-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AQPpJ34ZRBU1aHwVufXOdZg1zHSqVWRFKmhqiwrLLHUfTmn/HWHviw8N2ZNr8hF8 v85rQgpM3R9kNnWDZkzTLg== /in/edgar/work/20000623/0000883780-00-000089/0000883780-00-000089.txt : 20000920 0000883780-00-000089.hdr.sgml : 20000920 ACCESSION NUMBER: 0000883780-00-000089 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20000623 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TIVO INC CENTRAL INDEX KEY: 0001088825 STANDARD INDUSTRIAL CLASSIFICATION: [4841 ] IRS NUMBER: 770453167 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-57007 FILM NUMBER: 660076 BUSINESS ADDRESS: STREET 1: C/O COOLEY GODWARD LLP STREET 2: FIVE PALO ALTO SQUARE 3000 EL CAMINO REA CITY: PALO ALTO STATE: CA ZIP: 94306-2155 BUSINESS PHONE: 4087476080 MAIL ADDRESS: STREET 1: 894 ROSS DRIVE STREET 2: SUITE 100 CITY: SUNNYVALE STATE: CA ZIP: 94089 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA ONLINE INC CENTRAL INDEX KEY: 0000883780 STANDARD INDUSTRIAL CLASSIFICATION: [7370 ] IRS NUMBER: 541322110 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: AMERICA ONLINE, INC. STREET 2: 22000 AOL WAY CITY: DULLES STATE: VA ZIP: 20166 BUSINESS PHONE: 7032651000 MAIL ADDRESS: STREET 1: 22000 AOL WAY CITY: DULLES STATE: VA ZIP: 20166 SC 13D 1 0001.txt INITIAL STATEMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) TIVO INC. (Name of Issuer) Common Stock, par value $0.001 per share (Title of Class of Securities) 888706108 (CUSIP Number) Sheila A. Clark, Esq. Senior Vice President, Legal, America Online, Inc. 22000 AOL Way Dulles, Virginia 20166-9323 (703) 265-1000 Copy to: David J. Sorkin, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 (212) 455-2000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 13, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box 9. 1. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY): America Online, Inc. 54-1322110 - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ] (b) [ ] - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 3. SEC USE ONLY: - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 4. SOURCE OF FUNDS: OO - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - --------- ---------------------------------------------------------------------- - ---------------------- ------ -------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER BENEFICIALLY OWNED 480,307(1) BY EACH REPORTING PERSON WITH ------ -------------------------------------------------- ------ -------------------------------------------------- 8. SHARED VOTING POWER 20,301,301(2) (see Item 3 herein) ------ -------------------------------------------------- ------ -------------------------------------------------- 9. SOLE DISPOSITIVE POWER 480,307(1) - ------ ------------------------------------------------------------------------- - ------ ------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - ---------------------- ------ -------------------------------------------------- - --------- ---------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 20,781,608(2) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 54.7%(3) - --------- ---------------------------------------------------------------------- - --------- ---------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - -------------------- (1) America Online, Inc. presently owns 480,307 shares of TiVo Common Stock (as defined below). (2) America Online, Inc. has entered into a Voting Agreement, dated as of June 9, 2000, with certain stockholders of TiVo Inc., as summarized herein, with respect to 20,301,301 shares of TiVo Common Stock. America Online, Inc. does not have any rights as a stockholder of TiVo Inc., including the right to dispose of (or to direct the disposition of) any of the shares of TiVo Common Stock subject to such agreement. America Online, Inc. has also agreed to purchase, subject to certain conditions and limitations, up to two hundred million dollars worth of TiVo Common Stock pursuant to an Investment Agreement dated as of June 9, 2000, between TiVo Inc. and America Online, Inc. Prior to the closing of the transactions contemplated by such agreement, America Online will not have any rights as a stockholder of TiVo, including the right to dispose of (or to direct the disposition of) any of the shares of TiVo Common Stock it shall acquire pursuant to such agreement. Accordingly, America Online, Inc. expressly disclaims beneficial ownership of all shares subject to the Voting Agreement and the Investment Agreement. (3) Based on the number of shares of TiVo Common Stock outstanding on June 9, 2000, as represented by TiVo Inc. in the Investment Agreement. Item 1. Security and Issuer. This statement on Schedule 13D (this "Schedule 13D") relates to the common stock, par value $0.001 per share ("TiVo Common Stock"), of TiVo Inc., a Delaware corporation ("TiVo"). The address of the principal executive office of TiVo is 2160 Gold Street, Alviso, California 95002. Item 2. Identity and Background. This Schedule 13D is filed by America Online, Inc., a Delaware corporation ("America Online" or the "Reporting Person"). The address of the principal executive office of America Online is 22000 AOL Way, Dulles, Virginia 20166-9323. America Online is the world's leader in branded interactive services and content. To the best of America Online's knowledge as of the date hereof, the name, business address, present principal occupation or employment and citizenship of each executive officer and director of America Online, and the name, principal business and address of any corporation or other organization in which such employment is conducted is set forth in Schedule I hereto. The information contained in Schedule I is incorporated herein by reference. During the last five years, neither America Online nor, to the best of America Online's knowledge, any of the executive officers or directors of America Online listed in Schedule I hereto, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. To the best of America Online's knowledge, no directors or officers of America Online have legal or beneficial ownership of any TiVo Common Stock. Item 3. Source and Amount of Funds or Other Consideration. The information set forth or incorporated by reference in Items 4 and 5 is hereby incorporated herein by reference. America Online has agreed to purchase up to $200 million worth in the aggregate of TiVo Common Stock and, under certain circumstances, preferred stock of TiVo pursuant to an Investment Agreement, dated as of June 9, 2000 (the "Investment Agreement"), by and between TiVo and America Online, as more fully described in Item 4. America Online expects to make the purchase using funds from its working capital. In order to facilitate the transactions contemplated by the Investment Agreement, America Online has also entered into a Voting Agreement, dated as of June 9, 2000 (the "Voting Agreement"), with certain stockholders of TiVo named therein (collectively, the "Stockholders"). Pursuant to the terms of the Voting Agreement, the Stockholders have agreed, among other things, (i) to vote all of the shares of TiVo Common Stock beneficially owned by them in favor of (a) the amendment of the certificate of incorporation of TiVo as contemplated by the Investment Agreement and (b) the approval of the issuance by TiVo of the securities to be issued pursuant to the Investment Agreement, and (ii) except as contemplated in the Voting Agreement, not to sell, transfer, pledge, encumber, assign or otherwise dispose of such shares, unless the transferee agrees in writing to be bound by the Voting Agreement. The Voting Agreement terminates upon the earliest to occur of (x) the date the stockholders of TiVo approve the transactions contemplated by the Investment Agreement, (y) the date the Investment Agreement is terminated, or (z) December 31, 2000. The name of each Stockholder subject to the Voting Agreement and the number of outstanding shares of TiVo Common Stock held by such Stockholder are set forth on the signature pages thereto and are incorporated herein by reference. America Online did not pay additional consideration to any Stockholder in connection with the execution and delivery of the Voting Agreement. America Online does not have any direct or indirect ownership or incidence of ownership with respect to any shares of TiVo Common Stock or any other securities of TiVo pursuant to the Voting Agreement. Accordingly, America Online expressly disclaims beneficial ownership of all such shares or other securities. References to, and descriptions of, the Investment Agreement and the Voting Agreement as set forth above in this Item 3 are qualified in their entirety by reference to the copies of the Investment Agreement (including exhibits thereto) and the Voting Agreement included as Exhibits 1 and 2, respectively, to this Schedule 13D, and are incorporated in this Item 3 in their entirety where such references and descriptions appear. Item 4. Purpose of the Transaction. The information set forth or incorporated by reference in Items 2, 3 and 5 is hereby incorporated herein by reference. Prior to the consummation of the transactions contemplated by the Investment Agreement (the "Closing"), (i) the certificate of incorporation of TiVo will be amended in accordance with the terms of the Investment Agreement and the form of the Amended and Restated Certificate of Incorporation of TiVo attached as Exhibit A to the Investment Agreement, and (ii) pursuant to the Stockholders and Registration Rights Agreement, dated as of June 9, 2000 (the "Stockholders Agreement"), by and between TiVo and America Online, TiVo will take all such action as may be required under applicable law so that, at the option of America Online, effective as of the Closing, the Board of Directors of TiVo will include a director designated by America Online or the Board of Directors of TiVo will permit an observer appointed by America Online to attend all board meetings (the "Board Representation Rights"). Pursuant to the Investment Agreement, TiVo has agreed to issue and sell to America Online that number of shares of TiVo Common Stock which, when multiplied by the Common Stock Price (as defined below), is as near as possible to $200 million, subject to adjustment as described below. The "Common Stock Price" is the higher of $23.00 or the average closing price of the TiVo Common Stock on the Nasdaq National Market System for the ten consecutive trading days ending on the day immediately preceding the Determination Date (as defined below) (the "Closing Average"), subject to a maximum of $35.00 per share. In the event that the Closing Average is less than $10.00 per share, America Online has the right to terminate the Investment Agreement, subject to TiVo's right to adjust the Common Stock Price to $10.00 per share and rescind the termination. The "Determination Date" is the date on which all of the conditions to the closing of the transactions contemplated by the Investment Agreement (other than those which by their terms cannot be satisfied until such closing) shall have been satisfied or waived. If the Common Stock Price is less than $30.00 per share, (i) the number of shares of TiVo Common Stock issued to America Online will be reduced to a number equal to 6,666,667 shares multiplied by a fraction, the numerator of which is the Adjustment Price (as defined below) and the denominator of which is $30.00, and (ii) TiVo will instead issue and sell to America Online a number of shares of convertible preferred stock (the "Preferred Shares") having an aggregate initial liquidation value equal to the difference between (x) $200 million and (y) the aggregate number of shares of TiVo Common Stock purchased by America Online multiplied by the Adjustment Price. The "Adjustment Price" means either (a) the Common Stock Price (if the Closing Average is equal to or greater than $10.00 per share) or (b) the Closing Average (if the Closing Average is less than $10.00 per share). In addition, if, as of the date of the closing of the transactions contemplated by the Investment Agreement (the "Closing Date"), the sum of (x) the aggregate initial liquidation value of the Preferred Shares being acquired pursuant to the Investment Agreement, (y) the value of the TiVo Common Stock being acquired pursuant to the Investment Agreement, and (z) the value of the TiVo Common Stock previously owned by America Online exceeds 25% of the sum of (1) the aggregate initial liquidation value of the Preferred Shares being acquired pursuant to the Investment Agreement, (2) the value of the TiVo Common Stock being acquired pursuant to the Investment Agreement, and (3) the value of all of the shares of TiVo Common Stock outstanding on the Closing Date prior to the transactions contemplated by the Investment Agreement (such excess above 25% being the "Excess Equity Value"), then the number of Preferred Shares to be purchased by America Online will be reduced by such number of shares as would have an aggregate initial liquidation value equal to the Excess Equity Value (the "Excess Preferred Shares"). Any Preferred Shares purchased by America Online pursuant to the Investment Agreement will (i) be convertible into shares of TiVo Common Stock at a conversion price, subject to antidilution adjustment, equal to the lesser of $30.00 or three times the Closing Average, (ii) pay a dividend based on an average non-governmental institutional funds rate as reported by iMoneyNet, Inc., (iii) have one vote per share on all matters on which the TiVo Common Stock votes, and (iv) require a separate vote of the holders of the Preferred Shares with respect to, among other things, certain amendments to the certificate of incorporation, the authorization or issuance of certain classes or series of stock, certain dividends, repurchases and similar transactions and certain significant corporate transactions. In addition, all Preferred Shares shall automatically convert into TiVo Common Stock if the closing price of the TiVo Common Stock on the Nasdaq National Market exceeds $30.00 per share for eighteen trading days in any twenty consecutive trading day period. The Preferred Shares may be redeemed by TiVo, in whole and not in part, at any time after the third anniversary of the date on which they are issued, unless America Online has previously waived its right to receive dividends. The redemption price will be the original issue price of the Preferred Shares, plus all compounded or accrued and unpaid dividends. In addition, upon the Closing, TiVo will issue to America Online warrants (the "Warrants") to purchase in the aggregate a number of shares of TiVo Common Stock which, when combined with the number of shares of TiVo Common Stock owned by America Online as of the Closing Date and the number of shares of TiVo Common Stock that would be issuable as of the Closing Date upon the conversion of the Preferred Shares to be issued pursuant to the Investment Agreement, if any, would constitute (after issuance) 30% of all the issued and outstanding capital stock of TiVo as of such date (the "Warrant Shares"). The Warrant Shares shall be allocated among different forms of warrants as follows: (i) a warrant to purchase the lesser of (a) 33 1/3% of all the Warrant Shares and (b) 2,941,402 Warrant Shares shall be issued in the form of Warrant attached as Exhibit B to the Investment Agreement, and be exercisable for a period of six months following the satisfaction of certain performance requirements, with an exercise price equal to 90% of the average of the last reported trading prices of the TiVo Common Stock on the Nasdaq National Market System for the ten consecutive trading days preceding exercise; (ii) a warrant to purchase the lesser of (a) 33 1/3% of all the Warrant Shares and (b) 2,941,401 Warrant Shares shall be issued in the form of Warrant attached as Exhibit C to the Investment Agreement, and be exercisable for a period of six months following the satisfaction of certain performance requirements, with an exercise price equal to 90% of the average of the last reported trading prices of the TiVo Common Stock on the Nasdaq National Market System for the ten consecutive trading days preceding exercise; and (iii) (a) if the Closing Average is equal to or greater than $30.00, a warrant to purchase the remaining Warrant Shares after the allocation set forth in clauses (i) and (ii) above (the "Vested Warrant Shares") shall be issued in the form of Warrant attached as Exhibit D to the Investment Agreement, and be exercisable at any time until December 31, 2001, with an exercise price equal to the Common Stock Price, or (b) if the Closing Average is less than $30.00, (1) a warrant to purchase a number of Warrant Shares equal to the number of Vested Warrant Shares multiplied by a fraction, the numerator of which is the Adjustment Price and the denominator of which is $30.00 shall be issued in the form of Warrant attached as Exhibit D to the Investment Agreement, and be exercisable at any time until December 31, 2001, with an exercise price equal to the Common Stock Price, and (2) a warrant to purchase the remaining Vested Warrant Shares after the allocation set forth in the preceding clause (1) shall be issued in the form of Warrant attached as Exhibit E to the Investment Agreement, and be exercisable at any time until December 31, 2003, with an exercise price equal to the lesser of (x) $30.00 and (y) three times the Closing Average; provided that a portion of any Warrant to be issued pursuant to clause (b)(2) shall be mandatorily exercisable in accordance with its terms with respect to a number of Vested Warrant Shares equal to the number of shares of TiVo Common Stock, if any, that would have been issuable upon conversion of the Excess Preferred Shares (if they were issued) as of the Closing Date, subject to a maximum of all the Vested Warrant Shares subject to such Warrant. America Online will not pay additional consideration to TiVo upon the execution and delivery of the Warrants. Until the Warrants are issued and become exercisable, and are exercised, America Online will not have any right to vote (or to direct the vote of) or dispose of (or direct the disposition of), and is not entitled to any rights as a stockholder of TiVo with respect to, any shares of TiVo Common Stock that may be purchased pursuant to any Warrant. Accordingly, America Online expressly disclaims beneficial ownership of all such shares. A portion of the proceeds from the purchase of securities by America Online pursuant to the Investment Agreement and upon exercise of the Warrants up to an aggregate amount of $100 million shall be deposited into an escrow account. In the event that (i) the bona fide commercial release and deployment of hardware for the integrated AOL/TiVo television service has not occurred by December 31, 2001, and (ii) America Online has not committed an uncured material breach of the Product Integration and Marketing Agreement, dated as of June 9, 2000, by and between America Online and TiVo, then America Online shall have the right to require TiVo to repurchase a number of Preferred Shares and shares of TiVo Common Stock having an aggregate value equal to the escrowed funds in exchange for the release to America Online of the escrowed funds. If such release and deployment does occur prior to December 31, 2001, then all of the escrowed funds shall be released to TiVo for its use in accordance with the terms of the Investment Agreement. The Investment Agreement is subject to customary closing conditions, including (i) the approval of the Amended and Restated Certificate of Incorporation of TiVo and the issuance of the securities contemplated by the Investment Agreement by the stockholders of TiVo, (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the receipt of all other required consents or approvals, (iv) agreement by America Online and TiVo on (a) the technical, functional and performance specifications for certain operational software to be provided by America Online to TiVo, (b) milestones for the development and deployment of a joint AOL/TiVo television product and service, and (c) certain minimum quality and performance criteria for the joint AOL/TiVo television product and service, and (iv) the satisfaction or waiver of certain other conditions as more fully described in the Investment Agreement. In connection with the Investment Agreement and in consideration thereof, America Online and TiVo also entered into the Stockholders Agreement, whereby America Online received certain benefits, including but not limited to (i) certain information rights, (ii) certain rights to acquire additional securities in accordance with its pro rata ownership of TiVo Common Stock upon the issuance by TiVo of new shares of TiVo Common Stock or other securities convertible into or exchangeable for TiVo Common Stock (the "Equity Purchase Rights"), and (iii) certain rights to require TiVo to register with the U.S. Securities and Exchange Commission (the "SEC") transfers of TiVo securities by America Online and its transferees. Pursuant to the Stockholders Agreement, TiVo also granted the Board Representation Rights described above to America Online. America Online's Equity Purchase Rights and Board Representations Rights terminate upon the earlier to occur of (a) June 9, 2008, and (b) the first date following the Closing Date on which AOL does not own in excess of 10% of the outstanding shares of TiVo Common Stock (the period running from June 9, 2000, until the earlier to occur of such dates being referred to herein as the "Standstill Period"). Pursuant to the Stockholders Agreement, America Online has agreed that, during the Standstill Period: (i) (a) it shall be entitled to vote, or cause to be voted, that number of voting securities it owns representing up to 19.9% of the voting power of all the outstanding voting securities of TiVo on any matter submitted to a vote of stockholders (or for which action in lieu of a vote is solicited by TiVo) in America Online's sole discretion, and (b) it shall vote or cause to be voted all of the voting securities that it at any time owns representing in excess of 19.9% of the total voting power of all the outstanding voting securities of TiVo on any matter submitted to a vote of stockholders (or for which action in lieu of a vote is solicited by TiVo) in accordance with the recommendation of the Board of Directors of TiVo (provided that America Online shall not be limited or restricted in any manner in voting any number of voting securities and shall not be subject to any voting obligation with respect to any voting securities in respect of (1) any amendment to TiVo's certificate of incorporation that is adverse in a discriminatory manner to America Online, or (2) any Acquisition Proposal (as defined below) if TiVo has materially breached certain of its obligations under the Investment Agreement or the Stockholders Agreement relating to (A) competing proposals, or (B) obtaining the approval of its stockholders); (ii) it will not transfer any of its equity securities of TiVo to any person without TiVo's prior consent (provided that America Online may transfer all or, from time to time, any portion of its equity securities of TiVo (a) if, after giving effect to the transfer, the transferee will not, to America Online's knowledge, beneficially own or have the right to acquire in excess of 5% of the outstanding capital stock of TiVo, (b) in response to an Acquisition Proposal by a third party that has been recommended or approved by TiVo's Board of Directors, (c) to persons who are eligible to report their ownership of equity securities on Schedule 13G under Section 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor provision, (d) subject to certain obligations to make inquiries regarding ownership of TiVo securities by potential purchasers, pursuant to a bona fide underwritten public offering or Rule 144, (e) upon or following a change of control of TiVo, or (f) to any affiliate of America Online (provided that such affiliate shall agree in writing to be bound by the terms of the Stockholders Agreement, and provided further that in the event such transferee ceases to be an affiliate of America Online, such transferee shall transfer any equity securities then held by it to America Online or another affiliate of America Online); and (iii) to grant to TiVo, subject to certain specified exceptions, a right of first offer with respect to sales by America Online of its TiVo equity securities in private block transfers. In addition, America Online has agreed that, subject to the exercise of its Equity Purchase Rights and to certain exceptions discussed below, without the prior approval of the Board of Directors of TiVo (excluding, for purposes of such approval, the director designated by America Online, if any) it may not: (i) acquire or agree to acquire the beneficial ownership of any additional equity securities of TiVo or any voting rights with respect to the capital stock of TiVo (excluding any acquisition or proposed acquisition by America Online of beneficial ownership of any additional voting securities of TiVo which (a) is by way of stock dividends, stock reclassifications or other distributions or offerings made available on a pro rata basis to holders of securities of TiVo generally, or (b) involves equity securities acquired from TiVo or otherwise in accordance with the provisions of the Investment Agreement, the Stockholders Agreement and the transactions contemplated thereby); (ii) make, or in any way participate in, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act), to vote any securities of TiVo or seek to influence any person with respect to the voting of any securities of TiVo or publicly announce its intention to do so; (iii) make any public announcement with respect to, or submit any offer or purchase proposal that is required under applicable law to be made public by TiVo for, any merger, consolidation, purchase of substantial assets of TiVo (including securities), tender, exchange or other offer for any securities or other business combination involving TiVo (each, an "Acquisition Proposal"); (iv) act, either independently or in concert with others, in connection with any Acquisition Proposal, or form or join a "group" (as defined in Section 13(d)(3) of the Exchange Act) (except that America Online is not restricted from acting independently to submit an Acquisition Proposal that is not prohibited under clause (iii) above); or (v) make any demand, request or proposal to amend, waive or terminate any of the foregoing provisions (clauses (i) through (v) collectively, the "Acquisition Restrictions"). America Online will be released from the Acquisition Restrictions (i) upon the expiration of the Standstill Period, (ii) if TiVo materially breaches its obligations under the Stockholders Agreement described in the following paragraph, (iii) if TiVo materially breaches its obligations under the Investment Agreement relating to (a) competing proposals, or (b) obtaining the approval of its stockholders, or (iv) if TiVo delivers confidential information to any third party who has expressed an interest in making, or has made, an Acquisition Proposal and such third party has not entered into a "standstill" agreement or other agreement with TiVo containing restrictions similar to those discussed herein. Notwithstanding the Acquisition Restrictions, America Online is permitted to file one or more amendments to its Schedule 13D and any other similar or successor forms required to be filed with the SEC to reflect any proposals or announcements it is not prohibited from making, or other actions it is not prohibited from taking, pursuant to its standstill obligations under the Stockholders Agreement. Pursuant to the Stockholders Agreement, in the event that TiVo solicits an Acquisition Proposal or any interest in making an Acquisition Proposal from any third party or receives an unsolicited Acquisition Proposal which it determines to consider, then it is obligated to notify America Online within five business days of such event, and America Online will be released from the Acquisition Restrictions to the extent required in order to submit an Acquisition Proposal to TiVo and participate in the process developed by TiVo for consideration of Acquisition Proposals (if any), so long as America Online agrees to be bound by the same rules (if any) as are applicable to other parties participating in such process (provided that America Online will not be required to agree to any rules governing the conduct of any third party that are in any way more restrictive to America Online than its obligations contained in the standstill provisions of the Stockholders Agreement). Moreover, if TiVo, in connection with an Acquisition Proposal, at any time enters into a "standstill" agreement with a third party which contains terms that are more favorable to such third party than America Online's standstill obligations under the Stockholders Agreement, then the Acquisition Restrictions and