TiVo 2005 Annual Report Download - page 90

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Table of Contents
Development and deployment of the TiVo service software solution is targeted to occur within two years from the date of the agreement. Development
and deployment of the TiVo advertising management system is targeted to begin after the second anniversary of this agreement, but by no later than
February 15, 2008. In the event development of the TiVo service software solution and the TiVo advertising management system have not been completed by
the relevant deadlines, the Company could be subject to certain consequences, including, but not limited to, termination of the agreement. As part of this
agreement, Comcast is receiving a non-exclusive, non-transferable license to the Company's intellectual property in order to deploy the TiVo service software
solution and advertising management system, including certain trademark branding rights and a covenant not to assert under TiVo's patents, which rights
extend only to Comcast Corporation, its affiliates, and certain of its vendors and suppliers with respect to Comcast products and services. Such non-exclusive,
non-transferable license to the Company's intellectual property will, under certain circumstances, continue after the termination of this agreement. In addition,
Comcast is entitled to certain most favored customer terms as compared with other multi-channel video distributors who license certain TiVo technology.
Pursuant to the terms of this agreement, Comcast has the right to terminate the agreement in the event the Company is the subject of certain change of control
transactions involving any of certain specified companies.
18. ACQUISITION OF STRANGEBERRY INC.
On January 12, 2004, the Company acquired Strangeberry, a small Palo Alto, California, based technology company specializing in using home
network and broadband technologies to create new entertainment experiences on television. Strangeberry has created technology, based on industry standards
and including a collection of protocols and tools, designed to enable the development of new broadband-based content delivery services. The acquisition was
accounted for as an intangible asset purchase as Strangeberry was a company in the development stage. The purchase price of approximately $1.9 million was
allocated to developed technology that will be amortized into cost of revenues over its estimated life of 5 years. In exchange for all of the issued and
outstanding capital stock of Strangeberry, the Company issued 216,760 shares of TiVo common stock, par value $.001, to the stockholders of Strangeberry in
a private placement. Redpoint Associates II, LLC and Redpoint Ventures II, LP were stockholders of Strangeberry prior to the acquisition. One of the
managing directors of Redpoint Ventures II, LLC who exercises investment control over Redpoint Associates II, LLC and Redpoint Ventures III, LP is a
member of TiVo's board of directors. In addition, the Company issued 108,382 shares of restricted stock to four former employees of Strangeberry that vest
over 2 years of continued employment with TiVo Inc. As of January 31, 2006, 54,990 shares had been cancelled as a result of termination of employment
with the Company.
19. AOL RELATIONSHIP
Development and Distribution Agreement
On April 30, 2002, the Company entered into a Development and Distribution Agreement with America Online, Inc. ("AOL"). This new agreement
superseded, replaced and terminated the Product Integration and Marketing Agreement, dated June 9, 2000. Under the terms of the new agreement, AOL
agreed to pay TiVo a technology development fee to develop an application that works in conjunction with the AOL service and the Company's Series2
digital video recording technology platform. AOL made an up-front payment of $4 million under this agreement of which $2.7 million was included in
deferred revenue as of January 31, 2003. Under the agreement, AOL additionally had the option to purchase a non-exclusive license of the Company's digital
video recording technology. In connection with its exercise of this option, AOL would be required to pay TiVo an up-front fee, per-unit royalties and other
fees. Under the agreement, AOL agreed to fund certain research and development at TiVo. AOL may also choose to have the Company develop the AOL
service as a premium application on the Company's Series2 platform, in which case the Company will receive additional development funds, revenue share
from subscriptions of the AOL service on the TiVo platform and reimbursement from AOL for certain operating costs related to the AOL application. The
term of the Development and Distribution Agreement is four years. The Company recognized the revenue using the percentage-of-completion methodology
(see Note 2. "Revenue Recognition and Deferred Revenue"). During the fiscal years ended January 31, 2006, 2005, and 2004, the Company recognized zero,
zero, and $2.7 million, respectively, in revenues—related parties for engineering services.
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