Document:

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                                                                    EXHIBIT 10.1

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                                   TiVo Inc.

                                      and

                        Wells Fargo Shareowner Services

                                as Rights Agent

                               Rights Agreement

                         Dated as of January 16, 2001

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                               RIGHTS AGREEMENT
                               ----------------

     Rights Agreement, dated as of January 16, 2001, between TiVo Inc., a
Delaware corporation (the "Company"), and Wells Fargo Shareowner Services, a
Delaware corporation, as Rights Agent (the "Rights Agent").

                                   RECITALS
                                   --------

     WHEREAS, on January 9, 2001, the Board of Directors of the Company adopted
this Agreement, and has authorized and declared a dividend of one preferred
share purchase right (a "Right") for each Common Share (as defined in Section
1.6) of the Company outstanding at the close of business on January 31, 2001
(the "Record Date") and has authorized and directed the issuance of one Right
(subject to adjustment as provided herein) with respect to each Common Share
that shall become outstanding between the Record Date and the earliest of the
Distribution Date and the Expiration Date (as such terms are defined in Sections
3.1 and 7.1), each Right initially representing the right to purchase one one-
hundredth (subject to adjustment) of a share of Series B Junior Participating
Preferred Stock (the "Preferred Shares") of the Company having the rights,
powers and preferences set forth in the form of Certificate of Designation
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth provided, however, that Rights may be issued with respect
to Common Shares that shall become outstanding after the Distribution Date and
prior to the Expiration Date in accordance with Section 22.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

     Section 1.  Certain Definitions.  For purposes of this Agreement, the
                 -------------------
following terms have the meanings indicated:

          1.1.   Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding but shall not include (i) an Exempt Person or
(ii) any Existing Holder, unless and until such time as such Existing Holder
shall become the Beneficial Owner of (A) 30.01% or more of the Common Shares of
the Company then outstanding or (B) less than 10% of the Common Shares of the
Company then outstanding.  "Existing Holder" shall mean America Online, Inc.,
together with all of his Affiliates and Associates.  Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% (or, in the case of an Existing Holder, 30%) or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 15%  (or, in the case of an
Existing Holder, 30%) or more of the Common Shares of the Company then
outstanding solely by reason of share purchases by the Company and shall, after
such share purchases by the Company, become the Beneficial Owner of one or more
additional Common Shares of the Company, then such Person shall be deemed to be
an "Acquiring Person."  Notwithstanding the foregoing, if the Board of Directors
of the

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Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1.1, has become such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an "Acquiring Person"
or (B) such Person was aware of the extent of its Beneficial Ownership of Common
Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement), and without any intention of changing or
influencing control of the Company, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, as defined pursuant to the foregoing provisions
of this Section 1.1, then such Person shall not be deemed to be or have become
an "Acquiring Person" at any time for any purposes of this Agreement.  For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date
of this Agreement.

          1.2.   "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations, under
the Exchange Act, as in effect on the date of this Agreement.

          1.3.    A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:

                    (i)   which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement);

                    (ii)   which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has (A) the right to acquire (whether
such right is exercisable immediately, or only after the passage of time,
compliance with regulatory requirements, fulfillment of a condition or
otherwise) pursuant to any agreement, arrangement or understanding, whether or
not in writing (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, (w) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, (x) securities which such Person has a right
to acquire upon the exercise of Rights at any time prior to the time that any
Person becomes an Acquiring Person, (y) securities issuable upon the exercise of
Rights from and after the time that any Person becomes an Acquiring Person if
such Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3.1 or Section
22 ("Original Rights") or pursuant to Section 11.9 or Section 11.15 with respect
to an adjustment to Original Rights or (z) securities which such Person or any
of such Person's Affiliates or Associates may acquire, does or do acquire or may
be deemed to acquire or may be

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deemed to have the right to acquire, pursuant to any merger or other acquisition
agreement between the Company and such Person (or one or more of such Person's
Affiliates or Associates) if prior to such Person becoming an Acquiring Person
the Board of Directors of the Company has approved such agreement and determined
that such Person shall not be or be deemed to be the beneficial owner of such
securities within the meaning of this Section 1.3; or (B) the right to vote
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security under this clause (B) if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

                    (iii)  which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) and with respect to
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or consent as
described in the proviso to Section 1.3(ii)(B)) or disposing of any securities
of the Company;

provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section 1.3), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.

          1.4.   "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.

          1.5.   "close of business" on any given date shall mean 5:00 p.m., New
York time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.

          1.6.   "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $.001 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such other Person or, if such Person is a Subsidiary (as such
term is hereinafter defined) of another Person, the Person or Persons which
ultimately control such first-mentioned Person, and which has issued and
outstanding such capital stock, equity securities or equity interest.

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          1.7.   "Exempt Person" shall mean the Company, any Subsidiary of the
Company, in each case including, without limitation, its fiduciary capacity, or
any employee benefit plan of the Company or of any Subsidiary of the Company or
any entity or trustee holding shares of capital stock of the Company for or
pursuant to the terms of any such plan, or for the purpose of funding other
employee benefits for employees of the Company or any Subsidiary of the Company.

          1.8.   "Person" shall mean any individual, partnership, joint venture,
limited liability company, firm, corporation, unincorporated association, trust
or other entity, and shall include any successor (by merger or otherwise) of
such entity.

          1.9.   "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that an Acquiring Person has become such or that discloses information
which reveals the existence of an Acquiring Person or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person.