other provisions of the Stockholders Agreement governing such standstill obligations shall be deemed amended or supplemented to the extent necessary to provide America Online with the benefit of such more favorable terms. In addition, during the Standstill Period, TiVo is obligated under the Stockholders Agreement to notify America Online within five business days of (i) its receipt of a bona fide Acquisition Proposal from a third party, (ii) the determination by its Board of Directors to solicit any Acquisition Proposal from a third party, and (iii) the determination by its Board of Directors to provide confidential information to, or enter into negotiations or discussions with, a third party who has expressed an interest in making, or has made, an Acquisition Proposal. Following such notice, America Online shall then have two business days in which it may provide a list of at least 15 entities, each of which America Online in good faith deems to be (a) capable of completing an acquisition of TiVo, and (b) either a television or film media company, a video service operator, an Internet service provider or a company providing interactive video services or enabling platform technologies. Should America Online submit such a list, TiVo shall then be obligated to inform America Online within one business day whether or not the third party making such Acquisition Proposal or expressing interest in making an Acquisition Proposal is or is an affiliate of one of the entities set forth on such list. In addition, TiVo has also agreed that, during the Standstill Period, it shall not enter into any agreement, letter of intent or similar document (whether binding or not) with respect to any Acquisition Proposal prior to the expiration of a five business day period following the date on which it delivers a notice to America Online relating to (a) the determination by TiVo's Board of Directors to solicit any Acquisition Proposal from a third party or (b) the determination by TiVo's Board of Directors to provide confidential information to, or enter into negotiations or discussions with, a third party who has expressed an interest in making, or has made, an Acquisition Proposal, as discussed above. References to, and descriptions of, the Investment Agreement and the Stockholders Agreement as set forth above in this Item 4 are qualified in their entirety by reference to the copies of the Investment Agreement (including exhibits thereto) and the Stockholders Agreement included as Exhibits 1 and 3, respectively, to this Schedule 13D, and are incorporated in this Item 4 in their entirety where such references and descriptions appear. Item 5. Interest in Securities of TiVo. The information set forth or incorporated by reference in Items 2, 3 and 4 is hereby incorporated herein by reference. America Online is presently the beneficial owner of 480,307 shares of TiVo Common Stock (representing approximately 1.3% of the voting power of the shares of TiVo Common Stock outstanding as of June 9, 2000, as represented by TiVo in the Investment Agreement). America Online previously acquired these shares in the normal course of its business and investment activities. The number of shares of Common Stock subject to the Voting Agreement is 20,301,301 (representing approximately 53.5% of the voting power of shares of TiVo Common Stock outstanding as of June 9, 2000, as represented by TiVo in the Investment Agreement). By virtue of the Voting Agreement, America Online may be deemed to share with the Stockholders the power to vote shares of TiVo Common Stock subject to the Voting Agreement. However, America Online is not entitled to any rights as a stockholder of TiVo with respect to the shares of TiVo Common Stock covered by the Voting Agreement and expressly disclaims any beneficial ownership of the shares of TiVo Common Stock subject to the Voting Agreement. Other than as set forth in this Schedule 13D, to the best of America Online's knowledge as of the date hereof, (i) neither America Online nor any subsidiary or affiliate of America Online nor any of America Online's executive officers or directors, beneficially owns any shares of TiVo Common Stock, and (ii) there have been no transactions in the shares of TiVo Common Stock effected during the past 60 days by America Online, nor to the best of America Online's knowledge, by any subsidiary or affiliate of America Online or any of America Online's executive officers of directors. No other person is known by America Online to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of the Common Stock of TiVo obtainable by America Online upon the closing of the Share Purchase or the exercise of any Warrant. References to, and descriptions of, the Investment Agreement and the Voting Agreement as set forth above or incorporated in this Item 5 are qualified in their entirety by reference to the copies of the Investment Agreement and the Voting Agreement included as Exhibits 1 and 2, respectively, to this Schedule 13D, and are incorporated in this Item 5 in their entirety where such references and descriptions appear. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of TiVo. The information set forth, or incorporated by reference, in Items 3 through 5 is hereby incorporated herein by reference. Copies of the Investment Agreement, the Voting Agreement and the Stockholders Agreement are included as Exhibits 1, 2 and 3, respectively, to this Schedule 13D. To the best of America Online's knowledge, except as described in this Schedule 13D, there are at present no other contracts, arrangements, understandings or relationships among the persons named in Item 2 above, and between any such persons and any person, with respect to any securities of TiVo. Item 7. Material to be Filed as Exhibits. Exhibit Description 1. Investment Agreement, dated as of June 9, 2000, by and between America Online, Inc. and TiVo Inc. (including the Amended and Restated Certificate of Incorporation of TiVo Inc., attached thereto as Exhibit A, the Form of First Performance Warrant, attached thereto as Exhibit B, the Form of Second Performance Warrant, attached thereto as Exhibit C, the Form of First Vested Warrant, attached thereto as Exhibit D, the Form of Second Vested Warrant, attached thereto as Exhibit E, and the Form of Escrow Agreement, attached thereto as Exhibit F). 2. Voting Agreement, dated as of June 9, 2000, among America Online, Inc. and the stockholders of TiVo Inc. named therein. 3. Stockholders and Registration Rights Agreement, dated as of June 9, 2000, by and between America Online, Inc. and TiVo Inc. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. AMERICA ONLINE, INC. By: /s/J. Michael Kelly Name: J. Michael Kelly Title: Senior Vice President and Chief Financial Officer Dated: June 23, 2000 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF AMERICA ONLINE, INC. The following table sets forth the name, business address and present principal occupation or employment of each director and executive officer of America Online. Except as indicated below, each such person is a U.S. citizen, and the business address of each such person is 22000 AOL Way, Dulles, Virginia 20166-9323. Board of Directors Name and Title Present Principal Occupation - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Stephen M. Case, Chief Executive Officer and Chairman of the Chairman of the Board Board; America Online, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Daniel F. Akerson, Chairman of the Board; Director Nextel Communications, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- James L. Barksdale, Managing Partner; Director The Barksdale Group - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Frank J. Caufield, General Partner; Director Kleiner Perkins Caufield & Byers - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Miles R. Gilburne, Director; Director America Online, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- General Alexander M. Haig, Jr., Chairman and President; Director Worldwide Associates, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Kenneth J. Novack, Vice Chairman; Director America Online, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Robert W. Pittman, President and Chief Operating Officer; Director America Online, Inc. - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- General Colin L. Powell, Chairman; Director America's Promise: The Alliance for Youth - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Franklin D. Raines, Chairman and Chief Executive Officer; Director Fannie Mae - ------------------------------------ ------------------------------------------- - ------------------------------------ ------------------------------------------- Marjorie M. Scardino, Chief Executive Officer; Director Pearson PLC - ------------------------------------ ------------------------------------------- Executive Officers Who Are Not Directors: - ----------------------------------- -------------------------------------------- Name Title and Present Principal Occupation - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- Paul T. Cappuccio Senior Vice President and General Counsel; America Online, Inc. - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- J. Michael Kelly Senior Vice President, Chief Financial Officer and Assistant Secretary; America Online, Inc. - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- Kenneth B. Lerer Senior Vice President; America Online, Inc. - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- James F. MacGuidwin Senior Vice President, Controller and Chief Accounting & Budget Officer; America Online, Inc. - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- William J. Raduchel Senior Vice President and Chief Technology Officer; America Online, Inc. - ----------------------------------- -------------------------------------------- - ----------------------------------- -------------------------------------------- George Vradenburg, III Senior Vice President, Global and Strategic Policy; America Online, Inc. - ----------------------------------- -------------------------------------------- The present principal occupation of each of the named executive officers is the same as the named position(s) held with America Online, Inc. EXHIBIT INDEX Exhibit Description 1. Investment Agreement, dated as of June 9, 2000, by and between America Online, Inc. and TiVo Inc. (including the Amended and Restated Certificate of Incorporation of TiVo Inc., attached thereto as Exhibit A, the Form of First Performance Warrant, attached thereto as Exhibit B, the Form of Second Performance Warrant, attached thereto as Exhibit C, the Form of First Vested Warrant, attached thereto as Exhibit D, the Form of Second Vested Warrant, attached thereto as Exhibit E, and the Form of Escrow Agreement, attached thereto as Exhibit F). 2. Voting Agreement, dated as of June 9, 2000, among America Online, Inc. and the stockholders of TiVo Inc. named therein. 3. Stockholders and Registration Rights Agreement, dated as of June 9, 2000, by and between America Online, Inc. and TiVo Inc. EX-1 2 0002.txt INVESTMENT AGREEMENT TIVO INC. INVESTMENT AGREEMENT This Investment Agreement (the "Agreement") is entered into as of June 9, 2000, by and between TiVo Inc., a Delaware corporation (the "Company"), and America Online, Inc., a Delaware Corporation (the "Purchaser"), relating to, among other things, the Company's common stock, par value $0.001 per share (the "Common Stock"), and the Company's Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock"). Recitals Whereas, the Company desires to sell to the Purchaser and the Purchaser desires to purchase from the Company, Common Stock and, depending on the trading price of the Common Stock, Preferred Stock (collectively, the "Shares") on the terms and conditions set forth in this Agreement (the "Share Purchase"); Whereas, in connection with the sale and issuance of the Shares, the Company desires to issue to the Purchaser the Warrants (as defined herein) to purchase shares of Common Stock; Whereas, simultaneously herewith, the Company and the Purchaser are entering into (i) a Stockholders and Registration Rights Agreement (the "Stockholders Agreement") which will provide for certain rights and obligations of the parties related to, among other things, the Purchaser's equity interests in the Company, and (ii) a Product Integration and Marketing Agreement (the "Commercial Agreement"), pursuant to which the Company and the Purchaser will work together to jointly develop a branded interactive television service; Whereas, simultaneously herewith, certain stockholders of the Company collectively owning in excess of a majority of the outstanding shares of Common Stock are entering into a Voting Agreement (the "Voting Agreement") with the Purchaser, pursuant to which such stockholders agree to vote their shares of Common Stock in favor of certain of the transactions contemplated hereby and by the Related Agreements (as defined herein); Now, Therefore, in consideration of the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Agreement To Sell And Purchase. 1.1 Authorization of Shares. Subject to receipt of the Company Stockholder Approval (as defined below), the Company has authorized (i) the sale and issuance to the Purchaser of the Shares and the Warrants, (ii) the issuance of the shares of Common Stock to be issued upon conversion of the Preferred Shares (the "Conversion Shares") and (iii) the issuance of the Warrant Shares (as defined herein) to be issued upon exercise of the Warrants. The Shares, Conversion Shares and Warrant Shares shall have the rights, preferences, privileges and restrictions set forth in the Amended and Restated Certificate of Incorporation of the Company in the form attached hereto as Exhibit A (the "Restated Certificate"). 1.2 Sale and Purchase. (a) Common Stock. Subject to Section 1.2(c) and the other terms and conditions of this Agreement, the Company agrees to issue and sell to the Purchaser and the Purchaser agrees to purchase at the Closing (as defined below) that number of shares of Common Stock, which when multiplied by the Common Stock Price (as defined below) is as near as possible to two hundred million dollars ($200,000,000) (the "Common Shares"). Subject to Section 1.2(b), the per share purchase price for the Common Shares shall be equal to the higher of (i) $23.00, or (ii) the average closing price of the Common Stock on the Nasdaq National Market System for the 10 consecutive full trading days ending on the Determination Date (as defined below) (the "Closing Average"), subject to a maximum per share purchase price of thirty-five dollars ($35) (the "Common Stock Price"). If the Closing Average is less than ten dollars ($10) per share, the Purchaser will have the right to terminate this Agreement and the transactions contemplated hereby, subject to the Company's rights under Section 1.2(b), at any time during the four Business Day period commencing on the Determination Date, exercisable by the Purchaser's delivery of written notice to such effect to the Company during such four Business Day period; provided that such notice and the Purchaser's termination of this Agreement may be withdrawn at any time during such four Business Day period. For purposes hereof, "Determination Date" means the trading day immediately preceding the date on which all the conditions to Closing (other than conditions that, by their terms, cannot be satisfied until the Closing) set forth in Section 5 hereof shall have been satisfied or waived. (b) Adjustment of Common Stock Price. If the Purchaser exercises its termination right pursuant to Section 1.2(a), the Company shall have the right, exercisable during the three Business Day period following the date of the Purchaser's notice of termination by delivery of written notice to the Purchaser during such three Business Day period, to adjust the Common Stock Price to be ten dollars ($10) per share. If the Company makes an election to adjust the terms of the transaction as contemplated by the preceding sentence within such three Business Day period, (i) no termination of this Agreement shall be deemed to have occurred pursuant to Section 1.2(a) and (ii) this Agreement shall remain in effect in accordance with its terms, except that all references in this Agreement to the Common Stock Price shall be deemed to refer to the Common Stock Price as adjusted pursuant to this Section 1.2(b). (c) Restructuring of Share Purchase if Common Stock Price Is Less Than Thirty Dollars. In the event that the Common Stock Price is less than thirty dollars ($30) per share, the number of shares of Common Stock to be purchased by the Purchaser shall be reduced and, subject to the terms and conditions of this Agreement, the Company shall issue to the Purchaser shares of Preferred Stock in accordance with this Section 1.2(c). For purposes of this Section 1.2(c), the term "Adjustment Price" shall mean (i) if the Closing Average is equal to or greater than ten dollars ($10) per share, the Common Stock Price or (ii) if the Closing Average is less than $10, the Closing Average. (i) Decrease in Number of Common Shares Purchased. The number of Common Shares that the Company shall issue to the Purchaser shall be reduced to a number equal to 6,666,667 shares multiplied by a fraction, the numerator of which is the Adjustment Price and the denominator of which is thirty dollars ($30). (ii) Sale of Preferred Stock to the Purchaser. The Company agrees to issue to the Purchaser and the Purchaser agrees to purchase in accordance with the terms hereof that number of shares of Preferred Stock having an aggregate initial liquidation value equal to (x) two hundred million dollars ($200,000,000) less (y) the aggregate number of Common Shares purchased multiplied by the Adjustment Price (the "Preferred Shares"). If, as of the Closing Date, the sum of (1) the aggregate initial liquidation value of the Preferred Shares to be purchased pursuant to the preceding sentence, (2) the value of the Common Shares to be purchased (calculated as the product of the number of Common Shares to be purchased and the Common Stock Price) and (3) the value of the Common Stock previously owned by the Purchaser (calculated as the product of the number of such shares and the amount paid therefor), exceeds 25% of the sum of (1) the aggregate initial liquidation value of Preferred Shares to be purchased, (2) the value of Common Shares to be purchased (calculated as the product of the number of Common Shares to be purchased and the Common Stock Price) and (3) the value of all the shares of Common Stock outstanding on the Closing Date prior to the transactions contemplated hereby (calculated as the product of the number of such shares and the Closing Average) (such excess above 25%, the "Excess Equity Value"), then the number of shares of Preferred Stock to be purchased by the Purchaser shall be reduced by a number of shares as would have an aggregate initial liquidation value equal to the Excess Equity Value (the "Excess Preferred Shares"). 1.3 Warrants. Upon the closing of the Share Purchase, in accordance with this Section 1.3, the Company shall issue to the Purchaser warrants (the "Warrants") to purchase in the aggregate a number of shares of Common Stock which, when combined with the number of shares of Common Stock owned by the Purchaser as of the Closing Date and the number of shares of Common Stock that would be issuable as of the Closing pursuant to the Preferred Shares to be issued pursuant to Section 1.2(c)(ii), if any, would constitute (after issuance) 30% of all the issued and outstanding capital stock of the Company as of the Closing Date, rounded to the nearest whole share (the "Warrant Shares"). The Warrant Shares shall be allocated among different forms of warrants as follows: (i) a warrant to purchase the lesser of (i) 33 1/3% of all the Warrant Shares and (ii) 2,941,402 Warrant Shares shall be issued in the form of Exhibit B hereto; (ii) a warrant to purchase the lesser of (i) 33 1/3% of all the Warrant Shares and (ii) 2,941,401 Warrant Shares shall be issued in the form of Exhibit C hereto; and (iii) (A) if the Closing Average is equal to or greater than thirty dollars ($30), a warrant to purchase the remaining Warrant Shares after the allocation set forth in clauses (i) and (ii) above (the "Vested Warrant Shares") in the form of Exhibit D hereto, having a per share exercise price equal to the Common Stock Price or (B) if the Closing Average is less than thirty dollars ($30), (1) a warrant to purchase a number of Warrant Shares equal to the number of Vested Warrant Shares multiplied by a fraction, the numerator of which is the Adjustment Price and the denominator of which is thirty dollars ($30) in the form of Exhibit D hereto, having a per share exercise price equal to the Common Stock Price, and (2) a warrant to purchase the remaining Vested Warrant Shares after the allocation set forth in the preceding clause (1) in the form of Exhibit E hereto, having a per share exercise price equal to the lesser of (x) thirty dollars ($30) and (y) three times the Closing Average; provided that a portion of any Warrant to be issued pursuant to this Section 1.3(iii)(B)(2) shall be mandatorily exercisable in accordance with its terms with respect to a number of Vested Warrant Shares equal to the number of shares of Common Stock, if any, that would have been issuable upon conversion of the Excess Preferred Shares (if they were issued) as of the Closing Date, subject to a maximum of all the Vested Warrant Shares subject to such Warrant. The Purchaser shall not be obligated to pay any additional consideration for the issuance of the Warrants and, in addition to the terms set forth above, the terms of each of the Warrants shall be as set forth in Exhibits B, C, D and, if applicable, E. 1.4 Use and Escrow of Certain Funds. (a) The Company and the Purchaser agree that (i) sixty percent (60%) of the proceeds received by the Company in the Share Purchase and forty percent (40%) of the proceeds received by the Company upon the exercise of any of the Warrants shall be retained by the Company without any restriction whatsoever on the use thereof and (ii) an amount in cash equal to forty percent (40%) of any proceeds received by the Company in the Share Purchase and sixty percent (60%) of the proceeds received by the Company upon the exercise of any of the Warrants shall be deposited into an interest-bearing escrow account (the "Escrow Account") with an escrow agent to be selected by mutual agreement of the Company and the Purchaser pursuant to an escrow agreement in the form of Exhibit F hereto, with such changes and additions as shall be requested by the escrow agent or the L/C Bank (as defined below) and reasonably acceptable to the Company and the Purchaser (the "Escrow Agreement"). At any time that this Agreement provides for the Escrowed Funds to be released from the Escrow Account, both parties agree to take any action required under the Escrow Agreement to cause the release of the Escrowed Funds. Such proceeds shall be allocated in such manner until such time as the aggregate amount of proceeds retained by the Company pursuant to clause (i) above equals one hundred million dollars ($100,000,000), after which time an amount in cash equal to all such proceeds shall be deposited into the Escrow Account until such time as all such deposited funds (but excluding any interest earned on such funds) equal one hundred million dollars ($100,000,000), after which time all further proceeds shall be retained by the Company. All amounts deposited into the Escrow Account, together with all interest earned on amounts in the Escrow Account (all such funds and interest, the "Escrowed Funds"), shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party hereto, and shall be held and distributed in accordance with the terms, at the times and to the parties in accordance with the terms hereof and the Escrow Agreement. Upon release to the Company in accordance with this Section 1.4 and the terms of the Escrow Agreement, one hundred million dollars ($100,000,000) of the Escrowed Funds shall be designated as "Earmarked Funds" and used exclusively in accordance with Section 8.2 of the Commercial Agreement and any additional Escrowed Funds shall be released to the Company and may be used by the Company for any purpose whatsoever. If, upon the release of the Escrowed Funds to the Company in accordance with the terms of the Escrow Agreement, the amount of Escrowed Funds (excluding any interest earned while in the Escrow Account) is less than one hundred million dollars ($100,000,000) at such time, then 60% of the proceeds from the exercise of any of the Warrants (up to the difference between one hundred million dollars ($100,000,000) and such amount of Escrowed Funds) shall also be designated as "Earmarked Funds" and used exclusively in accordance with Section 8.2 of the Commercial Agreement. (b) If (i) the bona fide commercial release and deployment ("Set Top Box Launch") of the Integrated Product (as defined in the Commercial Agreement) has not occurred by December 31, 2001, and (ii) the Purchaser has not committed a Material Breach (as defined in the Commercial Agreement) of the Commercial Agreement that has not been cured or waived at such time, then the Purchaser shall have the option to require the Company, exercisable by written notice to such effect to the Company (a "Put Notice"), to repurchase that number of Preferred Shares having an initial liquidation value equal to the amount of proceeds deposited by the Company into the Escrow Account (the "Put Amount") and, if all the Preferred Shares have an aggregate initial liquidation value of less than the Put Amount, then the Purchaser may also require the Company to repurchase a number of shares of Common Stock having a value (calculated as the product of the number of shares of Common Stock and the Common Stock Price) equal to the difference between the aggregate initial liquidation value of the Preferred Shares and the Put Amount. Subject to Section 1.4(c), the aggregate purchase price for the repurchase of Shares pursuant to this Section 1.4(b) shall be deemed paid by the release to the Purchaser of all the Escrowed Funds (including all interest included therein); provided that amount of the interest earned on funds deposited into the Escrow Account to be released to the Purchaser shall be reduced by the amount of dividends actually paid in cash or Common Stock to the Purchaser on the Preferred Shares, subject to a maximum equal to the amount of all such interest. The closing of such repurchase shall occur as soon as practicable following delivery of the Purchaser's notice of exercise, subject to the receipt of necessary governmental approvals. The Company agrees to use its best efforts to obtain all such governmental approvals and take all such other actions as shall be required to consummate such repurchase. At such closing, the Purchaser shall deliver to the Company certificates representing the Shares to be repurchased and the Company shall deliver to the Purchaser and the escrow agent under the Escrow Agreement any notice of release or other instrument reasonably requested by either of them to effectuate the release of the Escrowed Funds (including all interest earned thereon, subject to the proviso in the second sentence of this section) in accordance with the terms of the Escrow Agreement and this Section 1.4(b). (c) Within thirty (30) days after the execution and delivery of this Agreement, the Company and the Purchaser shall establish with a financial institution selected by the Purchaser (the "L/C Bank") an irrevocable letter of credit in an amount equal to the amount of Escrowed Funds (as changed from time to time) for the benefit of the Purchaser in the form mutually agreed to be the parties (the "Letter of Credit"), which Letter of Credit shall be available for drawing by the Purchaser pursuant to this Section 1.4(c) and shall be secured by a first priority security interest in the Escrowed Funds as collateral for the Company's repayment of any amounts drawn on the Letter of Credit. The terms of the Letter of Credit shall include, without limitation, (i) a draw down period that shall expire no earlier than the 180th day after December 31, 2001 and (ii) the right of the Purchaser to draw upon the Letter of Credit as provided under this Section 1.4(c) without action or authorization on the part of the Company. In the event that, for any reason, all or any portion of the Escrowed Funds are not released to the Purchaser in accordance with Section 1.4(b) and the terms of the Escrow Agreement within thirty (30) days of the Purchaser's Put Notice, then the Purchaser shall have the right to draw on the Letter of Credit in an amount equal to the total amount of Escrowed Funds at the time of Purchaser's Put Notice less the amounts of any Escrowed Funds actually received by the Purchaser, and the Purchaser shall receive such funds at the closing contemplated by Section 1.4(b). The costs of the Letter of Credit shall be divided equally between the Company and the Purchaser; provided that the Company shall not be required to pay more than four hundred thousand dollars ($400,000) of such costs. (d) If the Set Top Box Launch occurs prior to December 31, 2001, the Company shall be entitled to receive from the escrow under the Escrow Agreement all Escrowed Funds. One hundred million dollars ($100,000,000) of the Escrowed Funds released to the Company shall be designated as Earmarked Funds and used exclusively in accordance with Section 8.2 of the Commercial Agreement and any additional Escrowed Funds shall be released to the Company and may be used by the Company for any purpose whatsoever. If, upon the release of the Escrowed Funds to the Company in accordance with the foregoing and the terms of the Escrow Agreement, the amount of Escrowed Funds (excluding any interest earned thereon) is less than one hundred million dollars ($100,000,000) at such time, then 60% of the proceeds from the exercise of any of the Warrants (up to the difference between one hundred million dollars ($100,000,000) and such amount of Escrowed Funds) shall also be designated as Earmarked Funds and used exclusively in accordance with Section 8.2 of the Commercial Agreement. 