TiVo 2005 Annual Report Download - page 89

Table of Contents
16. 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. On June 29, 2004, the Company renewed its loan and security agreement with
Silicon Valley Bank for an additional two years, whereby Silicon Valley Bank agreed to increase the amount of the revolving line of credit it extends to the
Company from a maximum of $6.0 million to $15.0 million. The first amendment to the Silicon Valley Bank loan and security agreement also replaces the
borrowing base requirement with a requirement that the Company maintains a certain pre-determined tangible net worth (as defined in the first amendment).
The line of credit remains secured by a first priority security interest on all of the Company's assets except for its intellectual property. However, the
agreement with Silicon Valley Bank also includes a negative pledge such that the Company will not, among other things except in accordance with certain
enumerated exceptions, sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its intellectual property without the
consent of Silicon Valley Bank. The line of credit now bears interest at the greater of prime or 4.00% per annum, but in an event of default that is continuing,
the interest rate becomes 3.00% above the rate effective immediately before the event of default. The first amendment also allows the Company to enter into
foreign exchange forward contracts in which it may commit to purchase from or sell to Silicon Valley Bank a set amount of foreign currency. 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 maintain certain financial ratios. At January 31, 2006, the Company was in compliance with these covenants and had zero outstanding under the
line of credit. The line of credit terminates and any and all borrowings are due on June 29, 2006, but may be terminated earlier by the Company without
penalty upon written notice and prompt repayment of all amounts borrowed.
17. COMCAST AGREEMENT
On March 15, 2005, the Company entered into a non-exclusive licensing and marketing agreement with Comcast STB Software DVR, LLC, a wholly-
owned subsidiary of Comcast Corporation, and Comcast Corporation, as guarantor of Comcast STB's obligations under the agreement. Pursuant to this
agreement, the Company has agreed to develop a TiVo-branded software solution for deployment on Comcast's DVR platforms, which would enable any
TiVo-specific DVR and networking features requested by Comcast, such as WishList® searches, Season Pass recordings, home media features, and
TiVoToGo transfers. In addition, the Company has agreed to develop an advertising management system for deployment on Comcast platforms to enable the
provision of local and national advertising to Comcast subscribers.
Under the agreement, Comcast paid TiVo an upfront fee that the Company has recorded as deferred revenue. As of January 31, 2006, the development
work was in the preliminary stages, as the Company worked towards an agreement on the engineering services to be delivered. Development costs were $4.6
million, as of January 31, 2006, and are classified on the consolidated balance sheet under prepaid expense and other, current.
Comcast will pay a recurring monthly fee per Comcast subscriber who receives the TiVo service through Comcast. Comcast will also pay the Company
fees for engineering services for the development and integration of the TiVo service software solution (subject to adjustment under certain circumstances)
and the advertising management system.
The initial term of this agreement is for seven years from completion of the TiVo service software solution, with Comcast permitted to renew for
additional 1-year terms for up to a total of 8 additional years as long as certain deployment thresholds have been achieved. During the term of the agreement,
TiVo will provide Comcast with certain customer and maintenance support and will provide certain additional development work. TiVo will have the
continuing right to sell certain types of advertising in connection with the TiVo service offered through Comcast. TiVo will also have a limited right to sell
certain types of advertising on other Comcast DVR set-top boxes enabled with the advertising management system, subject to Comcast's option to terminate
such right in exchange for certain advertising-related payments. Development and deployment of the TiVo service software solution is targeted to occur
within two years from the date of the agreement.
On March 28, 2006, the Company executed the First Amendment to the Licensing and Marketing Agreement, effective as of March 27, 2006, between
TiVo Inc. and Comcast STB Software DVR, LLC and Comcast Corporation. The First Amendment to the Licensing and Marketing Agreement extends the
acceptance deadline for the TiVo Interactive Advertising Management System from the second anniversary of the Effective Date of the Agreement to
February 15, 2008. Concurrently, the Company also finalized the scope of the engineering services to be delivered with respect to the initial statement of work
for the TiVo Interactive Advertising Management System. The First Amendment to the Licensing and Marketing Agreement is filed hereto and is
incorporated by reference herein.
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