TiVo 2003 Annual Report Download - page 85

Table of Contents
Equipment Lease Line
In March 1999, the Company entered into an equipment lease line for $2.5 million over the 12 months following the date of the lease. The annual
interest rate was 7.25%, and the line was repayable over 36 months. The lessor received a warrant for 60,814 shares of the Company's Series B preferred stock
at an exercise price of $1.26 per share. The Company expensed the estimated fair value of the warrants of $304,000 over the life of the lease. The estimated
fair value of the warrants was determined using the Black-Scholes option-pricing model. The principal assumptions used in the computation are: ten year
term, deemed fair value at the date of issuance of $5.50 per share, a risk-free rate of return of 5.07%, dividend yield of zero percent and a volatility of 50%.
As of January 31, 2004 and 2003, $2.3 million of the available lease line was used and was accounted for as a capital lease. The unused equipment lease line
expired February 2000. The current portion of the capital lease obligation, net of interest expense, at January 31, 2004, 2003, and 2002 was zero, zero, and
$536,000, respectively.
17. SILICON VALLEY BANK LINE OF CREDIT
On July 17, 2003, the Company entered into a loan and security agreement with Silicon Valley Bank, whereby Silicon Valley Bank agreed to extend a
revolving line of credit of up to the lesser of $6.0 million or a borrowing base. The borrowing base is equal to the sum of 80% of eligible accounts receivable
plus 100% of pledged certificates of deposit (up to $2.0 million). The line of credit is secured by a first priority security interest on all of the Company's assets
except for its intellectual property. The Company is required to maintain at least $2.0 million in pledged certificates of deposit with Silicon Valley Bank
during the term of the line of credit. These pledged certificates of deposit are included in Cash and Cash Equivalents as of January 31, 2004. The line of credit
bears interest at the greater of prime plus 0.75% or 5.00% per annum, but in an event of default, the interest rate becomes 3.00% above the rate effective
immediately before the event of default. The loan and security agreement includes, among other terms and conditions, limitations on the Company's ability to
dispose of its assets; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness (other than certain types of
permitted indebtedness, including existing and subordinated debt and debt to trade creditors incurred in the ordinary course of business); create, incur or allow
any lien on any of its property or assign any right to receive income except for certain permitted liens; make investments; pay dividends; or make
distributions; and contains a requirement that the Company maintains certain financial ratios. At January 31, 2004, the Company was in compliance with these
covenants. The line of credit terminates and any and all borrowings are due on June 30, 2004, but it may be terminated earlier by the Company without
penalty upon written notice and prompt repayment of all amounts borrowed. At January 31, 2004, there was no outstanding balance due on the line of credit.
18. RETIREMENT PLAN
In December 1997, the Company established a 401(k) Retirement Plan (the "Retirement Plan") available to employees who meet the plan's eligibility
requirements. Participants may elect to contribute a percentage of their compensation to the Retirement Plan up to a statutory limit. Participants are fully
vested in their contributions. The Company may make discretionary contributions to the Retirement Plan as a percentage of participant contributions, subject
to established limits. The Company has not made any contributions to the Retirement Plan through January 31, 2004.
19. ADOPTION OF STOCKHOLDER RIGHTS PLAN
On January 9, 2001, TiVo's Board of Directors declared a dividend distribution of one Preferred Share Purchase Right ("Right") on each outstanding
share of TiVo common stock outstanding at the close of business on January 1, 2001 ("the Rights Plan"). Subject to limited exceptions, the Rights will be
exercisable if a person or group acquires 15% or more or 30.01% or more in the case of AOL and its affiliates and associates, of the Company's common
stock or announces a tender offer for 15% or more of the common stock, ("Acquiring Person"). Under certain circumstances, each Right will entitle
stockholders to buy one one-hundredth of a share of newly created Series B Junior Participating Preferred Stock of TiVo at an exercise price of $60.00 per
Right, subject to adjustments under certain circumstances. The TiVo Board will be entitled to redeem the Rights at $.01 per Right at any time before a person
has become an Acquiring Person.
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