1.5 Adjustments. To the extent not actually adjusted pursuant to the adjustment provisions for the Preferred Stock in the Restated Certificate or in the terms of each applicable Warrant, the applicable purchase price, conversion price and exercise price with respect to the purchase of the Shares, the conversion of the Preferred Stock and the exercise of the Warrants and the number and nature of the securities to be received upon the conversion of the Preferred Stock and the exercise of the Warrants shall be adjusted to reflect any stock splits, cash or noncash dividends, recapitalizations, mergers, combinations, distributions, issuances, reclassifications, exchanges, substitutions or other similar events with respect to the capital stock of the Company, or sales of capital stock below the applicable purchase price with respect to the Shares, in each case, to provide the Purchaser with such terms and rights, economic and otherwise, that the Purchaser would have received if such event occurred after the Closing. Section 2. Closing, Delivery and Payment. 2.1 Closing. The closing of the sale and purchase of the Shares and Warrants by the Purchaser under this Agreement (the "Closing") shall take place five (5) days following the Determination Date, unless the Purchaser shall have delivered to the Company a notice exercising its termination right pursuant to Section 1.2(a) and the Company shall have exercised its right to adjust the terms of the transactions contemplated hereby pursuant to Section 1.2(b), in which case the Closing shall occur ten (10) Business Days following the Determination Date (or, if any such day is not a Business Day, on the next succeeding Business Day), at the offices of Cooley Godward LLP, 3175 Hanover Street, Palo Alto, California 94304 or at such other time or place as the Company and the Purchaser may mutually agree (the "Closing Date"). 2.2 Delivery. At the Closing, subject to the terms and conditions hereof, the Company shall deliver to the Purchaser (i) certificates registered in the name of the Purchaser representing the Shares to be purchased by the Purchaser in accordance with Section 1, free and clear of all liens, claims, encumbrances (other than those arising pursuant to this Agreement and the Related Agreements), and (ii) the Warrants in the form of the applicable exhibits attached hereto, for the Warrants to be issued to the Purchaser in accordance with Section 1, free and clear of all liens, claims and encumbrances (other than those arising pursuant to this Agreement and the Related Agreements), in each case duly executed by an authorized officer of the Company and registered in the name of the Purchaser. At the Closing, subject to the terms and conditions hereof, the Purchaser shall deliver to the Company the purchase price for the Shares by check or wire transfer of immediately available funds. Section 3. Representations and Warranties of the Company. Except as expressly set forth on a Schedule of Exceptions delivered by the Company to the Purchaser simultaneously herewith, the Company hereby represents and warrants to the Purchaser as of the date of this Agreement and the Closing Date as follows: 3.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and the Stockholders Agreement, the Commercial Agreement, the Warrants and the Escrow Agreement, (collectively, the "Related Agreements"), to give affect to the Restated Certificate, to issue and sell the Shares, the Warrants, the Warrant Shares and the Conversion Shares, to carry out the provisions of this Agreement, the Related Agreements and the Restated Certificate, and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so could not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company or its business, assets, financial condition, prospects, liabilities or results of operations (a "Material Adverse Effect"). The Company does not, directly or indirectly, own or control any interest in any corporation, joint venture, limited partnership or similar entity. Attached hereto as Exhibit G is a complete and correct copy of the by-laws of the Company, as amended to the date of this Agreement (the "By-laws"). 3.2 Capitalization; Voting Rights. The authorized capital stock of the Company as of May 31, 2000 consists of seventy-five million (75,000,000) shares of Common Stock (par value $.001 per share), of which (i) 37,977,220 shares were issued and outstanding and (ii) 6,141,409 shares were reserved for future issuance to employees and non-employee directors pursuant to outstanding stock options issued pursuant to the Company Option Plans (as defined below) and (iii) 25,000 shares were reserved for future issuance pursuant to the Outstanding Warrants (as defined below), and two million (2,000,000) shares of Preferred Stock (par value $.001 per share), of which no shares have been issued. The Company has not issued any shares of its capital stock between May 31, 2000 and the date of this Agreement, except pursuant to the exercise of options. All issued and outstanding shares of the Company's Common Stock: (a) have been duly authorized and validly issued, (b) are fully paid and nonassessable, (c) were issued without violation of any preemptive or preferential right, and (d) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The rights, preferences, privileges and restrictions of the Shares are as stated in the Restated Certificate. The Company will reserve an adequate number of shares of Common Stock for issuance upon conversion of the Preferred Shares and exercise of the Warrants. Except as may be granted pursuant to the Related Agreements, stock awards and options to purchase shares of Common Stock granted pursuant to the Company's 1997 Equity Incentive Plan, 1999 Equity Incentive Plan and 1999 Non-Employee Directors' Stock Option Plan (the "Company Option Plans") issued pursuant to the 1999 Employee Stock Purchase Plan (the "Purchase Plan") and outstanding warrants to purchase shares of the Company's Common Stock (the "Outstanding Warrants"), there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or shareholder agreements, or agreements of any kind for the purchase or acquisition from the Company of any of its securities or the designation of any board member by any series of Preferred Stock or by holders of Common Stock. The Company has reserved 12,800,000 shares of Common Stock for issuance to employees, officers or directors of, or consultants or advisors to the Company pursuant to the Company Option Plans, of which 3,677,766 remain available for future grant and has reserved 600,000 shares of Common Stock for issuance to employees pursuant to the Purchase Plan, of which 516,033 shares remain available for future issuance. When issued in compliance with the provisions of this Agreement and the Restated Certificate, the Shares, the Warrant Shares and the Conversion Shares will be duly authorized, validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Shares and the Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. Except as contained in the Related Agreements and the Restated Certificate, or as set forth in Section 3.2 of the Schedule of Exceptions, the Company is not aware of any written agreement or other understandings relating to the voting of its securities. Except as expressly provided in this Agreement or the Related Agreements, (x) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any securities of the Company and (y) there are no other subscriptions, options, calls, warrants or other rights (including registration rights, whether demand or piggyback registration rights), agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company to which the Company or any of its subsidiaries is a party. Except as set forth in Section 3.2 of the Schedule of Exceptions, the consummation of the transactions contemplated by this Agreement and the Related Agreements will not trigger the anti-dilution provisions or other price or conversion adjustment mechanisms of any outstanding subscriptions, options, calls, warrants, commitments, contracts, preemptive rights, rights of first refusal, demands, conversion rights or other agreements or arrangements of any character or nature whatsoever under which the Company is or may be obligated to issue or acquire shares of any of its capital stock. The sale of the Shares and the issuance of the Conversion Shares in accordance with the terms of the Restated Certificate and the issuance of the Warrant Shares in accordance with the terms of the Warrants is not and will not be subject to any preemptive rights, rights of first refusal, subscription or similar rights that have not been properly waived. 3.3 Authorization; Binding Obligations. (a) All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder as of the Closing and the authorization, sale, issuance and delivery of the Shares pursuant hereto and the Conversion Shares pursuant to the Restated Certificate has been taken, except for the approval by the stockholders of the Company (i) by a majority of the votes cast of the issuance of the Shares, the Warrant Shares and the Conversion Shares and (ii) by the holders of a majority of all the outstanding shares of Common Stock of the adoption of the Restated Certificate (together, the "Company Stockholder Approval"). The Company Stockholder Approval is the only vote of the holders of any class or series of the Company's securities necessary to adopt this Agreement and any of the Related Agreements and approve the transactions contemplated hereby and thereby. Each of the Agreement and the Related Agreements, are valid and binding obligations of the Company enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights; (b) general principles of equity that restrict the availability of equitable remedies; and (c) to the extent that the enforceability of the indemnification provisions in Section 6.4 of the Stockholders Agreement may be limited by applicable laws. The issuance and sale of the Shares and the Warrants, the subsequent exercise of the Warrants and the issuance of shares of Common Stock in connection therewith and the subsequent conversion of the Preferred Shares into Conversion Shares are not and will not be subject to any preemptive rights or rights of first refusal. (b) Other than filings which may be necessary pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or applicable state securities laws, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any public body or authority is necessary for the consummation by the Company of the transactions contemplated by this Agreement. 3.4 SEC Filings. (a) The Company has made available to the Purchaser accurate and complete copies (including exhibits thereto) of (i) its registration statement on Form S-1 (Reg. No. 333-83515 that was declared effective by the SEC on September 29, 1999, (ii) its quarterly report on Form 10-Q for the quarter ended September 30, 1999, (iii) its annual report on Form 10-K for the fiscal year ended December 31, 1999, as amended by Form 10-K/A filed April 28, 2000 (the "Form 10-K"), (iv) its quarterly report on Form 10-Q for the quarter ended March 31, 2000 and (v) all other forms, reports, schedules, statements and other documents required to be filed by the Company on a form other than Form D or Form S-8 with the SEC prior to the Closing (collectively, with all exhibits and schedules thereof and documents incorporated by reference therein, the "Company SEC Documents"). (b) Without limiting the foregoing, there are no contracts or other documents of the Company which are required to be filed as exhibits to the Company SEC Document which have not been so filed. (c) As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the Company SEC Documents complied or will comply in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be) and the rules and regulations promulgated thereunder; and (ii) none of the Company SEC Documents contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3.5 Financial Statements. The financial statements contained in the Company SEC Documents: (i) comply as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such financial statements and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end audit adjustments (which will not, individually or in the aggregate, be material); and (iii) fairly present the consolidated financial position of the Company as of the respective dates thereof and the consolidated results of operations and cash flows of the Company for the periods covered thereby. 3.6 Undisclosed Liabilities. Except for liabilities included or reserved for in the audited balance sheet of the Company for the year ended December 31, 1999, included in the Form 10-K or the unaudited consolidated balance sheet of the Company included in its Quarterly Report on Form 10-Q (the "Form 10-Q") for the quarter ended March 31, 2000 (the "Balance Sheet"), each as filed with the SEC, at March 31, 2000, the Company did not have, and since such date it has not incurred, liabilities or any other obligations whatsoever that are material (individually or in the aggregate) to the Company, except current liabilities incurred in the ordinary course of business consistent with past practice subsequent to March 31, 2000. 3.7 Contracts; Action. (a) Except as set forth in Section 3.7(a) of the Schedule of Exceptions or as disclosed in the Form 10-K, there are no contracts, agreements, understandings or proposed transactions between the Company and any of its officers, directors or affiliates or any family member or affiliate thereof that would be required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC. (b) For purposes of this Agreement, the term "Contracts" shall mean (i) all "material contracts" within the meaning of Item 601 of Regulation S-K of the SEC, (ii) contracts with distributors or suppliers or for services involving revenues or expenditures in excess of $800,000 annually, (iii) all contracts involving revenues or expenditures in excess of $250,000 annually containing non-competition provisions that purport to bind affiliates of the Company, (iv) all contracts restricting the payment of dividends upon, or the redemption or conversion of, the Shares, (v) those contracts identified in Section 3.7(b)(v) of the Schedule of Exceptions, and (vi) contracts under which the Company or any subsidiary has granted or received exclusive rights relating to the TiVo Channel (as defined in the Commercial Agreement). Except as set forth in Section 3.7(b) of the Schedule of Exceptions, the Company is not, nor to the Company's knowledge is any other party to any Contract, in material default under, or in material breach or material violation of, any Contract and, to the knowledge of the Company, no event has occurred which, with the giving of notice or passage of time or both would constitute a material default by the Company or any other party under any Contract. Other than Contracts which have terminated or expired in accordance with their terms, each of the Contracts is in full force and effect and (assuming due execution and delivery by the counterparties thereto) is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing). (c) Section 3.7 of the Schedule of Exceptions contains a list of all Contracts. 3.8 Obligations to Related Parties. Except as set forth in the Form 10-K, there are no, and since January 1, 1999 there have not been any, (i) obligations to or transactions with the Company's officers, directors, stockholders or employees or any family member or affiliate thereof of a type required to be disclosed pursuant to Item 402 of Regulation S-K of the SEC or (ii) obligations of or transactions with the Company's officers, directors, stockholders or employees or any family member or affiliate thereof of a type required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC. 3.9 Absence of Certain Changes. Since December 31, 1999, (i) no event, change or circumstance has occurred which would have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) the Company has carried on its business in the ordinary course consistent with past practices. 3.10 Legal Proceedings. Other than as disclosed in the Company SEC Documents filed and publicly available prior to the date hereof, there is no Action (as hereinafter defined), before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company, which is required to be disclosed in any Company SEC Document or which could have a Material Adverse Effect, or which might materially and adversely affect the consummation of the transactions contemplated by this Agreement or the Related Agreements. All summaries or descriptions of legal or governmental proceedings or contingencies contained in the Company SEC Documents are current and accurate in all material respects with respect to such matters. 3.11 Compliance with Laws. The Company is not in violation of any law, ordinance, governmental rule or regulation or court order, judgement or decree to which it is subject, other than violations (if any) that individually or in the aggregate will not have a Material Adverse Effect. Other than as disclosed in the Company SEC Documents filed and publicly available prior to the date hereof, the Company possesses such certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies the absence of which would have a Material Adverse Effect, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. 3.12 Properties. Except as otherwise stated in the Company SEC Documents filed and publicly available prior to the date hereof, the Company has good and marketable title, free and clear of all liens, encumbrances or claims to all of its material real and personal property, except liens, encumbrances and equities which are not material in the aggregate and do not materially affect the value of such property or interfere with the conduct of the business of the Company and, except as otherwise stated in the Company SEC Documents filed and publicly available prior to the date hereof, the Company has valid and binding leases to all of the real and personal property described in the Company SEC Documents as under lease to it with such exceptions as are not material and do not interfere with the conduct of the business of the Company. 3.13 Compliance with Other Instruments. The Company is not in violation or default of (i) any term of its Restated Certificate or Bylaws, or (ii) any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order, writ or any statute, rule or regulation applicable to the Company which in the case of clause (ii) could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect or which could have a Material Adverse Effect, or which might materially and adversely affect the consummation of the transactions contemplated by this Agreement or the Related Agreements. The execution, delivery, and performance of and compliance with this Agreement, and the Related Agreements, and the issuance and sale of the Shares and the Warrants pursuant hereto and of the Conversion Shares pursuant to the Restated Certificate and the Warrant Shares pursuant to the Warrants, will not result in any such violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 3.14 Offering Valid. Assuming the accuracy of the representations and warranties of the Purchaser contained in Section 4 hereof, the offer, sale and issuance of the Shares, the Warrants, the Warrant Shares and the Conversion Shares will be exempt from the registration requirements of the Securities Act and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the Shares to any person or persons or take any other action so as to bring the sale of such Shares by the Company within the registration provisions of the Securities Act or any state securities laws. 3.15 Taxes. The Company has filed all necessary material federal, state and foreign income and franchise tax returns and has paid all material taxes shown as due thereon, and the Company has no knowledge of any material tax deficiency which has been or might be asserted against the Company. 3.16 Employee Benefits. (a) General. The Company is not a party to and does not participate in or have any liability or contingent liability with respect to any "employee welfare benefit plan" or "employee pension benefit plan" as those terms are respectively defined in sections 3(1) and 3(2) of ERISA, or any "multiemployer plan" (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), except for the TeleWorld 401(k) Plan (hereinafter the "Plan") or as disclosed in Section 3.16 of the Schedule of Exceptions. (b) Compliance with Laws; Liabilities. As to the Plan: (i) The Plan complies and has been administered in form and in operation in all material respects with all requirements of law applicable thereto (including but not limited to ERISA and the Code), and there has been no notice issued by any Governmental Authority questioning or challenging such compliance. "Governmental Authority" shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal). (ii) The Plan complies in form and in operation in all material respects with all applicable requirements of sections 401(a) and 501(a) of the Code and the Company has received a favorable determination letter regarding its qualification; there have been no amendments to such plans except amendments (A) which are the subject of a determination letter issued with respect thereto by the Internal Revenue Service or (B) with respect to which the remedial amendment period (within the meaning of Treasury Regulation ss. 1.401(b)-1) has not expired; and to the knowledge of the Company no event has occurred which will or could give rise to disqualification of any such plan under such sections or to a tax under section 511 of the Code. (iii) None of the assets of the Plan is invested in employer securities or employer real property. (iv) To the knowledge of the Company, there have been no "prohibited transactions" (as described in section 406 of ERISA or section 4975 of the Code) with respect to the Plan. (v) To the knowledge of the Company, there has been no act or omission which has given rise to or may give rise to fines, penalties, taxes, or related charges under sections 502(c), 502(i), 502(l) or 4071 of ERISA or Chapters 43, 47, or 68 of the Code for which the Company may be liable. (vi) There are no actions, suits, or claims (other than routine claims for benefits) pending or, to the knowledge of the Company, threatened involving the Plan or the assets thereof, and no facts exist which could give rise to any such actions, suits, or claims (other than routine claims for benefits). (vii) The Plan is not subject to Title IV of ERISA. (viii) There has been no act or omission that would impair the right or ability of the Company to unilaterally amend or terminate the Plan. (c) With respect to each employee benefit plan, agreement, program, policy or other arrangement, whether or not subject to ERISA, maintained by the Company (including, but not limited to the Plan) (a "Company Plan"), the Company has delivered to the Purchaser a current, accurate and complete copy thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description; and (iv) for the two most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports. (d) No Company Plan exists that could result in the payment to any present or former employee of the Company of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of the Company as a result of the transaction contemplated by this Agreement. There is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code. 3.17 Executive Committee of the Board of Directors. The Company represents and warrants that (a) no officer, director or employee of any of the Company's corporate partners or corporate investors is a member of the Executive Committee of the Company's Board of Directors, (b) no current member of the of the Executive Committee of the Company's Board of Directors has been designated by any of the Company's corporate partners or corporate investors and (c) that it does not intend to designate or appoint, nor has it agreed to any contract or other instrument providing for the designation or appointment of, any officer, director or employee of any of the Company's corporate partners or corporate investors to the Executive Committee of the Company's Board of Directors. 3.18 Board Approval; Section 203 of DGCL; California Takeover Law; Rights Plans. The Board of Directors of the Company has, prior to the execution hereof and prior to the execution of any of the Related Agreements, approved the execution and delivery by the Company of this Agreement and each of the Related Agreements to which it is a party, and the execution and delivery by the parties thereto of the Voting Agreement and the consummation of the transactions contemplated by this Agreement and each of the Related Agreements. Such approval is sufficient to render inapplicable to this Agreement, the Related Agreements and the Voting Agreement and the transactions contemplated hereby and thereby (collectively, the "Investment") the provisions of Section 203 of the Delaware General Corporation Law. No takeover statute or similar statute or regulation of the State of California is applicable to this Agreement, the Related Agreements or the Voting Agreement or the Investment. Except as expressly provided in the Stockholders Agreement and Section 3.18 of the Schedule of Exceptions, no provision in the certificate of incorporation, bylaws or other governing instruments of the Company or the terms of any rights plan or preferred stock of the Company, would directly or indirectly restrict or impair the ability of the Purchaser to vote, or otherwise to exercise the rights of a stockholder with respect to, securities of the Company that may be acquired or controlled by the Purchaser or permit any stockholder to acquire securities of the Company on a basis not available to the Purchaser. 3.19 Patents and Trademarks. Section 3.19 of the Schedule of Exceptions sets forth a list of all patents, patent applications, registered copyrights and trademarks of the Company existing as of the date hereof. The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, information and other proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted, and such conduct of its business does not, to the Company's knowledge, infringe upon the rights of others, except as set forth in Section 3.19 to the Schedule of Exceptions. There are no outstanding options, licenses or agreements with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any third party which are necessary to the operation of the Company's products, other than such licenses or agreements arising from the purchase of "off the shelf" or standard products. Except as set forth in Section 3.19 of the Schedule of Exceptions, the Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets, confidential information or other proprietary rights of any other person or entity. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company's business as proposed to be conducted. Neither the execution nor delivery of this Agreement or any of the Related Agreements, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now obligated. The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been assigned to the Company. To the Company's knowledge, none of the Company's officers or employees have used nor are such officers or employees making use of any confidential information or trade secrets of others without authorization, including those of any former employer of such officer or employee. The Company is not aware of any violation by a third party of any of the Company's patents, licenses, trademarks, trade names, service marks, copyrights, trade secrets, confidential information or other proprietary rights. 