consultant agrees to indemnify and hold the Company
harmless from any liability for, or assessment of, any such taxes imposed on the
Company by relevant taxing authorities. Consultant will have no authority to
enter into contracts that bind the Company or create obligations on the part of
the Company without the prior written authorization of the Company.
6. Supervision of Consultant's Services. All services to be
------------------------------------
performed by Consultant, including but not limited to the Services, will be as
agreed between Consultant and the Company's CEO. Consultant will be required to
report to the CEO concerning the Services performed under this Agreement. The
nature and frequency of these reports will be left to the discretion of the CEO.
<PAGE>
7. Consulting or Other Services for Competitors. Consultant
--------------------------------------------
represents and warrants that Consultant will not, during the term of this
Agreement, perform any consulting or other services for any company, person or
entity whose business or proposed business in any way involves products or
services which could reasonably be determined to be competitive with the
products or services or proposed products or services of the Company.
8. Confidentiality Agreement. Consultant shall sign, or has signed,
-------------------------
a Confidential Information and Invention Assignment Agreement substantially in
the form attached to this Agreement as Exhibit C (the "Confidentiality
--------- ---------------
Agreement"), prior to or on the date on which Consultant's consulting
- ---------
relationship with the Company commences. In the event that Consultant is an
entity or otherwise will be causing individuals in its employ or under its
supervision to participate in the rendering of the Services, Consultant warrants
that it shall cause each of such individuals to execute a Confidentiality
Agreement in the form attached as Exhibit C.
---------
9. Conflicts with this Agreement. Consultant represents and warrants
-----------------------------
that neither Consultant nor any of Consultant's partners, employees or agents is
under any pre-existing obligation in conflict or in any way inconsistent with
the provisions of this Agreement. Consultant warrants that Consultant has the
right to disclose or use all ideas, processes, techniques and other information,
if any, which Consultant has gained from third parties, and which Consultant
discloses to the Company in the course of performance of this Agreement, without
liability to such third parties. Consultant represents and warrants that
Consultant has not granted any rights or licenses to any intellectual property
or technology that would conflict with Consultant's obligations under this
Agreement. Consultant will not knowingly infringe upon any copyright, patent,
trade secret or other property right of any former client, employer or third
party in the performance of the services required by this Agreement.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties.
(b) Sole Agreement. This Agreement, including the Exhibits
--------------
hereto, constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(c) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
(d) Choice of Law. The validity, interpretation, construction
-------------
and performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
-2-
<PAGE>
(e) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(g) Arbitration. Any dispute or claim arising out of or in
-----------
connection with any provision of this Agreement, excluding Section 7 hereof,
will be finally settled by binding arbitration in Mountain View, California in
accordance with the rules of the American Arbitration Association by one
arbitrator appointed in accordance with said rules. The arbitrator shall apply
California law, without reference to rules of conflicts of law or rules of
statutory arbitration, to the resolution of any dispute. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for preliminary or interim equitable relief, or to compel
arbitration in accordance with this paragraph, without breach of this
arbitration provision. This Section 10(g) shall not apply to the Confidentiality
Agreement.
(h) Advice of Counsel. EACH PARTY ACKNOWLEDGES THAT, IN EXECUTING
-----------------
THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF
INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY
PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
-3-
<PAGE>
The parties have executed this Agreement on the respective dates set
forth below.
REPLAY NETWORKS, INC.
By: /s/ Kim LeMasters
---------------------------------
Title: Chairman, CEO
------------------------------
Address: 1945 Charleston Rd.
Mountain View, CA 94043
Date:_______________________________
KEVIN BOHREN
/s/ Kevin Bohren
-------------------------------------
Signature
Address: P.O. Box 6632
Avon, CO 81620
Date: 12/9/99
--------------------------------
SIGNATURE PAGE TO ((COMPANYNAME)) CONSULTING AGREEMENT
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF CONSULTING SERVICES
----------------------------------
Description of Services Schedule/Deadline
----------------------- -----------------
Advisory services for business development n/a
activities
Search for permanent VP Business Development n/a
candidate
<PAGE>
EXHIBIT B
---------
EXHIBIT B
COMPENSATION
------------
Check applicable payment terms:
[ ] For Services rendered by Consultant under this Agreement, the Company shall
pay Consultant at the rate of $______ per hour, payable monthly within
thirty (30) days following receipt of Consultant's invoice for the work
done during the prior month. Unless otherwise agreed upon in writing by
Company, Company's maximum liability for all Services performed during the
term of this Agreement shall not exceed $____________.
[X] Beginning November 1, 1999 consultant shall be paid $20,833 per month,
payable in arrears on the 15/th/ day of each month following the end of the
month in which the Services are rendered. Consultant will be paid $7,500
for services rendered during the month of October 1999. Consultant shall
provide Services of at least 40 hours per week. Unless otherwise agreed
upon in writing by Company, Company's maximum liability for all Services
performed during the term of this Agreement shall not exceed $111,665.
[ ] Consultant shall be paid $____________ upon the execution of this Agreement
and $____________ upon completion of the Services specified on Exhibit A to
---------
this Agreement.
[ ] Consultant will be granted a non-qualified option to purchase _________
shares of the Company's Common Stock, at an exercise price equal to the
fair market value (as determined by the Company's Board of Directors) on
the date of grant (currently estimated to be $ _____ per share). This
option will vest and become exercisable as follows:
________________________________________________________________________________
[ ] Consultant is authorized to incur the following expenses:
________________________________________________________________________________
<PAGE>
EXHIBIT C
---------
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
------------------------------
(omitted)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated August 31, 1999 relating to the financial statements of
ReplayTV, Inc., which appears in such Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
San Jose, California
January 26, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 14,636 686
<SECURITIES> 35,204 25
<RECEIVABLES> 292 0
<ALLOWANCES> 9 0
<INVENTORY> 988 0
<CURRENT-ASSETS> 334 225
<PP&E> 1,864 157
<DEPRECIATION> 156 25
<TOTAL-ASSETS> 53,406 1,068
<CURRENT-LIABILITIES> 5,407 1,328
<BONDS> 0 0
0 0
26 8
<COMMON> 6 4
<OTHER-SE> 47,967 (272)
<TOTAL-LIABILITY-AND-EQUITY> 53,406 1,068
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 20,459 3,256
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (342) 28
<INCOME-PRETAX> (20,117) (3,284)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (20,117) (3,284)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (20,117) (3,284)
<EPS-BASIC> (2.73) (0.48)
<EPS-DILUTED> (2.73) (0.48)
</TABLE>