3.20 Brokers. No broker, investment banker, financial advisor or other person other than Credit Suisse First Boston Corporation is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement or the Related Agreements based upon arrangements made by or on behalf of the Company. The fees and expenses of Credit Suisse First Boston Corporation will be paid by the Company. 3.21 Disclosure. Neither this Agreement (including all Exhibits and Schedules hereto) nor any of the Related Agreements or any other agreements or instruments contemplated to be executed and delivered by the Company in connection with this Agreement, taken together with the Company SEC Documents, contain any untrue statement of material fact; and none of such documents omits to state any material fact necessary to make any of the representations, warranties or other statements or information contained therein not misleading. Section 4. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows (such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement): 4.1 Requisite Power and Authority. The Purchaser has all necessary corporate power under all applicable provisions of law to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All action on the Purchaser's part required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, (b) general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 6.4 of the Stockholders Agreement may be limited by applicable laws. 4.2 Investment Representations. The Purchaser understands that neither the Shares nor the Conversion Shares have been registered under the Securities Act. The Purchaser also understands that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon the Purchaser's representations contained in the Agreement. The Purchaser hereby represents and warrants as follows: (a) Purchaser Bears Economic Risk. The Purchaser is capable of evaluating the merits and risks of its investment in the Company and by reason of its, or of its management's, business or financial experience, the Purchaser has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. The Purchaser may bear the economic risk of this investment indefinitely unless the Shares (or the Conversion Shares) are registered pursuant to the Securities Act, or an exemption from registration is available. The Purchaser also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow the Purchaser to transfer all or any portion of the Shares or the Conversion Shares under the circumstances, in the amounts or at the times the Purchaser might propose. (b) Acquisition for Own Account. The Purchaser is acquiring the Shares and the Conversion Shares for the Purchaser's own account for investment only, and not with a view towards their distribution. (c) Accredited Investor. The Purchaser is an accredited investor within the meaning of Regulation D under the Securities Act. (d) Company Information. The Purchaser has had an opportunity to discuss the Company's business, management and financial affairs with directors, officers and management of the Company. The Purchaser has also had the opportunity to ask questions of and receive answers from, the Company and its management regarding the terms and conditions of this investment. (e) Rule 144. The Purchaser acknowledges and agrees that the Shares, and, if issued, the Conversion Shares may be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act, as in effect from time to time, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations. (f) Residence. The office or offices of the Purchaser in which its investment decision was made is located at 22000 AOL Way, Dulles, Virginia, 20166-9323. 4.3 Transfer Restrictions. The Purchaser acknowledges and agrees that the Shares and, if issued, the Conversion Shares are subject to restrictions on transfer as set forth in the Stockholders Agreement. Section 5. Conditions to Closing. 5.1 Conditions to Purchaser's Obligations. The Purchaser's obligations to purchase the Shares at the Closing are subject to the satisfaction, at or prior to such Closing, of the following conditions, unless otherwise waived: (a) Representations and Warranties True; Performance of Obligations. The representations and warranties made by the Company in Section 3 hereof that are qualified by materiality or Material Adverse Effect shall be true and correct and those not so qualified shall be true and correct in all material respects in each case as of the Closing Date with the same force and effect as if they had been made as of such Closing Date, and the Company shall have performed and complied with all agreements, obligations and conditions herein required to be performed or complied with by it on or prior to such Closing. (b) Legal Investment. On the Closing Date, the sale and issuance of the Shares and the Warrants and the proposed issuance of the Conversion Shares and the Warrant Shares shall be legally permitted by all laws and regulations to which the Purchaser and the Company are subject, and there shall not be in effect any statute, law, rule, regulation, order, judgment or decree in effect which has the effect of rendering the consummation of any of the transactions contemplated by this Agreement or the Related Agreements unlawful (c) Consents, Permits, and Waivers. The Company shall have obtained any and all consents, authorizations, approvals, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement and the Related Agreements (except for such as may be properly obtained subsequent to such Closing). (d) Filing of Restated Certificate. The Restated Certificate shall have been accepted for filing by the Secretary of State of the State of Delaware and shall be in full force and effect as of the Closing Date. (e) Corporate Documents. The Company shall have delivered to the Purchaser or its counsel, copies of all corporate documents of the Company as the Purchaser shall reasonably request. (f) Compliance Certificate. The Company shall have delivered to the Purchaser a Compliance Certificate, executed by the President of the Company, dated the date of such Closing, to the effect that the conditions specified in subsections (a), (c) and (d) of this Section 5.1 have been satisfied. (g) Other Agreements. Each of the Commercial Agreement, the Stockholders Agreement and the Escrow Agreement shall have been executed and delivered by the parties thereto, shall be in full force and effect, except for failures to be in full force and effect due to the actions or omissions of the Purchaser, and shall not have been breached by the Company, and the Purchaser and the Company shall have agreed on and finalized the Specifications, the Milestone Schedule and the Acceptance Criteria (as each such term is defined in the Commercial Agreement) pursuant to Sections 3.1(c) and 3.1(e) of the Commercial Agreement. (h) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchaser and its special counsel, and the Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (i) Secretary's Certificate. The Purchaser shall have received from the Company's Secretary, a certificate having attached thereto (i) the Company's Restated Certificate, (ii) the Company's Bylaws as in effect at the time of the Closing, (iii) resolutions approved by the Board of Directors of the Company authorizing the transactions contemplated hereby, and (iv) good standing certificates (including tax good standing) with respect to the Company from the applicable authority(ies) in Delaware and any other jurisdiction in which the Company is qualified to do business, dated a recent date before the Closing. (j) HSR Compliance. Any waiting period applicable to the purchase of the Shares under the HSR Act shall have terminated or expired. (k) Legal Opinion. The Purchaser shall have received from Cooley Godward LLP, legal counsel to the Company, an opinion addressed to the Purchaser, dated as of the Closing Date, in form and substance reasonably satisfactory to counsel for the Purchaser, and subject to customary exceptions and qualifications (including without limitation a qualification regarding interpretation in accordance with California law), to the effect that: (i) the Company (A) has been duly incorporated and is validly existing in good standing under the laws of the State of Delaware, (B) to the best knowledge of such counsel, is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the owning or leasing of properties or the conduct of business makes such qualification necessary, except where the failure to so qualify would not have a Material Adverse Effect, and (C) has full corporate power and authority to carry on its business as described in the Company SEC Documents and to own and operate its properties. The Company has full corporate power and authority to enter into and perform this Agreement, the Stockholders Agreement, the Commercial Agreement and the Warrants, and to issue, sell and deliver the Shares, the Warrants, the Warrant Shares and the Conversion Shares. All legally required corporate proceedings in connection with the authorization and issuance of the Shares, the Warrants, the Warrant Shares and the Conversion Shares and the sale of the Shares, the Warrants, the Warrant Shares by the Company in accordance with the terms of this Agreement (including but not limited to all required Board of Directors and stockholder approvals) have been taken or have been obtained; (ii) this Agreement, the Stockholders Agreement and the Warrants have been duly executed and delivered by the Company and are legal, valid and binding agreements of the Company enforceable in accordance with their terms, except as rights to indemnification thereunder may be limited and subject to laws regarding creditor rights and general equitable principles; (iii) other than in connection with any securities laws (with respect to which counsel need express no opinion other than as provided in (vi) below), all consents, approvals, permits, orders or authorizations of, and all qualifications, registrations, designations or declarations with, any federal, Delaware corporate or California state governmental authority required on the part of the Company in connection with the execution and delivery of this Agreement, the Stockholders Agreement and the Warrants and consummation of the transactions occurring at the Closing hereunder and thereunder have been obtained and are effective, and such counsel is not aware of any proceedings, or written threat of any proceedings, that question the validity thereof; (iv) all the outstanding shares of the Company's Common Stock have been, and the Shares, the Warrant Shares and the Conversion Shares, upon issuance and delivery and payment therefor in the manner herein described, will be, duly authorized, validly issued, fully paid and nonassessable. No preemptive rights to subscribe for or to purchase, and no restriction upon the voting or transfer of, the Shares, the Warrants Shares or the Conversion Shares exist pursuant to the Restated Certificate or Bylaws, or, to the best of such counsel's knowledge, pursuant to any agreement or other instrument to which the Company is a party or by which it may be bound; (v) to the best of such counsel's knowledge there are no legal or governmental proceedings pending or overtly threatened against the Company required to be disclosed in the Company SEC Documents which are not so disclosed; (vi) the offer and sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares is exempt from the registration requirements of the Securities Act, subject to the timely filing of a Form D pursuant to Securities Exchange Commission Regulation D; and (vii) the execution and delivery of this Agreement, the Related Agreements by the Company, and the issuance and sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares and the consummation of the transactions contemplated by this Agreement, the Stockholders Agreement and the Warrants by the Company will not conflict with or constitute a breach of or a default (with the passage of time or otherwise) under (i) the Restated Certificate or Bylaws of the Company, (ii) any Delaware corporate or California statute, law or regulation to which the Company or any of its properties may be subject, or any judgment, decree or order, known to such counsel, of any court or governmental agency or authority entered in any proceeding to which the Company was or is now a party or by which it is bound, except for any conflict, breach or default that would not have a Material Adverse Effect or (iii) any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject which has been identified in a certificate of the Chief Financial Officer of the Company as material to the Company, except for any conflict, breach or default that would not have a Material Adverse Effect. (viii) As of the Closing Date, the Restated Certificate will be in full force and effect. (l) Board Representative. A representative of the Purchaser shall have been appointed, at the option of the Purchaser, as either a member of or an observer to the board of directors of the Company in accordance with Section 2.1 of the Stockholders Agreement. 5.2 Conditions to Obligations of the Company. The Company's obligation to issue and sell the Shares at the Closing is subject to the satisfaction, on or prior to such Closing, of the following conditions, unless otherwise waived: (a) Representations and Warranties True. The representations and warranties made by the Purchaser in Section 4 hereof shall be true and correct in all material respects at the date of such Closing, with the same force and effect as if they had been made on and as of said date. (b) Performance of Obligations. The Purchaser shall have performed and complied with all agreements and conditions herein required to be performed or complied with by the Purchaser on or before such Closing. (c) Filing of Restated Certificate. The Restated Certificate shall have been accepted for filing with the Secretary of State of the State of Delaware and shall be in full force and effect as of such Closing Date. (d) Other Agreements. Each of the Commercial Agreement, the Stockholders Agreement and the Escrow Agreement shall have been executed and delivered by the parties thereto, shall be in full force and effect, except for failures to be in full force and effect due to the actions or omissions of the Company, and shall not have been breached by the Purchaser. (e) HSR Compliance. Any waiting period applicable to the purchase of the Shares under the HSR Act shall have terminated or expired. 5.3 Conditions to Obligations of both the Company and the Purchaser. (a) Stockholder Approval. The Company Stockholder Approval shall have been obtained. Section 6. Additional Covenants. 6.1 HSR Compliance; Other Approvals. (a) The Company and the Purchaser shall, promptly after the date of this Agreement, prepare and file the notifications required under the HSR Act for the issuance and sale of the Shares, the Warrants, the Warrant Shares and the Conversion Shares. The Company and the Purchaser shall respond as promptly as practicable to (i) any inquiries or requests received from the Federal Trade Commission or the Department of Justice for additional information or documentation and (ii) any inquiries or requests received from any state attorney general or other governmental body in connection with antitrust or related matters. Each of the Company and the Purchaser shall promptly inform the other party of any communication to or from the Federal Trade Commission, the Department of Justice or any other governmental body. The Company and the Purchaser will consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any legal proceeding under or relating to the HSR Act or any other federal or state antitrust or fair trade law. (b) Each of the parties hereto shall use their commercially reasonable efforts to give such notices and obtain all other authorizations, consents, orders and approvals of all governmental authorities and other third parties that may be or become necessary or desirable for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Related Agreements and will cooperate fully with the other party hereto in promptly seeking to obtain all such authorizations, consents, orders and approvals. 6.2 Competing Proposals. (a) Notification Regarding Competing Strategic Relationships. Prior to receipt of the Company Stockholder Approval, the Company will notify the Purchaser in writing within five Business Days of: (i) the Company's receipt of a bona fide proposal from a third party for a strategic relationship that would be preclusive of any of the transactions contemplated by this Agreement (a "Competing Strategic Relationship"); (ii) the determination by the Company's Board of Directors to solicit any Competing Strategic Relationship; or (iii) the determination by the Company's Board of Directors to provide confidential information to, or enter into discussions or negotiations with, any third party concerning any Competing Strategic Relationship. Such notice shall disclose the identity of the party making or involved in such proposal for a Competing Strategic Relationship and the material terms of any such proposed Competing Strategic Relationship. (b) Acquisition and Competing Strategic Relationship Proposals. Prior to the Closing, the Company shall, and shall cause its nonstockholder affiliates and the officers, directors and employees of the Company and its subsidiaries to, and shall instruct its stockholder affiliates and the representatives and agents of the Company and its subsidiaries (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its subsidiaries) to, immediately cease and terminate any existing activities, discussions or negotiations, if any, with any parties conducted heretofore with respect to any (i) Competing Strategic Relationship or (ii) acquisition or exchange of all or any material portion of the assets of, or more than 15% of the equity interest in, the Company (by direct purchase from the Company, tender or exchange offer or otherwise) or any business combination, merger or similar transaction (including an exchange of stock or assets) with or involving the Company (an "Acquisition Transaction"), other than the transactions contemplated hereby. Except as set forth in this Section 6.2(b), prior to the Closing, the Company shall not, and shall cause its nonstockholder affiliates and the officers, directors and employees of the Company and its subsidiaries not to, and shall instruct its stockholder affiliates and the representatives and agents of the Company and its subsidiaries (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its subsidiaries) not to, directly or indirectly, knowingly encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information or data (other than the Company's standard public information package) to, any corporation, partnership, person or other entity or group (other than Purchaser, any affiliate or associate of Purchaser or any designees of Purchaser) with respect to any inquiries or the making of any offer or proposal (including, without limitation, any offer or proposal to the stockholders of the Company) concerning an Acquisition Transaction (an "Acquisition Proposal") or a Competing Strategic Relationship (a "Competing Strategic Relationship Proposal") or otherwise knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal or a Competing Strategic Relationship Proposal; provided, however, that (x) prior to the receipt of the Company Stockholder Approval, the Company may furnish information and access, but only in response to a request for information or access, to any person or entity making a bona fide written Acquisition Proposal to the board of directors of the Company after the date hereof which was not knowingly encouraged, solicited or initiated by the Company or any of its affiliates or any director, employee, representative or agent of the Company or any of its subsidiaries (including, without limitation, any investment banker, attorney or accountant retained by the Company or any of its subsidiaries) on or after the date hereof and may participate in discussions and negotiate with such person or entity concerning any such Acquisition Proposal and (y) after the Company Stockholders Meeting, the Board of Directors of the Company may authorize the Company, to enter into a binding written agreement concerning a Superior Proposal (as defined below), if and only if, in any such case under clause (x) or (y) above, (i) the board of directors of the Company determines in good faith, (A) taking into account the written, reasoned advice of outside counsel to the Company to the effect that failing to provide such information or access or to participate in such discussions or negotiations or so to authorize, as the case may be, is reasonably likely to constitute a breach of such board's fiduciary duties under applicable law, (B) taking into account the written advice of financial advisors to the Company to such effect, that such Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the person or entity making the proposal and would, if consummated, result in a transaction more favorable to the Company's stockholders from a financial point of view than the transaction contemplated by this Agreement (any such more favorable Acquisition Proposal as to which both of the determinations referred to in subclauses (A) and (B) of this clause (i) have been made being referred to in this Agreement as a "Superior Proposal"), and (ii) the board of directors of the Company receives from the person or entity making such bona fide written Acquisition Proposal an executed confidentiality agreement the terms of which are (without regard to the terms of such Acquisition Proposal) (A) no less favorable to the Company, and (B) no less restrictive to the person or entity making such bona fide written Acquisition Proposal than those contained in the Stockholders Agreement. Nothing in this Agreement shall prohibit the Board of Directors of the Company from, to the extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. 6.3 Stockholder Approval. As promptly as practicable following the date hereof, the Company shall take all action necessary to obtain the Company Stockholder Approval, including, without limitation, preparing, filing with the SEC and mailing to its stockholders a proxy statement or statements with respect thereto, and duly calling, giving notice of, convening and holding a meeting or meetings of its stockholders for such purpose (the "Company Stockholders Meeting"). Notwithstanding that any of the other conditions to the Closing may not be satisfied, the Company will use its best efforts to cause the Company Stockholders Meeting to occur as soon as reasonably possible after the date hereof. The Board shall recommend that its stockholders provide the Company Stockholder Approval, and may not withdraw or modify such recommendation prior to the taking of the votes to be taken at the Company Stockholders Meeting. 6.4 Ordinary Course of Business. (a) Except as otherwise contemplated by the terms of this Agreement, during the period from the date of this Agreement to the Closing Date (the "Pre-Closing Period"), each of the Company and its subsidiaries shall use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its officers and employees and preserve its relationships with customers, suppliers, licensors, licensees, advertisers, distributors and others having business dealings with it to the end that its goodwill and ongoing businesses shall be unimpaired. (b) Without limiting the generality of the foregoing, during the Pre-Closing Period, each of the Company and its subsidiaries shall not, without the prior consent of Purchaser: (i) (A) remove the chief executive officer or president (or, if there are no officers with such titles, the officers whose responsibility is executive oversight of the Company's and its subsidiaries' operations) or any executive vice president, or appoint any person to fill a vacancy in any such office, or (B) approve any new, or modify any existing material executive officer and director compensation plans or agreements; (ii) change the number of directors or the composition or structure of the Company's Board of Directors; (iii) except as contemplated by the Restated Certificate, increase or decrease the total number of authorized or issued shares of Preferred Stock; (iv) take any action which would require the approval of the holders of the Preferred Stock pursuant to Article III, Section D.2(b) of the Restated Certificate, if the Preferred Stock were issued; (v) redeem, acquire or otherwise purchase any shares of Common Stock or preferred stock of the Company, except pursuant to Company Plans or agreements entered into in the ordinary course with employees of the Company; (vi) sell a subsidiary's securities to any third party (other than the Company or any other wholly owned subsidiary of the Company); (vii) sell or transfer any of the Company's or its subsidiaries' technology or other Intellectual Property, to any other person, other than in the ordinary course of business; or (viii) enter into any arrangement or contract to do any of the foregoing. 6.5 Efforts. Each party hereto agrees to use commercially reasonable efforts to take any and all actions required in order to consummate the transactions contemplated in this Agreement and the Related Agreements. 6.6 Notification of Certain Matters. During the Pre-Closing Period, the Company shall give prompt notice to the Purchaser of the occurrence or non-occurrence of any event known to the Company the occurrence or non-occurrence of which would reasonably be expected to cause any representation or warranty contained in Section 3 to be untrue in any material respect, the failure of the Company to comply with or satisfy any covenant or agreement under this Agreement, or the failure to be satisfied of any of the conditions set forth in Section 5. 6.7 Reservation of Shares. From and after the Closing, the Company shall at all times reserve and keep available for issuance such number of its authorized but unissued shares of Common Stock as shall be sufficient to permit the exercise in full of all the Warrants and the conversion in full of all the Preferred Stock. 6.8 Restated Certificate. Upon receipt of the Company Stockholder Approval, the Company shall take all such action to file the Restated Certificate with the Secretary of State of the State of Delaware and all such other action to cause the Restated Certificate to be accepted for filing and effective. Section 7. Miscellaneous. 7.1 Termination. This Agreement may be terminated by (i) mutual agreement of the parties hereto, (ii) by the Purchaser pursuant to Section 1.2(a), subject to the Company's rights under Section 1.2(b), (iii) by the Purchaser or the Company in the event the Closing has not occurred by February 28, 2001; provided, that the termination right pursuant to this clause (iii) may not be exercised by a party whose nonperformance has delayed the Closing or (iv) by either party in the event the Commercial Agreement is terminated prior to the Closing. Upon termination of this Agreement pursuant to this Section 7.1 (and subject to Section 1.2(b)), this Agreement (except for Section 7.9) shall be void and of no further force and effect and no party shall have any liability to any other party under this Agreement, except that nothing herein shall relieve any party from any liability for the breach of any of the representations, warranties, covenants and agreements set forth in this Agreement. 7.2 Definitions. For purposes of this Agreement: "affiliate" means any person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; "Business Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York; "knowledge" of any person means knowledge of a particular fact or matter of which such person (or if such person is not an individual, any of its directors or officers) is actually aware or of which a prudent person (or if such person is not an individual, its directors or officers acting prudently) would be aware after reasonable inquiry; and "person" means any individual, corporation, partnership, association, trust, unincorporated organization, limited liability company, or other entity or a group (as defined in Section 13(d)(3) of the Exchange Act of 1934 ,as amended) of the foregoing. 7.3 Governing Law. This Agreement shall be governed in all respects by the laws of the State of New York as such laws are applied to agreements to be performed entirely in New York. 7.4 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Purchaser and each closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 7.5 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Shares or the Warrants from time to time. 7.6 Entire Agreement. This Agreement, the Exhibits and Schedules hereto, the Related Agreements and the other documents delivered pursuant hereto and thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 7.7 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 7.8 Amendment and Waiver. (a) This Agreement may be amended or modified only upon the written consent of the Company and the Purchaser. (b) The obligations of the Company and the rights of the holders of the Shares, the Warrants, the Warrant Shares and the Conversion Shares under this Agreement may be waived only with the written consent of the Purchaser. 7.9 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, the Related Agreements or the Restated Certificate, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on the Purchaser' part of any breach, default or noncompliance under this Agreement, the Related Agreements or under the Restated Certificate or any waiver on such party's part of any provisions or conditions of this Agreement, the Related Agreements, or the Restated Certificate must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, the Related Agreements, the Restated Certificate, by law, or otherwise afforded to any party, shall be cumulative and not alternative. 7.10 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day; (c) five (5) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent in each case to the respective address specified below: (a) If to the Purchaser, to: America Online, Inc. 22000 AOL Way Dulles, VA 20166-9323 Attn: General Counsel With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017-3954 Attn: David J. Sorkin, Esq. (b) If to the Company, to TiVo Inc. 2160 Gold Street Alviso, CA 95002 Attn: Chief Financial Officer With a copy to: Latham & Watkins 135 Commonwealth Drive Menlo Park, CA 94025 Attn: Alan Mendelson, Esq. or at such other address as the Company or the Purchaser may designate by ten (10) days advance written notice to the other parties hereto. 7.11 Expenses. Each Party shall pay its own costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. 7.12 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 7.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 7.14 Broker's Fees. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 7.13 being untrue. 7.15 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. 7.16 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 SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION BEING AVAILABLE. In Witness Whereof, the parties hereto have executed this Investment Agreement as of the date set forth in the first paragraph hereof. Company: Tivo Inc. By: /s/ Michael Ramsay Name: Michael Ramsay Title: President and Chief Executive Officer In Witness Whereof, the parties hereto have executed this Investment Agreement as of the date set forth in the first paragraph hereof. Purchaser: America Online, Inc. By: /s/ David M. Colburn Name: David M. Colburn Title: President, Business Affairs INDEX OF EXHIBITS Amended and Restated Certificate of Incorporation Exhibit A Form of Warrant Exhibit B Form of Warrant Exhibit C Form of Warrant Exhibit D Form of Warrant Exhibit E Form of Escrow Agreement Exhibit F By-laws of the Company Exhibit G EXHIBIT A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT B FORM OF WARRANT EXHIBIT C FORM OF WARRANT EXHIBIT D FORM OF WARRANT EXHIBIT E FORM OF WARRANT EXHIBIT F FORM OF ESCROW AGREEMENT EXHIBIT G BY-LAWS OF THE COMPANY Table Of Contents Page Section 1. Agreement To Sell And Purchase...............................1 1.1 Authorization of Shares......................................1 1.2 Sale and Purchase............................................2 1.3 Warrants.....................................................3 1.5 Adjustments..................................................6 Section 2. Closing, Delivery and Payment................................6 2.1 Closing......................................................6 2.2 Delivery.....................................................6 Section 3. Representations and Warranties of the Company................7 3.1 Organization, Good Standing and Qualification................7 3.2 Capitalization; Voting Rights................................7 3.3 Authorization; Binding Obligations...........................8 3.4 SEC Filings..................................................9 3.5 Financial Statements........................................10 3.6 Undisclosed Liabilities.....................................10 3.7 Contracts; Action...........................................10 3.8 Obligations to Related Parties..............................11 3.9 Absence of Certain Changes..................................11 3.10 Legal Proceedings...........................................11 3.11 Compliance with Laws........................................11 3.12 Properties..................................................12 3.13 Compliance with Other Instruments...........................12 3.14 Offering Valid..............................................12 3.15 Taxes.......................................................12 3.16 Employee Benefits...........................................12 3.17 Executive Committee of the Board of Directors...............14 3.18 Board Approval; Section 203 of DGCL; California Takeover Law; Rights Plans...........................................14 3.19 Patents and Trademarks......................................14 3.20 Brokers.....................................................15 3.21 Disclosure..................................................15 Section 4. Representations and Warranties of the Purchaser.............16 4.1 Requisite Power and Authority...............................16 4.2 Investment Representations..................................16 4.3 Transfer Restrictions.......................................17 Section 5. Conditions to Closing.......................................17 5.1 Conditions to Purchaser's Obligations.......................17 5.2 Conditions to Obligations of the Company....................20 5.3 Conditions to Obligations of both the Company and the Purchaser...................................................21 Section 6. Additional Covenants........................................21 6.1 HSR Compliance; Other Approvals.............................21 6.2 Competing Proposals.........................................21 (a) Notification Regarding Competing Strategic Relationships...........................................21 (b) Acquisition and Competing Strategic Relationship Proposals...............................................22 6.3 Stockholder Approval........................................23 6.4 Ordinary Course of Business.................................23 6.5 Efforts.....................................................24 6.6 Notification of Certain Matters.............................24 6.7 Reservation of Shares.......................................24 6.8 Restated Certificate........................................24 Section 7. Miscellaneous...............................................24 7.1 Termination.................................................24 7.2 Definitions.................................................25 7.3 Governing Law...............................................25 7.4 Survival....................................................25 7.5 Successors and Assigns......................................25 7.6 Entire Agreement............................................25 7.7 Severability................................................26 7.8 Amendment and Waiver........................................26 7.9 Delays or Omissions.........................................26 7.10 Notices.....................................................26 7.11 Expenses....................................................27 7.12 Titles and Subtitles........................................27 7.13 Counterparts................................................27 7.14 Broker's Fees...............................................27 7.15 Pronouns....................................................28 7.16 California Corporate Securities Law.........................28 EX-2 3 0003.txt VOTING AGREEMENT VOTING AGREEMENT, dated as of June 9, 2000 (this "Agreement"), among America Online, Inc., a Delaware corporation ("America Online"), and the stockholders of TiVo Inc., a Delaware corporation ("TiVo"), that are parties hereto (each, a "Stockholder" and, collectively, the "Stockholders"). W I T N E S S E T H: WHEREAS, America Online and TiVo are, concurrently with the execution and delivery of this Agreement, entering into an Investment Agreement, dated as of the date hereof (including the exhibits thereto, the "Investment Agreement;" capitalized terms used without definition herein having the meanings assigned to them in the Investment Agreement), pursuant to which America Online will acquire shares of the capital stock of TiVo; and WHEREAS, as of the date hereof, each Stockholder is the record and beneficial owner of the number of shares of common stock, par value $0.001 per share, of TiVo ("TiVo Common Stock"), as set forth on the signature page hereof beneath such Stockholder's name (with respect to each Stockholder, such Stockholder's "Existing Shares" and, together with any shares of TiVo Common Stock or other voting capital stock of TiVo acquired after the date hereof, whether upon the exercise of warrants, options, conversion of convertible securities or otherwise, such Stockholder's "Shares"); NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I VOTING 1.1 Agreement to Vote. Each Stockholder hereby agrees that it shall, and shall cause the holder of record on any applicable record date to, from time to time, at the request of America Online, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of TiVo, however called, or in connection with any written consent of the holders of TiVo Common Stock, (a) if a meeting is held, appear at such meeting or otherwise cause the Shares that are beneficially owned or held of record by such Stockholder or as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting to be counted as present thereat for purposes of establishing a quorum, and (b) vote or consent (or cause to be voted or consented), in person or by proxy, all Shares, and any other voting securities of TiVo (whether acquired heretofore or hereafter) that are beneficially owned or held of record by such Stockholder or as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting, in favor of (i) the amendments to the certificate of incorporation of TiVo contemplated by the Investment Agreement and the form of Amended and Restated Certificate of Incorporation of TiVo attached as Exhibit A to the Investment Agreement and (ii) the approval of the issuance by TiVo of the Shares, the Conversion Shares, the Warrants and the Warrant Shares (as each such term is defined in the Investment Agreement) pursuant to the terms of the Investment Agreement and shares of Common Stock pursuant to the Stockholders Agreement (any matter under clauses (i) or (ii), a "Subject Proposal"). 1.2 Proxy. Each Stockholder hereby irrevocably grants to, and appoints, David Courtney and any person designated in writing by him, and each of them individually, as such Stockholder's proxy, agent and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote (or cause to be voted) the Shares beneficially owned or held of record by such Stockholder or as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting, or grant a consent or approval in respect of such Shares, in each case, on any Subject Proposal in a manner consistent with Section 1.1. America Online acknowledges that no Stockholder is granting a proxy with respect to any matter to be voted on by TiVo's stockholders other than a Subject Proposal. Each Stockholder hereby affirms that such proxy is given in connection with the execution of the Investment Agreement, is coupled with an interest and may under no circumstances be revoked prior to the termination of this Agreement. 1.3 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in America Online any direct or indirect ownership or incidence of ownership of or with respect to any Shares. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to the Stockholders, and America Online shall have no authority to manage, direct, superintend, restrict, regulate, govern, or administer any of the policies or operations of TiVo or exercise any power or authority to direct the Stockholders in the voting of any of the Shares, except as otherwise provided herein, or in the performance of the Stockholders' duties or responsibilities as stockholders of TiVo. 1.4 No Inconsistent Agreements. Each Stockholder hereby covenants and agrees that, except as contemplated by this Agreement and the Investment Agreement, the Stockholder (a) has not entered, and shall not enter at any time while this Agreement remains in effect, into any voting agreement or voting trust with respect to the Shares and (b) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy or power of attorney with respect to the Shares, in either case, which is inconsistent with such Stockholder's obligations pursuant to this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER Each Stockholder hereby, severally and not jointly, represents and warrants to America Online as follows: 2.1 Authorization; Validity of Agreement; Necessary Action. Such Stockholder has full power and authority to execute and deliver this Agreement, to perform such Stockholder's obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by such Stockholder of this Agreement and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by such Stockholder and no other actions or proceedings on the part of such Stockholder are necessary to authorize the execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of America Online, constitutes a valid and binding obligation of such Stockholder, enforceable against it in accordance with its terms. 2.2 Shares. Such Stockholder's Existing Shares are, and all of its Shares from the date hereof through and on the Closing Date will be, owned beneficially and of record by such Stockholder (subject to any dispositions of Shares permitted by Section 3.1(a) hereof). As of the date hereof, such Stockholder's Existing Shares constitute all of the shares of TiVo Common Stock owned of record or beneficially by such Stockholder. Such Stockholder has or will have sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Article I hereof, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of such Stockholder's Existing Shares and with respect to all of such Stockholder's Shares at the Company Stockholders Meeting, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. ARTICLE III OTHER COVENANTS 3.1 Further Agreements of Stockholders. (a) Each Stockholder, severally and not jointly, hereby agrees, while this Agreement is in effect, and except as contemplated hereby, not to sell, transfer, pledge, encumber, assign or otherwise dispose of (collectively, a "Transfer") or enforce or permit the execution of the provisions of any redemption, share purchase or sale, recapitalization or other agreement with TiVo or enter into any contract, option or other arrangement or understanding with respect to the offer for sale, sale, transfer, pledge, encumbrance, assignment or other disposition of, any of its Existing Shares, any Shares acquired after the date hereof, any securities exercisable for or convertible into TiVo Common Stock, any other capital stock of TiVo or any interest in any of the foregoing with any Person, except to a Person who agrees in writing, pursuant to an agreement delivered to AOL, to be bound by this Agreement as a Stockholder and be subject to Sections 1.1 and 1.2. (b) In the event of a stock dividend or distribution, or any change in TiVo Common Stock by reason of any stock dividend or distribution, or any change in TiVo Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Shares may be changed or exchanged or which are received in such transaction. ARTICLE IV MISCELLANEOUS 4.1 Termination. This Agreement shall terminate and no party shall have any rights or duties hereunder upon the earlier of (a) the date on which the Company Stockholder Approval (as defined in the Investment Agreement) is received, (b) the termination of the Investment Agreement pursuant to the terms thereof, or (c) December 31, 2000. Nothing in this Section 4.1 shall relieve or otherwise limit any party of liability for breach of this Agreement. 4.2 Further Assurances. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement. 4.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to America Online, to its address specified in Section 7.8 of the Investment Agreement (including a copy to Simpson Thacher & Bartlett); and (b) if to a Stockholder, as provided on the signature pages hereof. 4.4 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. 4.5 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware (without giving effect to choice of law principles thereof). 4.6 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 4.7 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. [Remainder of this page intentionally left blank]. IN WITNESS WHEREOF, America Online and each of the Stockholders have caused this Agreement to be signed by their respective officers or other authorized person thereunto duly authorized as of the date first written above. AMERICA ONLINE, INC. By: /s/ David M. Colburn Name: David M. Colburn Title: President, Business Affairs /s/ Michael Ramsay Michael Ramsay Number of Existing Shares: 2,114,999 Notices Address: c/o TiVo, Inc. 2160 Gold Street Alviso, CA 95002 Fax: (408) 519-5333 Attention: /s/ James Barton James Barton Number of Existing Shares: 1,624,999 Notices Address: TiVo, Inc. 2160 Gold Street Alviso, CA 95002 Fax: (408) 519-5333 Attention: /s/ David Courtney David Courtney Number of Existing Shares: 75,000 Notices Address: TiVo, Inc. 2160 Gold Street Alviso, CA 95002 Fax: (408) 519-5333 Attention: New Enterprise Associates VII, Limited Partnership By: NEA Partners VII, Limited Partnership Its General Partner By: /s/ Mark Perry Name: Mark W. Perry Title: General Partner NEA Presidents Fund, L.P. By: NEA General Partners, L.P. Its General Partner By: /s/ C. Richard Kramlich Name: C. Richard Kramlich Title: General Partner NEA Ventures 1997, Limited Partnership By: /s/ Jacqueline Myers Name: Jacqueline Myers Title: Vice President Number of Existing Shares: 4,167,204 Notices Address: New Enterprise Associates 2490 Sand Hill Road Menlo Park, CA 94025 Fax: (650) 854-9397 Attention: Stewart Alage Institutional Venture Partners VII, L.P. By Its General Partner Institutional Venture Management VII, L.P. By: /s/ Norman A. Fogelsong Name: Norman A. Fogelsong Title: General Partner Institutional Venture Management VII, L.P. By: /s/ Norman A. Fogelsong Name: Norman A. Fogelsong Title: General Partner IVP Founders Fund I, L.P. By Its General Partner Institutional Venture Management VI, L.P. By: /s/Norman A. Fogelsong Name: Norman A. Fogelsong Title: General Partner Number of Existing Shares: 4,217,204 Notices Address: 3000 Sand Hill Road Bldg. 2, Suite 290 Menlo Park, CA 94025 Fax: (650) 854-5762 Attention: Geoffrey Young Philips Venture Capital Fund B.V. By: /s/ James Oosterveld Name: James Oosterveld Title: Director and By: /s/ A.Westerlaken Name: A. Westerlaken Title: Director Number of Existing Shares: 1,351,351 Notices Address: Philips Venture Capital Fund B.V. Building HRT-24 Rembrandt Tower Amstelplain 1 P.O. Box 77900 1070 MX Amsterdam The Netherlands Fax: 31 20 59 77 890 Attention: Mr. J. P. Oosterveld Sony Corporation of America, Inc. By: /s/ Kenneth L. Ness Name: Kenneth L. Ness Title: Senior Vice President and Secretary Number of Existing Shares: 2,643,482 Notices Address: Fax: Attention: DirecTV, Inc. By: /s/ E.W. Hartenstein Name: E.W. Hartenstein Title: Chariman of the Board Number of Existing Shares: 3,386,601 Notices Address: 2230 E. Imperial Highway El Segundo, CA 90245 Fax: (310) 964-0222 cc: (310) 726-4884 Attention: E.W. Hartenstein cc: Legal Department /s/ John Hendricks John Hendricks Number of Existing Shares: 720,461 Notices Address: Discovery Communications, Inc. 7700 Wisconsin Avenue Bethesda, MD 20819 Fax: (301) 986-5999 Attention: John Hendricks EX-3 4 0004.txt STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT by and between TIVO INC. and AMERICA ONLINE, INC. dated as of June 9, 2000 TABLE OF CONTENTS Page RECITALS.....................................................................1 ARTICLE I DEFINITIONS........................................................1 SECTION 1.1 Certain Defined Terms..................................1 SECTION 1.2 Other Definitional Provisions........................ .9 ARTICLE II CORPORATE GOVERNANCE OF THE COMPANY...............................9 SECTION 2.1 Board Representation/Observation.......................9 SECTION 2.2 Available Information.................................11 SECTION 2.3 Access................................................12 SECTION 2.4 Voting of Shares......................................12 SECTION 2.5 Termination of Rights and Obligations.................13 SECTION 2.6 Other Approval Rights.................................13 SECTION 2.7 Ownership Restrictions................................13 ARTICLE III TRANSFERS.......................................................13 SECTION 3.1 Transfer Restrictions.................................13 SECTION 3.2 Transferees...........................................14 SECTION 3.3 Right of First Offer..................................14 SECTION 3.4 Termination of Rights and Obligations.................15 ARTICLE IV EQUITY PURCHASE RIGHTS...........................................16 SECTION 4.1 Unregistered Securities Offerings.....................16 SECTION 4.2 Other Issuances of Common Stock.......................17 SECTION 4.3 Issuances of Convertible Securities...................18 SECTION 4.4 No Restrictions.......................................19 SECTION 4.5 Termination of Equity Purchase Rights.................20 ARTICLE V REGISTRATION RIGHTS...............................................20 SECTION 5.1 Registration on Request...............................20 SECTION 5.2 Incidental Registrations..............................24 SECTION 5.3 Additional Registration Rights........................25 ARTICLE VI REGISTRATION PROCEDURES..........................................25 SECTION 6.1 Registration Procedures...............................25 SECTION 6.2 Information Supplied..................................29 SECTION 6.3 Restrictions on Disposition...........................29 SECTION 6.4 Indemnification.......................................29 SECTION 6.5 Required Reports......................................33 SECTION 6.6 Holdback Agreement....................................33 SECTION 6.7 No Inconsistent Agreement.............................33 ARTICLE VII STANDSTILL......................................................34 SECTION 7.1 Acquisition of Additional Voting Securities...........34 ARTICLE VIII RIGHT OF NOTIFICATION AND FORBEARANCE..........................35 SECTION 8.1 Right of Notification.................................35 SECTION 8.2 Forbearance...........................................36 SECTION 8.3 Other Rights..........................................36 ARTICLE IX MISCELLANEOUS....................................................36 SECTION 9.1 Termination...........................................36 SECTION 9.2 Amendments and Waivers................................37 SECTION 9.3 Successors, Assigns and Transferees...................37 SECTION 9.4 Notices...............................................37 SECTION 9.5 Further Assurances....................................37 SECTION 9.6 Entire Agreement......................................37 SECTION 9.7 Delays or Omissions...................................38 SECTION 9.8 Governing Law; Jurisdiction; Waiver of Jury Trial.....38 SECTION 9.9 Severability..........................................38 SECTION 9.10 Enforcement..........................................38 SECTION 9.11 Titles and Subtitles.................................38 SECTION 9.12 Counterparts; Facsimile Signatures...................38 STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT THIS STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of June 9, 2000, among TiVo Inc., a Delaware corporation (the "Company"), and America Online, Inc., a Delaware corporation ( "AOL"). RECITALS WHEREAS, the Company and AOL have entered into a Definitive Product Integration and Marketing Relationship Agreement, dated as of the date hereof (the "Commercial Agreement") pursuant to which the Company and AOL will work together to jointly develop a branded interactive television service; WHEREAS, the Company and AOL have entered into a Investment Agreement, dated as of the date hereof (the "Investment Agreement"), pursuant to which the Company has agreed to sell to AOL and AOL has agreed to purchase from the Company shares of its Common Stock (the "Shares") and, in certain circumstances, its Series A Convertible Preferred Stock, par value $0.001 per share (the "Preferred Shares"), upon the terms provided in the Investment Agreement and in the amended and restated certificate of incorporation of the Company in the form attached to the Investment Agreement as Exhibit A, and (ii) warrants to purchase shares of Common Stock, upon the terms provided in the Investment Agreement and in the forms of warrants attached as Exhibits B, C, D and E to the Investment Agreement (the "Warrants"). WHEREAS, the parties hereto desire to enter into certain arrangements relating to the Company and AOL's interest in the Company. NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION1.1 Certain Defined Terms. As used herein, the following terms shall have the following meanings: "Acquisition Proposal" means any offer or proposal for any merger, consolidation, purchase of substantial assets of the Company (including securities), tender, exchange or other offer for any Equity Securities or other business combination involving the Company or any of its Subsidiaries. "Acquisition Proposal Notice" has the meaning assigned to such term in Section 8.1(a). "Acquisition Restrictions" has the meaning assigned to such term in Section 7.1(a). "Adverse Effect" has the meaning ascribed to such term in Section 5.1(g). "Adverse Market Effect" has the meaning ascribed to such term in Section 5.1(h). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such specified Person. "AOL Offer Notice" has the meaning assigned to such term in Section 3.3(a). "AOL Offered Securities" has the meaning assigned to such term in Section 3.3(a). "AOL Observer" has the meaning ascribed to such term in Section 2.1. "AOL Participation Securities" has the meaning assigned to such term in Section 4.3(a). "AOL Representative" has the meaning ascribed to such term in Section 2.1. "AOL Unregistered Shares" has the meaning assigned to such term in Section 4.1(a). "Arbitrating Investment Banker" has the meaning assigned to such term in the definition of Fair Market Value contained in this Section 1.1. "beneficial owner" or "beneficially own" has the meaning given such term in Rule 13d-3 under the Exchange Act and a Person's beneficial ownership of either Common Stock or Preferred Shares or other Voting Securities of the Company shall be calculated in accordance with the provisions of such Rule; provided that, for purposes of determining beneficial ownership, a Person shall be deemed to be the beneficial owner of any security which may be acquired by such Person whether within sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities. "Business Day" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York. "Bylaws" means the Amended and Restated Bylaws of the Company, as in effect on the date hereof and as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the terms of the Certificate and the terms of this Agreement. "Capital Stock" means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited) or equivalent ownership interests in or issued by such Person and, with respect to the Company, includes any and all shares of Common Stock, the Preferred Shares and any other shares of preferred stock of the Company. "Certificate" means the Amended and Restated Certificate of Incorporation of the Company as in effect on the date hereof and as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and the terms of this Agreement. "Change of Control" means: (a) any Person is or becomes the beneficial owner, directly or indirectly (whether by merger, consolidation, purchase of securities or otherwise), of more than 50% of the total voting power of all the outstanding Voting Securities of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for the purposes of this clause, such person shall be deemed to beneficially own any Voting Securities of the Company held by an entity, if such Person beneficially owns, directly or indirectly, more than 50% of the total voting power of the Voting Securities of such entity). (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Company Board (together with any new Directors whose election by such Company Board or whose nomination for election by the stockholders of the Company, as the case may be, was approved by a vote of at least a majority of the Directors then still in office who were either Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company Board then in office; (c) the Transfer, lease or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Third Party; or (d) the adoption by the stockholders of the Company of a plan or proposal for the liquidation or dissolution of the Company. "Claims" has the meaning assigned to such term in Section 6.4(a). "Closing" has the meaning assigned to such term in the Investment Agreement. "Commercial Agreement" has the meaning assigned to such term in the Recitals. "Common Stock" means the common shares, par value $0.001 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination. "Company Board" means the Board of Directors of the Company. "Company Offering" has the meaning assigned to such term in Section 5.1(h). "control" (including the terms "controlled by" and "under common control with"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise. "Delay Notice" has the meaning assigned to such term in Section 5.1(h). "Demand Party" has the meaning assigned to such term in Section 5.1(a). "Director" means a member of the Company Board. "Equity Securities" means any and all shares of Capital Stock of the Company, securities of the Company convertible into, or exchangeable or exercisable for, such shares, and options, warrants or other rights to acquire such shares (including the Warrants). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Fair Market Value" means, as of any date, (A) with respect to the securities of any Person, either (x) the average of the closing reported sale prices of such securities on the principal national securities exchange or automated quotation service on which such security is then listed or quoted for the ten consecutive trading days immediately prior to the date as of which Market Value is being determined, or (y) if such securities are not publicly traded, then the fair market value of such securities as mutually agreed in good faith between the Company and AOL or, failing such agreement, as determined by a nationally recognized investment banking firm selected by mutual agreement of an investment banking firm selected by AOL and an investment banking firm selected by the Company (the "Arbitrating Investment Banker"), and (B) with respect to any other assets, the fair market value of such assets as determined by the Arbitrating Investment Banker in accordance with the procedures set forth in clause (y) above. "GAAP" means generally accepted accounting principles, as in effect in the United States of America from time to time. "Group" has the meaning assigned to such term in Section 13(d)(3) of the Exchange Act. "Holder" means AOL and any Affiliates of AOL as well as any Transferee of AOL or any of its Affiliates entitled to the rights under Articles V and VI of this Agreement. "Incentive Issuances" means the issuance or grant of any option to purchase Common Stock or shares of Common Stock (including upon the exercise of options) in the ordinary course of business under any employee stock option, employee stock purchase or other equity-based employee incentive plan, which plan was approved by the Company Board prior to such grant or issuance. "Indemnified Parties" has the meaning assigned to such term in Section 6.4(a). "Information Delay Notice" has the meaning assigned to such term in Section 5.1(h). "Investment Agreement" has the meaning assigned to such term in the Recitals. "Law" has the meaning assigned to such term in the Investment Agreement. "Managing Underwriters" has the meaning assigned to such term in Section 5.1(f). "Material Breach of the Commercial Agreement" means a "Material Breach" as defined in the Commercial Agreement. "NASD" means the National Association of Securities Dealers, Inc. "Nasdaq" means the Nasdaq National Market tier of The Nasdaq Stock Market. "NYSE" means The New York Stock Exchange, Inc. "Other Issuance Shares" has the meaning assigned to such term in Section 4.2(a). "Other Share Issuance" has the meaning assigned to such term in Section 4.2(a). "Ownership Percentage" means, at any time, the ratio, expressed as a percentage, (i) of the total shares of Common Stock beneficially owned by AOL and its Affiliates to (ii) the total number of outstanding shares of Common Stock, in each case (x) including (A) all shares issuable upon conversion of the Preferred Shares, if any, and (B) all shares issuable upon exercise of all the Warrants (regardless of whether they are exercisable at such time), but (y) excluding all shares issuable upon the conversion or exercise of Participation Securities or any other convertible or exercisable securities of the Company. "Participation Offering" has the meaning assigned to such term in Section 4.3(a). "Participation Offering Notice" has the meaning assigned to such term in Section 4.3(b). "Participation Securities" has the meaning assigned to such term in Section 4.3(a). "Person" means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing. "Preferred Shares" has the meaning assigned to such term in the Recitals. "Pro Rata Portion" means: (a) for purposes of Section 4.1, on any issuance date for Unregistered Shares, the number or amount of Unregistered Shares equal to the product of (i) the total number or amount of Unregistered Shares to be issued by the Company on the applicable date multiplied by (ii) the fraction determined by dividing (A) the number of shares of Common Stock beneficially owned by AOL and its Affiliates (including the shares of Common Stock issuable upon conversion of the Preferred Shares, but excluding any shares of Common Stock issuable pursuant to the Warrants or Participation Securities held by AOL on such date) by (B) the total number of shares of Common Stock outstanding on such date; (b) for purposes of Section 4.2, on any issuance date for an Other Share Issuance, the number or amount of Other Issuance Shares included in such Other Share Issuance equal to the product of (i) the total number or amount of Other Issuance Shares issued by the Company on the applicable date multiplied by (ii) the fraction determined by dividing (A) the number of shares of Common Stock beneficially owned by AOL and its Affiliates (including the shares of Common Stock issuable upon conversion of the Preferred Shares, but excluding any shares of Common Stock issuable pursuant to the Warrants or Participation Securities held by AOL on such date) by (B) the total number of shares of Common Stock outstanding on such date; or (c) for purposes of Section 4.3, on any issuance date for Participation Securities, the number or amount of Participation Securities equal to the product of (i) the total number or amount of Participation Convertible Securities to be issued by the Company multiplied by (ii) the fraction determined by dividing (A) the number of shares of Common Stock beneficially owned by AOL and its Affiliates on such date (including the shares of Common Stock issuable upon conversion of the Preferred Shares, exercise of the Warrants, and exercise or conversion of Participation Securities previously issued and outstanding) by (B) the total number of shares of Common Stock outstanding on such date (including the shares of Common Stock issuable upon conversion of the Preferred Shares, exercise of the Warrants, and exercise or conversion of Participation Securities previously issued and outstanding). "Registrable Securities" means any Preferred Shares and any Common Stock (including the Warrant Shares) held by any Holder. For purposes of this Agreement, any required calculation of the amount of, or percentage of, Registrable Securities shall be based on the number of shares of Common Stock which are Registrable Securities, including shares issuable upon the conversion, exchange or exercise of any security convertible, exchangeable or exercisable into Common Stock (including the Warrants and the Preferred Shares). As to any particular Registrable Securities, once issued, such Registrable Securities shall cease to be Registrable Securities when: (i) a registration statement with respect to the sale by the Holder of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement; (ii) such securities shall have been distributed to the public pursuant to Rule 144; or (iii) such securities shall have ceased to be outstanding. "Registration Expenses" means any and all expenses incident to performance of or compliance with Articles V and VI of this Agreement, including: (i) all SEC and NYSE or other securities exchange, Nasdaq or NASD registration and filing fees; (ii) all fees and expenses of complying with securities or blue sky laws (including the reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities); (iii) all printing, messenger and delivery expenses; (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on Nasdaq or any other securities exchange pursuant to this Agreement and all rating agency fees; (v) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance; (vi) any reasonable fees and disbursements of underwriters and their counsel customarily paid by the issuers or sellers of securities, and the reasonable fees and expenses of special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions; and (vii) all expenses incurred in connection with any road shows. "Rule 144" means Rule 144 (or any successor provision) promulgated under the Securities Act. "Schedule 13D" means the Statement on Schedule 13D filed by AOL pursuant to Rule 13d-1 under the Exchange Act relating to AOL's interest in the Company's Capital Stock, and any amendments thereto. "SEC" means the U.S. Securities and Exchange Commission or any other federal agency then administering the Securities Act or the Exchange Act and other federal securities laws. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Set Top Box Launch" has the meaning assigned to such term in the Investment Agreement. "Shares" has the meaning assigned to such term in the Recitals. "Standstill Period" means the period commencing on the date hereof and continuing until the earlier of: (i) the eighth anniversary of the date hereof; or (ii) the first date on which AOL does not own in excess of 10% of the outstanding shares of Common Stock. "Subsidiary" means (i) any corporation of which a majority of the securities entitled to vote generally in the election of directors thereof, at the time as of which any determination is being made, are owned by another entity, either directly or indirectly, and (ii) any joint venture, general or limited partnership, limited liability company or other legal entity in which an entity is the record or beneficial owner, directly or indirectly, of a majority of the voting interests or the general partner. "Third Party" means any Person who is not an Affiliate of AOL, including any Group, other than a Group which includes AOL or any of its Affiliates as members. "Transaction Agreements" means the, collectively, this Agreement, the Investment Agreement, the Warrants, the Voting Agreement (as defined in the Investment Agreement), the Escrow Agreement (as defined in the Investment Agreement), the Restated Certificate (as defined in the Investment Agreement) and the Commercial Agreement. "Transaction Delay Notice" has the meaning assigned to such term in Section 5.1(h). "Transfer" means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Equity Securities beneficially owned by a Person. "Transferee" means any Person to whom AOL or any Transferee thereof Transfers Equity Securities of the Company. "Unregistered Offering" has the meaning assigned to such term in Section 4.1(a). "Unregistered Offering Notice" has the meaning assigned to such term in Section 4.1(b). "Unregistered Shares" has the meaning assigned to such term in Section 4.1(a). "Voting Securities" means, at any time, shares of any class of Equity Securities which are then entitled to vote generally in the election of Directors. "Warrants" has the meaning assigned to such term in the Recitals. "Warrant Shares" means the shares of Common Stock or other Equity Securities purchasable pursuant to the Warrants, as adjusted from time to time in accordance with the terms of such Warrants and this Agreement, whether such Warrant is exercisable or not. SECTION 1.2 Other Definitional Provisions. (a) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article and Section references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. ARTICLE II CORPORATE GOVERNANCE OF THE COMPANY SECTION 2.1 Board Representation/Observation. (a) Subject to Sections 2.5 and 2.1(c), AOL will be entitled to designate one person for election to the Company Board (the "AOL Representative"). The Company agrees to take all such action as may be required under applicable Law: (i) so that, effective as of the Closing, the Company Board will include the AOL Representative, and the AOL Representative shall be a member of the class of Directors having a term extending until the 2003 annual meeting of shareholders of the Company; (ii) to include the AOL Representative in the slate of nominees for the class of Directors in which the AOL Representative is designated recommended by the Company Board for election by the stockholders of the Company; and (iii) to use its best efforts to cause the election of the AOL Representative to the Company Board, including nominating such individual to be elected as a Director of the Company Board. (b) In the event that a vacancy is created on the Company Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of any AOL Representative, the Company and the remaining Directors will cause the vacancy created thereby to be filled by a new designee of AOL as soon as possible, who is designated in the manner specified in this Section 2.1, and the Company hereby agrees to take, or cause to be taken, at any time and from time to time, all actions necessary to accomplish the same. Unless requested by AOL, the Company agrees not to take any action to cause the removal of any AOL Representative without cause. (c) AOL shall have the right, exercisable at any time by written notice to the Company, to appoint one observer (the "AOL Observer") to attend all regular and special meetings of the Board of Directors. Upon delivery to the Company of the notice designating an AOL Observer, AOL shall cause the AOL Representative, if any, to resign as a member of the Company Board; provided that the person serving as the AOL Representative shall be permitted to serve as the AOL Observer. Upon the removal of any AOL Observer, AOL shall have the right, at its sole discretion, subject to Section 2.6, to appoint an AOL Representative in accordance with Section 2.1(a) or a replacement AOL Observer in accordance with this Section 2.1(c); provided that (i) after replacing an AOL Representative with an AOL Observer, AOL shall be permitted to freely replace such AOL Observer with an AOL Representative on one occasion, and (ii) thereafter, if AOL desires to replace such AOL Representative with an AOL Observer, AOL and the Company shall consult in good faith regarding AOL's desire to designate an AOL Representative and such AOL Representative shall be subject to the reasonable discretion of the Company. The AOL Observer shall be entitled to receive the same notice of any such meeting and all other information and materials (financial and otherwise) as and at the same time received by the Directors, and shall have the right to participate therein, but shall not have the right to vote on any matter or to be counted for purposes of determining whether a quorum is present thereat. In addition, the AOL Observer shall have the right to receive copies of any action proposed to be taken by written consent of the Board of Director without a meeting. (d) The Company shall reimburse each AOL Representative or AOL Observer, as the case may be, for his or her reasonable out-of-pocket expenses incurred by him or her for the purpose of attending meetings of the Company Board or committees thereof. The AOL Representative or AOL Observer shall also be entitled to the same benefits (including coverage under insurance policies) as other non-employee Directors. (e) Notwithstanding that any AOL Representative may be a member of the Company Board or an AOL Observer may be entitled to observe Company Board meetings, AOL and its Affiliates may, and, to the greatest extent permitted by the General Corporation Law of the State of Delaware, any individual serving as an AOL Representative or an AOL Observer may in his own right or as a director, officer, employee or shareholder of any other Person, carry on any activity, pursue any business opportunity or enter into any agreement, arrangement or understanding whatsoever. SECTION 2.2 Available Information. (a) So long as AOL and its Affiliates collectively own Common Stock and Preferred Shares representing 85% of the shares of Common Stock issued to it at the Closing or receivable upon conversion of the Preferred Shares as of the Closing, the Company will deliver, or will cause to be delivered, the following to AOL: (i) to the extent prepared by the Company, as soon as practical after the preparation thereof, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each month, consolidated statements of income and cash flows of the Company and its Subsidiaries, for each month and for the current fiscal year of the Company to date, a comparison of such statements to the corresponding periods of the prior fiscal year and to the Company's business plan then in effect; and (ii) an annual budget, a business plan and financial forecasts for the Company for the next fiscal year of the Company, no later than thirty (30) days before the beginning of the Company's next fiscal year, in such manner and form as approved by the Company Board, which shall include at least a projection of income and a projected cash flow statement for each fiscal quarter in such fiscal year and a projected balance sheet as of the end of each fiscal quarter in such fiscal year. Any material changes in such business plan shall be delivered to the AOL Representative, the AOL Observer or AOL, as the case may be, as promptly as practicable after such changes have been approved by the Company Board. (b) The Company will promptly deliver to AOL when available such number of copies of each annual report on Form 10-K and quarterly report on Form 10-Q of the Company, as filed with the SEC, as AOL shall reasonably request. In the event an annual report on Form 10-K or quarterly report on Form 10-Q is unavailable, the Company may, in lieu of the requirements of the preceding sentence, deliver, or cause to be delivered, the following to the AOL Representative, the AOL Observer or AOL, as the case may be: (i) as soon as practicable after the end of each fiscal year of the Company, and in any event within ninety (90) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such year, prepared in accordance with GAAP and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and followed promptly thereafter (to the extent not available) such financial statements accompanied by the opinion of independent public accountants of recognized national standing selected by the Company, and a Company-prepared comparison to the Company's business plan for such year as approved by the Company Board; and (ii) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, a consolidated balance sheet of the Company and its Subsidiaries as of the end of each such quarterly period, and consolidated statements of income and cash flows of the Company and its Subsidiaries for such period and for the current fiscal year to date, prepared in accordance with GAAP and setting forth in comparative form the figures for the corresponding periods of the previous fiscal year and to the Company's business plan then in effect and approved by the Company Board, subject to changes resulting from normal year-end audit adjustments, all in reasonable detail and certified by the principal financial or accounting officer of the Company, except that such financial statements need not contain the notes required by GAAP. SECTION 2.3 Access. So long as AOL and its Affiliates collectively own Common Stock and Preferred Shares representing 85% of the shares of Common Stock issued to it at the Closing or receivable upon conversion of the Preferred Shares as of the Closing, the company will afford AOL the opportunity to discuss the Company's business, affairs, finances, prospects and accounts with the Company's Chief Executive Officer on a quarterly basis and the Company's Chief Financial Officer on a monthly basis, and at such other times and with such other officers, attorneys and accountants of the Company as the Company shall approve (such approval not to be unreasonably withheld). SECTION 2.4 Voting of Shares. (a) Voting of Shares by AOL. Subject to the final sentence of this Section 2.4 and to Section 2.5, AOL shall be entitled to vote, or cause to be voted, that number of Voting Securities it owns representing up to 19.9% of the voting power of all the outstanding Voting Securities of the Company on any matter submitted to a vote of stockholders (or for which action in lieu of a vote is solicited by the Company) in AOL's sole discretion. Subject to the final sentence of this Section 2.4 and to Section 2.5, AOL agrees to vote or cause to be voted all of the Voting Securities that it at any time owns representing in excess of 19.9% of the total voting power of all the outstanding Voting Securities on any matter submitted to a vote of stockholders (or for which action in lieu of a vote is solicited by the Company) in accordance with the recommendation of the Company Board. Notwithstanding the foregoing, AOL shall not be limited or restricted in any manner in voting any number of Voting Securities and shall not be subject to any voting obligation with respect to any Voting Securities in respect of any of the following: (i) any amendment to the Company's Certificate that is adverse in a discriminatory manner to AOL; or (ii) any Acquisition Proposal if the Company has materially breached any of its obligations under Section 6.2 or Section 6.3 of the Investment Agreement or Section 7.1(e), Section 7.1(f) or Article VIII of this Agreement. (b) Voting of Shares by New Investors. In the event that prior to the Closing (as defined in the Investment Agreement), the Company issues any voting securities in a transaction that is not an underwritten offering, then the Company shall require as a condition of such issuance that the purchasers of such securities enter into a voting agreement similar to the Voting Agreement to vote in favor of the transactions contemplated by the Investment Agreement. SECTION 2.5 Termination of Rights and Obligations.. The provisions of Section 2.1 and Section 2.4 shall terminate upon expiration of the Standstill Period. SECTION 2.6 Other Approval Rights.. If the Company at any time after the date hereof grants to any other holders of Equity Securities any rights to consent to or approve any corporate action, transaction, or other event or development concerning the Company or its business, this Agreement shall be deemed amended to provide to AOL substantially equivalent rights of consent or approval. SECTION 2.7 Ownership Restrictions.. The Company shall not adopt, enter into or enforce any restriction on AOL's ability to acquire ownership (beneficial or otherwise) of any securities of the Company, pursuant to a shareholder rights plan or otherwise, except (i) as expressly provided herein and in the other Transaction Agreements or (ii) pursuant to a customary shareholder rights plan that expressly provides that no adverse effect on AOL will occur (including, without limitation, the separation or exercisability of the rights issued pursuant to such plan or the designation of AOL or its affiliates as an "acquiring person" or the like) under such plan by reason of or due to (x) AOL acquiring beneficial ownership of up to 30% of all the outstanding shares of Common Stock, (y) any acquisition of beneficial or record ownership by AOL or its Affiliates of securities of the Company pursuant to the terms of any of the Transaction Agreements (including, without limitation, Article I of the Investment Agreement, Articles IV or VII hereof, the conversion, antidilution, adjustment, dividend or redemption provisions of the Preferred Shares, the exercise, adjustment or antidilution provisions of the Warrants or otherwise) or (z) any action taken by the Company (including, without limitation, repurchases of securities or dividends on equity securities). ARTICLE III TRANSFERS SECTION 3.1 Transfer Restrictions. (a) Subject to Sections 3.1(b) and 3.4, neither AOL nor any of its Affiliates will transfer any of their Equity Securities to any Person without the Company's prior consent. (b) Notwithstanding the foregoing, and subject to Sections 3.3 (including Sections 3.3(d)) and 3.4, AOL and its Affiliates may Transfer all or, from time to time, any portion of their Equity Securities: (i) if, after giving effect to the Transfer, the Transferee will not, to AOL's knowledge, beneficially own or have the right to acquire in excess of 5% of the outstanding Capital Stock of the Company; (ii) in response to a Third Party Acquisition Proposal that has been recommended or approved by the Company Board; (iii) to Persons who are eligible to report their ownership of Equity Securities on Schedule 13G under Section 13(g) of the Exchange Act or any successor provision; (iv) pursuant to a bona fide underwritten public offering or Rule 144; provided that, (A) in the case of an underwritten offering, the underwriters have been requested to inquire, and (B) in the case of a sale pursuant to Rule 144 that is not executed on any securities exchange or in the over-the-counter market, AOL or its representatives have inquired, whether any purchaser in such transaction will beneficially own, after giving effect to such transaction, in excess of 5% of the outstanding Capital Stock of the Company; (v) upon or following a Change of Control of the Company; or (vi) to any Affiliate of AOL; provided that such Affiliate shall agree in writing to be bound by the terms of this Agreement in accordance with Section 9.4; provided further that in the event such Transferee ceases to be an Affiliate of AOL, such Transferee shall Transfer any Equity Securities then held by it to AOL or another Affiliate of AOL. SECTION 3.2 Transferees. Except as set forth in Section 3.1(vi), no Transferee of AOL or its Affiliates will be obligated, or entitled to rights, under this Agreement. SECTION 3.3 Right of First Offer. Subject to Sections 3.3(d) and 3.4, AOL agrees not to Transfer any of its Equity Securities except as set forth below: (a) Notice. Prior to any Transfer of Equity Securities by AOL, AOL shall deliver to the Company written notice (the "AOL Offer Notice"), which notice shall state the number of Equity Securities proposed to be Transferred (the "AOL Offered Securities") and the proposed purchase price therefor. (b) Exercise. For a period of ten (10) days following receipt of the AOL Offer Notice, the Company shall have the option, but not the obligation, to purchase all, but not less than all, of the AOL Offered Securities for a purchase price per share in cash equal to the purchase price per share set forth in the AOL Offer Notice and on the same terms and conditions as applicable to the proposed Transfer. In the event the Company elects to purchase all of the AOL Offered Securities, the Company shall provide written notice to AOL no later than ten (10) days following receipt by the Company of the AOL Offer Notice. Any purchase by the Company of AOL Offered Securities under this Section 3.3 shall occur as soon as practicable following the Company's election to exercise its rights under this Section 3.3, but in any event within twenty (20) days following such election. At the closing of such purchase, AOL shall deliver a certificate or certificates to the Company, duly endorsed for transfer or accompanied by stock powers duly executed, in either case executed in blank or in favor of the Company against payment of the aggregate purchase price therefor by wire transfer of immediately available funds. In the event the Company fails to elect to purchase all the AOL Offered Securities by delivery of a notice to such effect pursuant to Section 3.3(a), then the Company shall be deemed to have elected not to purchase the AOL Offered Securities pursuant to this Section 3.3. (c) Completion of Transfer. In the event the Company elects not to purchase the AOL Offered Securities pursuant to this Section 3.3, AOL may, within one hundred twenty (120) days following the expiration of the 10-day period set forth in Section 3.3(b), Transfer the AOL Offered Securities at a price not lower, and on other terms no less favorable to AOL, than those set forth in the AOL Offer Notice; provided that, if the consideration to be received by AOL consists in whole or in part of consideration other than cash, the portion of the price received by AOL for the Transfer of the Offered Securities consisting of such non-cash consideration shall deemed to be the Fair Market Value of such non-cash consideration as of the date AOL enters into a binding agreement with respect to the Transfer of the Offered Securities or, if no such agreement is entered into, the date of the consummation of the Transfer of the Offered Securities (it being understood that in connection with any determination of Fair Market Value which involves an Arbitrating Investment Banker, the fees and expenses of such Arbitrating Investment Banker shall be paid by AOL if it is determined that the total price to be paid to AOL for the Offered Securities is less than that set forth in the AOL Offer Notice and otherwise shall be paid by the Company). If the AOL Offered Securities are not so Transferred within such 120-day period, such securities shall again become subject to all of the terms and conditions of the Agreement and may not thereafter be Transferred except in the manner and on the terms herein provided. (d) Exceptions to the Right of First Offer. This Section 3.3 shall not apply to Transfers of Equity Securities by AOL made in accordance with paragraphs (ii), (iv), (v) or (vi) of Section 3.1(b). SECTION 3.4 Termination of Rights and Obligations. The provisions of this Article III shall terminate upon expiration of the Standstill Period. ARTICLE IV EQUITY PURCHASE RIGHTS SECTION 4.1 Unregistered Securities Offerings. (a) Grant of Right. Subject to Section 4.5 and the other terms and conditions of this Section 4.1, the Company hereby grants to AOL the right to subscribe for and purchase its Pro Rata Portion (or any lesser amount as AOL may elect) of any shares of Common Stock (the "Unregistered Shares") that the Company may, from time to time, propose to issue (excluding Incentive Issuances) pursuant to an offering of Common Stock for cash consideration that is not registered with the SEC (each an "Unregistered Offering"). The number or amount of Unregistered Shares which AOL may subscribe for or purchase pursuant to this Section 4.1 shall be referred to as the "AOL Unregistered Shares." (b) Notice. The Company shall deliver to AOL written notice (an "Unregistered Offering Notice") of each proposed Unregistered Offering, which shall set forth the material terms and conditions of the proposed Unregistered Offering that are known to the Company at the time such notice is given, including, to the extent available, the name of any proposed purchaser(s), the names of any underwriters, placement agents, initial purchasers or similar participants in such offering, the proposed manner of disposition, the number and amount of Unregistered Shares proposed to be issued and the proposed purchase price per share (or range of purchase prices). In addition, the Company shall have the continuing obligation to (i) promptly provide (and, if available to the Company prior to the time AOL must notify the Company whether it desires to participate in such Unregistered Offering pursuant to Section 4.1(c), prior to such time) to AOL any additional material information regarding the terms of such Unregistered Offering (including changes in such terms) that becomes available to the Company, including as a result of discussions with underwriters, private placement agents, initial purchasers or similar participants in such offering and (ii) promptly provide to AOL any other information available to the Company concerning such Unregistered Offering that AOL shall reasonably request. Each Unregistered Offering Notice must be received by AOL at least fifteen (15) days prior to the proposed Unregistered Offering. (c) Exercise. At any time during the 10-day period following receipt of an Unregistered Offering Notice, AOL may elect to purchase any or all of the AOL Unregistered Shares at the purchase price and upon the other terms and conditions upon which shares of Common Stock are actually issued in the Unregistered Offering by delivering a written notice to such effect to the Company. If (i) AOL elects to purchase AOL Unregistered Shares and after such election the price at which Unregistered Shares are issued is greater than 133% of the price specified in the Unregistered Offering Notice (or the last written notice delivered to AOL regarding such issuance of Unregistered Shares), then AOL shall be entitled to withdraw its election to purchase AOL Unregistered Shares or (ii) if AOL fails to elect to purchase AOL Unregistered Shares during such 10-day period and after such 10-day period the price at which Unregistered Shares are issued is less than 67% of the price specified in the Unregistered Offering Notice (or the last written notice delivered to AOL regarding such issuance of Unregistered Shares), then AOL shall be released from its obligations under Article VII of this Agreement for a period of sixty (60) days following the consummation of such Unregistered Offering (or, if later, the cessation of any restrictions under applicable Law or the rules of Nasdaq or any stock exchange on AOL's ability to purchase Common Stock) in order to allow AOL to purchase the number of shares of Common Stock that it could have purchased in such Unregistered Offering. Except as provided in the following sentence, such purchase shall be consummated concurrently with the consummation of the Unregistered Offering. The closing of any purchase of AOL Unregistered Shares by AOL may be extended beyond the closing of the transaction described in the Unregistered Offering Notice to the extent necessary to obtain required governmental approvals and other necessary approvals and the Company and AOL shall use their respective reasonable best efforts to obtain such approvals. (d) Completion of the Unregistered Offering. The Company shall not complete any Unregistered Offering unless it has complied with the provisions of this Section 4.1. If the Company fails to complete any Unregistered Offering within thirty (30) days following the exercise by AOL of its rights to participate in such Unregistered Offering pursuant to this Section 4.1, AOL shall thereafter be entitled to withdraw or change its election to purchase AOL Unregistered Shares and the Company shall continue to comply with this Section 4.1 until such time as the Company shall deliver to AOL a written notice that the Company is terminating such Unregistered Offering. Upon any termination of an Unregistered Offering without any shares of Common Stock having been issued, the Company shall have no obligation to issue or sell shares of Common Stock to AOL, but shall be obligated to comply with this Section 4.1 for any subsequent Unregistered Offering. (e) Warrants. Immediately following each Unregistered Offering (or the sixty-day period specified in clause (ii) of the second sentence of Section 4.1(c), if applicable), the number of Warrant Shares shall be increased, to the extent AOL actually purchases AOL Unregistered Shares, in the aggregate by a number of shares of Common Stock equal to (x) a fraction, the numerator of which is the number of AOL Unregistered Shares which AOL actually purchased in connection with such Unregistered Offering and the denominator of which is the number of AOL Unregistered Shares which AOL was entitled to purchase in connection with such Unregistered Offering, multiplied by (y) that number of shares of Common Stock necessary to restore AOL's Ownership Percentage to the Ownership Percentage in effect immediately prior to such Unregistered Offering. Any such increase in the number of Warrant Shares shall be allocated proportionally among all Warrants unexercised at such time. Upon presentation of the Warrants to the Company by AOL, the Company shall issue to AOL new Warrants reflecting the increased number of shares of Common Stock subject thereto. The Company shall at all time cause to be reserved for issuance the aggregate number of Warrant Shares issuable pursuant to the Warrants. SECTION 4.2 Other Issuances of Common Stock. (a) Release from Standstill. Subject to Section 4.5, in the event the Company issues shares of Common Stock other than pursuant to an Unregistered Offering or an Incentive Issuance (an "Other Share Issuance"), AOL will be released from its obligations under Article VII of this Agreement for a period of sixty (60) days following its receipt of the notice described in the next sentence (or, if later, the cessation of any restrictions under applicable Law or the rules of Nasdaq or any stock exchange on AOL's ability to purchase Common Stock) in order to allow AOL to purchase a number of shares of Common Stock equal to its Pro Rata Portion of the total number of shares of Common Stock (the "Other Issuance Shares") issued in such Other Share Issuance. Upon the closing of any Other Share Issuance, the Company shall notify AOL in writing of such fact and shall specify the number of shares of Common Stock issued in such Other Share Issuance. (b) Warrants. Immediately following the expiration of the 60-day period referred to in Section 4.2(a), the number of Warrant Shares shall be increased, to the extent AOL actually purchases Other Issuance Shares, in the aggregate by a number of shares of Common Stock equal to (x) a fraction, the numerator of which is the number of Other Issuance Shares which AOL actually purchased in connection with such Other Share Issuance and the denominator of which is the number of Other Issuance Shares which AOL was entitled to purchase in connection with such Other Share Issuance multiplied by (y) that number of shares of Common Stock necessary to restore AOL's Ownership Percentage to the Ownership Percentage in effect immediately prior to such Other Share Issuance. Any such increase in the number of Warrant Shares shall be allocated proportionally among all Warrants unexercised at such time. Upon presentation of the Warrants to the Company by AOL, the Company shall issue to AOL new Warrants reflecting the increased number of shares of Common Stock subject thereto. The Company shall at all time cause to be reserved for issuance the aggregate number of Warrant Shares issuable pursuant to the Warrants. SECTION 4.3 Issuances of Convertible Securities. (a) Grant of Right. Subject to Section 4.5 and the other terms of this Section 4.3, the Company hereby grants to AOL the right to subscribe for and purchase its Pro Rata Portion (or any lesser amount as AOL may elect) of any securities exercisable for or convertible into Common Stock (the "Participation Securities") that the Company may, from time to time, propose to issue (excluding Incentive Issuances) (each a "Participation Offering"). The number or amount of Participation Convertible Securities which AOL may subscribe for and purchase pursuant to this Section 4.3 shall be referred to as the "AOL Participation Securities." (b) Notice. The Company shall deliver to AOL written notice (a "Participation Offering Notice") of each proposed Participation Offering, which shall set forth the material terms and conditions of the proposed Participation Offering that are known to the Company at the time such notice is given, including, to the extent available, the name of any proposed purchaser(s), the names of any underwriters, placement agents, initial purchasers or similar participants in such offering, the proposed manner of disposition, the number and amount of Participation Securities proposed to be issued, a description of the conversion or exchange features of the Participation Securities and the proposed purchase price per security (or range of purchase prices) (including a description of any non-cash consideration sufficiently detailed to permit valuation thereof). In addition, the Company shall have the continuing obligation to (i) promptly provide (and, if available to the Company prior to the time AOL must notify the Company whether it desires to participate in such Participation Offering pursuant to Section 4.3(c), prior to such time) to AOL any additional material information regarding the terms of such Participation Offering (including changes in such terms) that becomes available to the Company, including as a result of discussions with underwriters, private placement agents, initial purchasers or similar participants in such offering and (ii) promptly provide to AOL any other information available to the Company concerning such Participation Offering that AOL shall reasonably request. Each Participation Offering Notice must be received by AOL at least fifteen (15) days prior to the proposed Participation Offering. (c) Exercise. At any time during the 10-day period following receipt of a Participation Offering Notice, AOL may elect to purchase any or all of the AOL Participation Securities at the purchase (or if the purchase price includes consideration other than cash, the amount in cash equal to the fair value of such other consideration) and upon the other terms and conditions upon which the Participation Securities are actually issued by delivering a written notice to such effect to the Company. If (i) AOL elects to purchase AOL Participation Securities and after such election the price at which Participation Securities are issued is greater than 133% of the price specified in the Participation Offering Notice (or the last written notice delivered to AOL regarding such issuance of Participation Securities Shares), then AOL shall be entitled to withdraw its election to purchase AOL Participation Securities or (ii) if AOL fails to elect to purchase AOL Participation Securities during such 10-day period and after such 10-day period the price at which Participation Securities are issued is less than 67% of the price specified in the Participation Offering Notice (or the last written notice delivered to AOL regarding such issuance of Participation Securities), then AOL shall be released from its obligations under Article VII of this Agreement for a period of sixty (60) days in order to allow AOL to purchase the number of shares of Common Stock that would be issuable upon conversion of the all Participation Securities it could have purchased in such Participation Offering. Except as provided in the following sentence, such purchase shall be consummated concurrently with the consummation of the Participation Offering. The closing of any purchase of AOL Participation Securities by AOL may be extended beyond the closing of the transaction described in the Participation Notice to the extent necessary to obtain required governmental approvals and other necessary approvals and the Company and AOL shall use their respective reasonable best efforts to obtain such approvals. (d) Completion of the Participation Offering. The Company shall not complete any Participation Offering unless it has complied with the provisions of this Section 4.3. If the Company fails to complete any Participation Offering within thirty (30) days following the exercise by AOL of its rights to participate in such Participation Offering pursuant to this Section 4.3, AOL shall thereafter be entitled to withdraw or change its election to purchase AOL Participation Securities and the Company shall continue to comply with this Section 4.3 until such time as the Company shall deliver to AOL a written notice that the Company is terminating such Participation Offering. Upon any termination of an Participation Offering without any Participation Securities having been issued, the Company shall have no obligation to issue or sell any AOL Participation Securities to AOL, but shall be obligated to comply with this Section 4.3 for any subsequent Participation Offering. SECTION 4.4 No Restrictions. The Company shall not enter into or permit to become effective any restrictions on AOL's rights under this Article IV, whether pursuant to a contract, provision of the Certificate or Bylaws or otherwise. The Company represents to AOL that it has, and for each purchase of securities pursuant to this Article IV it will, approve the acquisition of securities by AOL for purposes of Section 203 of the General Corporation Law of the State of Delaware. SECTION 4.5 Termination of Equity Purchase Rights. AOL's equity purchase rights under this Article IV will expire upon the earlier of (i) December 31, 2001 or (ii) the Set Top Box Launch. ARTICLE V REGISTRATION RIGHTS SECTION 5.1 Registration on Request. (a) Request. Subject to Section 5.1(b), at any time after the date hereof, AOL (or any other Holder; provided that no Transferee of AOL or any of its Affiliates or of any Transferee may request a registration pursuant to this Section 5.1 unless the right to make such a request was transferred to such Transferee pursuant to Section 9.3) (individually or collectively, as the case may be, the "Demand Party") may request in writing that the Company effect the registration under the Securities Act of an underwritten offering of all or part of such Demand Party's Registrable Securities, specifying the number of Registrable Securities proposed to be sold. Subject to the other provisions of this Section 5.1, the Company shall promptly give written notice of such requested registration to all other Holders, and thereupon will, as expeditiously as possible, use its efforts to best effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by the Demand Party; and (ii) all other Registrable Securities which the Company has been requested to register by any other Holder thereof by written request given to the Company within thirty (30) days after the giving of such written notice by the Company (which request shall specify the amount of such Registrable Securities), all to the extent necessary to permit the disposition of the Registrable Securities so to be registered. (b) Limits on Registration Requests. Notwithstanding Section 5.1(a): (i) in no event will the Company be required to effect more than four (4) registrations pursuant to this Section 5.1; (ii) following the nine month anniversary of the Closing, upon the request of AOL, the Company will be required to effect up to two (2) registrations pursuant to Section 5.1(a); (iii) except as set forth in paragraph (ii) above, the Company will not be required to effect a registration pursuant to Section 5.1(a) until the earliest of: (A) the second anniversary of the date hereof; (B) the termination of the Commercial Agreement pursuant to the mutual agreement of the Company and AOL; (C) the occurrence of a Material Breach of the Commercial Agreement by the Company, so long as such Material Breach has not been cured prior to the Demand Party's request for a registration pursuant to Section 5.1(a); or (D) the expiration of the Commercial Agreement in accordance with its terms; and (iv) if AOL commits a Material Breach of the Commercial Agreement, the Company will not be obligated to file a registration statement relating to any request under this Section 5.1 prior to the earlier of (x) the expiration of a period of twelve (12) months from the date such Material Breach occurred and (y) the date such Material Breach has been cured. Nothing in this Section 5.1 shall operate to limit the right of any Holder to (i) request the registration of Common Stock issuable upon the exercise or conversion of any Warrants or Preferred Shares held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock underlying such Warrants or Preferred Shares or (ii) request the registration at one time of both Preferred Shares convertible into Common Stock and the Common Stock underlying any such Preferred Shares. (c) Registration Statement Form. The Company shall select the registration statement form for any registration pursuant to this Section 5.1. (d) Expenses. In connection with registrations pursuant to this Section 5.1: (i) each Holder will pay its own underwriting fees and discounts, if any, and the fees and expenses of its legal, accounting and other advisors with respect to the sale of its Registrable Securities; and (ii) the Company will pay all other Registration Expenses; provided that the Company shall not be required to pay for expenses of any registration proceeding begun pursuant to this Section 5.1 (other than SEC registration fees which the Company is able to apply to a subsequent registration statement), the request of which has been subsequently withdrawn by the Demand Party, unless (a) the withdrawal is based upon material adverse information or developments concerning the Company of which the Demand Party was not aware at the time of such request, (b) the Holders of a majority of the Registrable Securities agree to forfeit their right to one requested registration pursuant to Section 5.1 (in which event such right shall be forfeited by all Holders), (c) the Company has exercised its right to postpone such registration pursuant to Section 5.1(h), (d) any event of the kinds described in Section 6.1(f) occurs or (e) the requested registration is not timely completed due to the Company's failure to comply with any of its obligations hereunder or other actions or omissions of the Company. (e) Effective Registration Statement. A registration requested pursuant to this Section 5.1 will not be deemed to have been effected: (i) unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until the earlier of (x) such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition thereof set forth in such registration statement or (y) one-hundred-eighty (180) days after the effective date of such registration statement; (ii) if after it has become effective, the registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority and does not thereafter become effective and remain effective for the period specified in paragraph (i) above; or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Demand Party or other Holders. (f) Underwriters. The managing underwriters for any registration under this Section 5.1 shall each be a nationally recognized investment banking firm and shall be selected by the Company; provided, that such underwriter(s) shall be reasonably satisfactory to AOL (the "Managing Underwriters"). (g) Priority in Requested Registrations. If the Managing Underwriter of a requested registration pursuant to this Section 5.1 advises the Company in writing that, in its opinion, the number of securities to be included in such registration would be likely to have a material adverse effect on the price, timing or distribution of the securities to be offered in such offering as contemplated by the Holders (an "Adverse Effect"), then the Company shall include in such registration: (i) first, 100% of the Registrable Securities requested to be included by the Demand Party and all other Holders of Registrable Securities, if any (reduced, if necessary, pro rata in proportion to the respective number of shares proposed to be included by each); (b) second, after inclusion of all the Registrable Securities proposed to be included in such registration by the Demand Party and the other Holders, to the extent of the amount of Equity Securities requested to be included by the Company in such registration which, in the opinion of such Managing Underwriter, can be sold without having the material adverse effect referred to above, such Equity Securities requested to be included by the Company; and (c) third, after inclusion of all the Registrable Securities proposed to be included in such registration by the Demand Party and the other Holders and all the Equity Securities proposed to be included by the Company, to the extent of the amount of Equity Securities requested to be included by the other stockholders of the Company in such registration which, in the opinion of such Managing Underwriter, can be sold without having the material adverse effect referred to above, such Equity Securities requested to be included by other stockholders of the Company. If the Managing Underwriter of any underwritten offering shall advise the Holders participating in a registration pursuant to this Section 5.1 that the Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the Demand Party, then the Demand Party shall have the right to notify the Company that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such registration statement and such requested and withdrawn registration shall not be deemed to have been effected pursuant to Section 5.1(b)(i). (h) Postponements in Requested Registrations. (i) If, upon receipt of a registration request pursuant to Section 5.1(a), the Company is advised in writing by the Managing Underwriter that, in such firm's opinion, a registration at the time and on the terms requested would materially adversely affect any public offering of Common Stock by the Company (other than in connection with employee benefit and similar plans) (a "Company Offering") with respect to which the Company has commenced preparations for a registration prior to the receipt of a registration request pursuant to Section 5.1(a) or the Company Board has concluded in good faith based on the written advice of an investment banking firm of national reputation that the completion of the distribution with respect to the offering contemplated by the registration request pursuant to Section 5.1(a) would have a long-term material adverse effect on the trading market for the Common Stock (an "Adverse Market Effect"), and, in either case, the Company furnishes the Holders with a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company to such effect (and attaching the written advice of such Managing Underwriter or investment banking firm) (the "Transaction Delay Notice") promptly after such request, the Company shall not be required to effect a registration pursuant to Section 5.1(a) until the earliest of (A) sixty (60) days after the completion of such Company Offering, (B) promptly after the abandonment of such Company Offering, (C) promptly after a determination by the Company Board that no Adverse Market Effect would occur or (D) ninety (90) days after the date of the Transaction Delay Notice. (ii) If upon receipt of a registration request pursuant to Section 5.1(a) or while a registration request pursuant to Section 5.1(a) is pending, the Company Board determines in its good faith reasonable judgment after consultation with its principal outside securities counsel that the filing of a registration statement would require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential and the Company provides the Holders written notice (the "Information Delay Notice" and, together with the Transaction Delay Notice, the "Delay Notice") thereof promptly after the Company makes such determination, which shall be made promptly after the receipt of any request, the Company shall not be required to comply with its obligations under Section 5.1(a) until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material or (B) ninety (90) days after the Holders' receipt of such notice. (iii) Notwithstanding the foregoing provisions of this Section 5.1(h), the Company shall be entitled to serve (x) only one (1) Delay Notice with respect to any registration requested pursuant to Section 5.1(a) and (y) only two (2) Delay Notices in the aggregate. SECTION 5.2 Incidental Registrations. (a) If the Company at any time after the date hereof proposes to register Equity Securities under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or other forms promulgated for similar purposes), whether or not for sale for its own account, in a manner which would permit registration of Registrable Securities for sale to the public under the Securities Act, it will, at each such time, give prompt written notice to all Holders of its intention to do so and of such Holders' rights under this Agreement. Upon the written request of any such Holder made within thirty (30) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder), the Company will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof; provided that: (i) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith); and (ii) if such registration involves an underwritten offering, all Holders requesting to be included in the Company's registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company, with such differences, including any with respect to indemnification and liability insurance, as may be customary or appropriate in combined primary and secondary offerings. If a registration requested pursuant to this Section 5.2 involves an underwritten public offering, any Holder requesting to be included in such registration may elect, in writing prior to the effective date of the registration statement filed in connection with such registration, not to register all or any part of such securities in connection with such registration. Nothing in this Section shall operate to limit the right of any Holder to request the registration of Common Stock issuable upon conversion, exchange or exercise of securities, including Warrants or Preferred Shares, held by such Holder notwithstanding the fact that at the time of request such Holder does not hold the Common Stock underlying such securities. The registrations provided for in this Section 5.2 are in addition to, and not in lieu of, registrations made upon the request of any Demand Party in accordance with Section 5.1. (b) Expenses. In connection with each registration of Registrable Securities requested pursuant to this Section 5.2: (i) each Holder will pay its own underwriting fees and discounts, if any, and the fees and expenses of its legal, accounting and other advisors with respect to the sale of its Registrable Securities; and (ii) the Company will pay all other Registration Expenses. (c) Priority in Incidental Registrations. If a registration pursuant to this Section 5.2 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of Registrable Securities requested to be included in such registration would be likely to have a material adverse effect on the price, timing or distribution of the securities to be offered in such offering as contemplated by the Company (other than the Registrable Securities), then the Company shall include in such registration (i) first, 100% of the securities proposed to be included by the Company, if any, and the Holders (reduced, if necessary, pro rata in proportion to the respective number of shares proposed to be included by each; provided that in no event shall the securities to be issued by the Company be reduced to less than 75% of the total number of securities to be included in the offering) and (b) second, to the extent of the amount of Equity Securities requested to be included by other stockholders of the Company in such registration which, in the opinion of such managing underwriter, can be sold without having the material adverse effect referred to above, such Equity Securities requested to be included by other stockholders of the Company. SECTION 5.3 Additional Registration Rights. If the Company at any time after the date hereof grants to any other holders of Common Stock (or securities that are convertible, exchangeable or exercisable into Common Stock) any rights to request the Company to effect the registration under the Securities Act of any such shares of Common Stock (or any such securities) on terms more favorable to such holders than the terms set forth in this Article V or Article VI, the terms of this Article V or Article VI, as the case may be, will be deemed amended or supplemented to the extent necessary to provide the Holders such more favorable rights and benefits. ARTICLE VI REGISTRATION PROCEDURES SECTION 6.1 Registration Procedures. If and whenever the Company is required to use its best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company will, as expeditiously as possible: (a) prepare and, in any event within thirty (30) days after the receipt of a request for registration, file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective within ninety (90) days of the initial filing; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of one-hundred-eighty (180) days and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; provided, however, that before filing a registration statement or prospectus, or any amendments or supplements thereto in accordance with Sections 6.1(a) or (b), the Company will furnish to AOL copies of all documents proposed to be filed, which documents will be subject to the prompt and reasonable review and comment by the Holders and their counsel; provided further that, except for any section of the prospectus, or any amendment or supplement thereto, relating to the Holders of Registrable Securities and the plan of distribution of the Registrable Securities, the content of such registration or any supplement or amendment thereto shall be within the reasonable discretion of the Company; (c) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits filed therewith, including any documents incorporated by reference), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller; (d) use its best efforts to register or qualify such Registrable Securities covered by such registration in such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this subsection (d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (e) use its commercially reasonable efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) notify each seller of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the Company's becoming aware that 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, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the sellers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable (but not more than eighteen (18) months) after the effective date of the registration statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act; (h) use its best efforts to list all Registrable Securities covered by such registration statement on Nasdaq or any other national securities exchange on which Registrable Securities of the same class covered by such registration statement are then listed and, if no such Registrable Securities are so listed, on Nasdaq or any national securities exchange on which the Common Stock is then listed; (i) enter into such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other Persons in addition to, or in substitution for the provisions of Section 6.4 hereof, and take such other actions as sellers of a majority of shares of such Registrable Securities or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (j) obtain a "cold comfort" letter or letters from the Company's independent public accounts in customary form and covering matters of the type customarily covered by "cold comfort" letters as the seller or sellers of a majority of shares of such Registrable Securities shall reasonably request; (k) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information requested by any such seller, underwriter, attorney, accountant or agent reasonably necessary to facilitate the disposition of such securities or to establish by any such person that it conducted due diligence or a reasonable investigation of the Company in connection with such registration and disposition; (l) notify the Holders of Registrable Securities included in such registration statement and the managing underwriter or agent, immediately, and confirm the notice in writing: (i) when the registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement to the prospectus or any amendment to the prospectus shall have been filed; (ii) of the receipt of any comments from the SEC; (iii) of any request of the SEC to amend the registration statement or amend or supplement the prospectus or for additional information; and (iv) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes; (m) use its best efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (n) if requested by the managing underwriter or agent or any Holder of Registrable Securities covered by the registration statement, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or agent or such Holder reasonably requests to be included therein, including, with respect to the number of Registrable Securities being sold by such Holder to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment; (o) cooperate with the Holders of Registrable Securities covered by the registration statement and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or agent, if any, or such Holders may request; (p) use its best efforts to obtain for delivery to the Holders of Registrable Securities being registered and to the underwriter or agent an opinion or opinions from counsel for the Company in customary form and in form, substance and scope reasonably satisfactory to such Holders, underwriters or agents and their counsel; (q) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD or Nasdaq or any other securities exchange or self regulatory organization; and (r) subject to and consistent with the best judgment of the underwriters, use its commercially reasonable efforts (taking into account the interests of the Company) to make available the executive officers of the Company to participate with the Holders and any underwriters in any "road shows" or other selling efforts that may be reasonably requested by the Holders in connection with the methods of distribution for the Registrable Securities. SECTION 6.2 Information Supplied. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish it with such information regarding such seller and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as the Company may from time to time reasonably request in writing. SECTION 6.3 Restrictions on Disposition. Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6.1(f), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.1(f), and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in Section 6.1(b) shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6.1(f) and to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 6.1(f). SECTION 6.4 Indemnification. (a) Indemnification by the Company. In the event of any registration of any securities of the Company under the Securities Act pursuant to Article V, the Company shall indemnify, to the extent permitted by law, the seller of any Registrable Securities covered by such registration statement, each Affiliate of such seller and their respective directors, officers, employees and stockholders or members or general and limited partners (and any director, officer, Affiliate, employee, stockholder and controlling Person of any of the foregoing), each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act (collectively, the "Indemnified Parties"), against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof ("Claims") and expenses (including reasonable attorney's fees and reasonable expenses of investigation) to which such Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as such Claims or expenses arise out of, relate to or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto; or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading. (b) Limits on Indemnification by the Company. Notwithstanding the foregoing, the Company shall not be liable to any Indemnified Party in any such case to the extent, but only to the extent: (i) that any such Claim or expense arises out of, relates to or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information regarding the seller of Registrable Securities furnished to the Company through an instrument duly executed by or on behalf of such seller specifically stating that it is for use in the preparation thereof; and (ii) that the foregoing indemnity with respect to any untrue statement contained in or omitted from a registration statement or the prospectus shall not inure to the benefit of any party (or any person controlling such party) who is obligated to deliver a prospectus in transactions in a security as to which a registration statement has been filed pursuant to the Securities Act and from whom the person asserting any such Claims purchased any of the Registrable Securities to the extent that it is finally judicially determined that such Claims resulted solely from the fact that such party sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the registration statement or the prospectus, as amended or supplemented, and (x) the Company shall have previously and timely furnished sufficient copies of the registration statement or prospectus, as so amended or supplemented, to such party in accordance with this Agreement and (y) the registration statement or prospectus, as so amended or supplemented, would have corrected such untrue statement or omission of a material fact. (c) Survival of the Company's Indemnification Obligation. The indemnity provided by this Section 6.4 will remain in full force and effect regardless of any investigation made by or on behalf of any Indemnified Party and shall survive the Transfer of securities by any seller. (d) Indemnification by the Prospective Sellers. The Company may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Sections 5.1 or 5.2 herein, that it shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter to indemnify (in the same manner and to the same extent as set forth in Section 6.4(a)) the Company and all other prospective sellers or any underwriter, as the case may be, with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such seller or underwriter specifically stating that it is for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any of the prospective sellers, or any of their respective Affiliates, directors, officers or controlling Persons and shall survive the Transfer of securities by any seller. In no event shall the liability of any seller of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds actually received by such seller upon the sale of the Registrable Securities giving rise to such indemnification obligation. (e) Notice and Defense of Action. Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 6.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action or proceeding; provided, however, that the failure of the indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 6.4, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. In case any such action or proceeding is brought against an indemnified party, unless in such indemnified party's reasonable judgment (after consultation with legal counsel) a conflict of interest between such indemnified and indemnifying parties may exist in respect of such action or proceeding, the indemnifying party will be entitled to participate in and to assume the defense thereof (at its expense), jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in the event that (i) the indemnifying party declines or fails to assume the defense of the action or proceeding or to employ counsel reasonably satisfactory to the indemnified party, in either case within a 30-day period, (ii) if the indemnifying party is not vigorously defending such action or proceeding or (iii) the named parties to any proceeding (including impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, then such indemnified party may employ counsel to represent or defend it in any such action or proceeding and the indemnifying party shall pay the reasonable fees and disbursements of such counsel or other representative as incurred; provided, however, that the indemnifying party shall not be required to pay the fees and disbursements of more than one counsel for all indemnified parties (together with appropriate local counsel) in any jurisdiction in any single action or proceeding. (f) Settlement. No indemnifying party will settle any action or proceeding or consent to the entry of any judgment without the prior written consent of the indemnified party, unless such settlement or judgment (i) includes as an unconditional term thereof the giving by the claimant or plaintiff of a release to such indemnified party from all liability in respect of such action or proceeding and (ii) does not involve the imposition of equitable remedies or the imposition of any obligations on such indemnified party and does not otherwise adversely affect such indemnified party, other than as a result of the imposition of financial obligations for which such indemnified party will be indemnified hereunder. No indemnified party will settle any action or proceeding or consent to the entry of any judgment without the prior written consent of the indemnifying party, unless such settlement or judgment (i) includes as an unconditional term thereof a release of such indemnifying party from all liability in respect of such action or proceeding or (ii) the indemnifying party fails to assume and maintain the defense of the applicable action or proceeding pursuant to this Section 6.4(c). (g) Contribution. (i) If the indemnification provided for in this Section 6.4 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any Claim or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, to the extent permitted by applicable law, shall contribute to the amount paid or payable by such indemnified party as a result of such Claim or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions which resulted in such Claim or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by agreement of the indemnifying party and indemnified party or, failing that, by a court of law, by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party under this Section 6.4(g) as a result of the Claim and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any action or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4(g) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 6.4(g)(i). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (h) Other Indemnification Obligations. Indemnification similar to that specified in this Section 6.4 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any Law or with any governmental authority other than as required by the Securities Act. (i) Additional Liabilities. The obligations of the parties under this Section 6.4 shall be in addition to any liability which any party may otherwise have to any other party. SECTION 6.5 Required Reports. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act (or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available such information), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 6.6 Holdback Agreement. If any registration under Section 5.1 or under Section 5.2 in which a Holder participates is in connection with an underwritten public offering, each Holder agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Equity Securities of the Company (in each case, other than as part of such underwritten public offering), within seven (7) days before, or one hundred eighty (180) days (or such lesser period as the managing underwriters may permit) after, the effective date of any such registration pursuant to Sections 5.1 or 5.2, and the Company hereby also so agrees, and agrees to use reasonable efforts to cause each other holder of any equity security of the Company purchased from the Company (at any time other than in a public offering), to agree to similar limitations of like duration. SECTION 6.7 No Inconsistent Agreement. The Company represents and warrants that it will not enter into, or cause or permit any of its Subsidiaries to enter into, any agreement which conflicts with or limits or prohibits the exercise of the rights granted to the Holders of Registrable Securities in this Agreement. ARTICLE VII STANDSTILL SECTION 7.1 Acquisition of Additional Voting Securities. (a) Subject to Section 7.1(c) and Sections 4.1, 4.2 and 4.3, during the Standstill Period, AOL hereby agrees that it may not, and that it will not permit its controlled Affiliates to, without the prior approval of the Company Board (excluding, for purposes of such approval, the AOL Representative): (i) acquire or agree to acquire the beneficial ownership of any additional Equity Securities of the Company or any voting rights with respect to the Capital Stock of the Company; provided that the foregoing restrictions shall not apply to any acquisition or proposed acquisition of beneficial ownership of any additional Voting Securities of the Company: (x) which is by way of stock dividends, stock reclassifications or other distributions or offerings made available on a pro rata basis to holders of Equity Securities of the Company generally; or (y) involves Equity Securities acquired from the Company (including upon exercise of the Warrants, conversion of Preferred Shares and Participation Securities or pursuant to Article IV) or otherwise in accordance with the provisions of this Agreement and the other Transaction Agreements; (ii) make, or in any way participate in, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A under the Exchange Act) to vote any Voting Securities of the Company or seek to influence any Person with respect to the voting of any Voting Securities of the Company or publicly announce its intention to do so; (iii) make any public announcement with respect to, or submit any offer or purchase proposal that is required under applicable law to be made public by the Company for, any Acquisition Proposal; (iv) act, either independently or in concert with others, in connection with any Acquisition Proposal, or form or join a Group; provided that this Section 7.1(a)(iv) shall not restrict AOL from acting independently to submit an Acquisition Proposal that is not prohibited under paragraph (iii) of this Section 7.1(a); or (v) make any demand, request or proposal to amend, waive or terminate any provision of this Section 7.1 (collectively, the "Acquisition Restrictions"). (b) Nothing contained in this Section 7.1 shall be construed to limit or restrict any action taken in good faith by the AOL Representative or AOL Observer in his or her capacity as a Director or observer on the Company Board. (c) The Acquisition Restrictions will cease to apply from and after such time as (i) the Company materially breaches any of its obligations under Section 7.1(e) or Article VIII of this Agreement, (ii) the Company materially breaches its obligations under Sections 6.2 or 6.3 of the Investment Agreement or (iii) the Company or any representative of the Company delivers confidential information to any Third Party who has expressed an interest in making, or has made, an Acquisition Proposal and such Third Party has not entered into a "standstill" agreement or other agreement containing restrictions similar to those contained in this Section 7.1 with the Company. (d) Notwithstanding the Acquisition Restrictions, AOL shall be permitted to file one or more amendments to its Schedule 13D and any other similar or successor forms required to be filed with the SEC to reflect any proposals or announcements it is not prohibited from making, or other actions it is not prohibited from taking, pursuant to this Section 7.1. (e) In the event (i) the Company or any representative of the Company solicits an Acquisition Proposal or any interest in making an Acquisition Proposal from any Third Party or (ii) the Company receives an unsolicited Acquisition Proposal which it determines to consider, then AOL shall be notified promptly, but in any event, within five (5) Business Days of such event and will be released from the Acquisition Restrictions to the extent required in order to submit an Acquisition Proposal to the Company and participate in the process developed by the Company for consideration of Acquisition Proposals (if any), so long as AOL agrees to be bound by the same rules (if any) as are applicable to other Third Parties participating in such process; provided, however, in no event will AOL be required to agree to any rules governing the conduct of any Third Party that are in any way more restrictive to AOL than its obligations contained in this Section 7.1. (f) If the Company or any representative of the Company at any time delivers confidential information to any Third Party who has expressed an interest in making, or has made, an Acquisition Proposal and such Third Party has entered into a "standstill" agreement with the Company which contains terms that are more favorable to such Third Party than AOL's obligations under this Section 7.1, then the Acquisition Restrictions and the other provisions of this Section 7.1 shall be deemed amended or supplemented to the extent necessary to provide AOL with the benefit of such more favorable terms. ARTICLE VIII RIGHT OF NOTIFICATION AND FORBEARANCE SECTION 8.1 Right of Notification. (a) During the Standstill Period, the Company will notify AOL in writing within five (5) Business Days of (i) its receipt of a bona fide Acquisition Proposal from a Third Party, (ii) the determination by the Company Board to solicit any Acquisition Proposal from a Third Party, and (iii) the determination by the Company Board to provide confidential information to, or enter into negotiations or discussions with, a Third Party who has expressed an interest (which Third Party in the case of clause (iii) has included a potential price or price range which the Company Board has determined warrants exploration) in making, or has made, an Acquisition Proposal (each, an "Acquisition Proposal Notice"). (b) Within two (2) Business Days of receipt of any Acquisition Proposal Notice, AOL may provide a list of at least fifteen (15) entities, each of which AOL in good faith deems to be (i) capable of completing an acquisition of the Company and (ii) either (w) a television or film media company, (x) a video service operator, (y) an Internet service provider or (z) a company providing interactive video services or enabling platform technologies. (c) Within one (1) Business Day of the Company's receipt of such list, the Company will specify whether or not the Third Party making such Acquisition Proposal or expressing interest in making an Acquisition Proposal is or is an Affiliate of one of the entities set forth on such list. SECTION 8.2 Forbearance. During the Standstill Period, the Company shall not enter into any agreement, letter of intent or similar document (whether binding or not) with respect to any Acquisition Proposal prior to the expiration of a five (5) Business Day period following delivery of an Acquisition Proposal Notice under paragraph (ii) or (iii) of Section 8.1(a), relating to such Acquisition Proposal. SECTION 8.3 Other Rights. If the Company at any time after the date hereof grants to any Person(s) any rights of notification or forbearance with terms that are more favorable to such Person(s) than the terms set forth in this Article VIII, the terms of this Article VIII will be deemed amended or supplemented to the extent necessary to provide AOL such more favorable terms. ARTICLE IX MISCELLANEOUS SECTION 9.1 Termination. (a) Except as specifically set forth herein, the provisions of this Agreement shall terminate as follows: (i) by mutual agreement of the parties; (ii) at such time as no Holder holds any Registrable Securities; or (iii) upon the termination of the Investment Agreement prior to the closing of the issuance of the Shares, Preferred Shares (if any) and Warrants thereunder. (b) Nothing herein shall relieve any party from any liability for the breach of any of the agreements set forth in this Agreement. SECTION 9.2 Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against any party hereto unless such modification, amendment or waiver is approved in writing by such party. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. SECTION 9.3 Successors, Assigns and Transferees. This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors, permitted assigns and Transferees. Except as expressly provided herein, this Agreement may not be assigned without the prior written consent of the other party, except that (i) AOL may assign its rights and obligations hereunder to any of its Affiliates and (ii) AOL (or any Transferee of Equity Securities) may assign any or all of its rights under Articles V and VI to any Transferee of Equity Securities. SECTION 9.4 Notices. (a) All notices required or permitted hereunder shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient or, if not, then on the next Business Day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. (b) All communications shall be sent as follows: (i) to the Company and AOL, to their respective addresses specified in Section 7.10 of the Investment Agreement; (ii) to any other Holder, to the address of such Holder as shown in the stock record books of the Company; or (iii) to such other address for any party as it may specify by like notice. SECTION 9.5 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder. SECTION 9.6 Entire Agreement. Except as otherwise expressly set forth herein, this document and the other Transaction Agreements embody the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, that may have related to the subject matter hereof in any way. SECTION 9.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach, default or noncompliance under this Agreement or any waiver on such party's part of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative. SECTION 9.8 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed in all respects by the laws of the State of New York, except, in the case of the Company and with respect to Section 2.1, to the extent that the General Corporation Law of the State of Delaware is applicable. Any suit, action or proceeding with respect to this Agreement may be brought in any court or before any similar authority in a court of competent jurisdiction in the State of New York, and the parties hereto hereby submit to the non-exclusive jurisdiction of such courts for the purpose of such suit, proceeding or judgment. Each of the parties hereto hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding in relation to this Agreement and for any counterclaim therein. SECTION 9.9 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 9.10 Enforcement. Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. SECTION 9.11 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. SECTION 9.12 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s). [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have executed the STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof. TIVO INC. By: /s/ Michael Ramsay Name: Michael Ramsay Title: President and Chief Executive Officer AMERICA ONLINE, INC. By: /s/ David M. Colburn Name: David M. Colburn Title: President, Business Affairs -----END PRIVACY-ENHANCED MESSAGE-----