          1.10.  "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interests is owned, of record or beneficially, directly or indirectly,
by such Person.

          1.11.  A "Trigger Event" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.

          1.12.  The following terms shall have the meanings defined for such
terms in the Sections set forth below:

<TABLE>
<CAPTION>
            Term                                  Section
            ----                                  -------
            <S>                                   <C>
            Adjustment Shares                     11.1.2
            common stock equivalent               11.1.3
            Company                               Recitals
            current per share market price        11.4
            Current Value                         11.1.3
            Distribution Date                     3.1
            equivalent preferred stock            11.2
            Exchange Act                          1.1
            Exchange Consideration                27
            Existing Holder                       1.1
            Expiration Date                       7.1
            Final Expiration Date                 7.1
            Nasdaq                                9
            Original Rights                       1.3
            Preferred Shares                      Recitals
            Principal Party                       13.2
            Purchase Price                        4
</TABLE>

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<TABLE>
            <S>                                   <C>
            Record Date                           Recitals
            Redemption Date                       7.1
            Redemption Price                      23.1
            Right                                 Recitals
            Right Certificate                     3.1
            Rights Agent                          Recitals
            Security                              11.4
            Spread                                11.1.3
            Substitution Period                   11.1.3
            Summary of Rights                     3.2
            Trading Day                           11.4
</TABLE>

     Section 2.  Appointment of Rights Agent. The Company hereby appoints the
                 ---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3, shall prior to the Distribution Date also be the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall determine. Contemporaneously with such appointment, if any, the
Company shall notify the Rights Agent thereof.

     Section 3.  Issuance of Right Certificates.
                 ------------------------------

          3.1.   Rights Evidenced by Share Certificates.  Until the earlier of
                 --------------------------------------
(i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business
Day after the date of the commencement of, or first public announcement of the
intent of any Person (other than an Exempt Person) to commence, a tender or
exchange offer the consummation of which would result in any Person (other than
an Exempt Person) becoming the Beneficial Owner of Common Shares aggregating 15%
or more of the then outstanding Common Shares of the Company (the earlier of (i)
and (ii) being herein referred to as the "Distribution Date"), (x) the Rights
(unless earlier expired, redeemed or terminated) will be evidenced (subject to
the provisions of Section 3.2) by the certificates for Common Shares registered
in the names of the holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying Common
Shares. The preceding sentence notwithstanding, prior to the occurrence of a
Distribution Date specified as a result of an event described in clause (ii) (or
such later Distribution Date as the Board of Directors of the Company may select
pursuant to this sentence), the Board of Directors may postpone, one or more
times, the Distribution Date which would occur as a result of an event described
in clause (ii) beyond the date set forth in such clause (ii). Nothing herein
shall permit such a postponement of a Distribution Date after a Person becomes
an Acquiring Person. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign and the
Company (or, if requested, the Rights Agent) will send, by first-class, postage-
prepaid mail, to each record holder of Common Shares as of the close of business
on the Distribution Date (other than any Acquiring Person or any Associate or
Affiliate of an Acquiring Person), at the address of such holder shown on the
records of the Company, one or

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more certificates for Rights, in substantially the form of Exhibit B hereto (a
"Right Certificate"), evidencing one Right (subject to adjustment as provided
herein) for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.

          3.2.   Summary of Rights.  On the Record Date or as soon as
                 -----------------
practicable thereafter, the Company will send or cause to be sent a copy of a
Summary of Rights to Purchase Preferred Shares, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage-
prepaid mail, to each record holder of Common Shares as of the close of business
on the Record Date at the address of such holder shown on the records of the
Company. With respect to certificates for Common Shares outstanding as of the
close of business on the Record Date, until the Distribution Date (or the
earlier Expiration Date), the Rights will be evidenced by such certificates for
Common Shares registered in the names of the holders thereof together with a
copy of the Summary of Rights and the registered holders of the Common Shares
shall also be registered holders of the associated Rights. Until the
Distribution Date (or the earlier Expiration Date), the surrender for transfer
of any certificate for Common Shares outstanding at the close of business on the
Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.

          3.3.   New Certificates After Record Date.  Certificates for Common
                 ----------------------------------
Shares which become outstanding (whether upon issuance out of authorized but
unissued Common Shares, disposition out of treasury or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earliest of
the Distribution Date or the Expiration Date, shall have impressed, printed,
stamped, written or otherwise affixed onto them the following legend:

     This certificate also evidences and entitles the holder hereof to
     certain rights as set forth in an Agreement between TiVo Inc.
     (the "Company") and Wells Fargo Shareowner Services, as Rights
     Agent, dated as of January 16, 2001, as the same may be amended
     from time to time (the "Agreement"), the terms of which are
     hereby incorporated herein by reference and a copy of which is on
     file at the principal executive offices of the Company. Under
     certain circumstances, as set forth in the Agreement, such Rights
     will be evidenced by separate certificates and will no longer be
     evidenced by this certificate. The Company will mail to the
     holder of this certificate a copy of the Agreement without charge
     after receipt of a written request therefor. As described in the
     Agreement, Rights which are owned by, transferred to or have been
     owned by Acquiring Persons or Associates or Affiliates thereof
     (as defined in the Agreement) shall become null and void and will
     no longer be transferable.

With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Expiration Date), the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificates,
except as otherwise provided herein, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.  In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so

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that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.

     Notwithstanding this Section 3.3, the omission of a legend shall not affect
the enforceability of any part of this Agreement or the rights of any holder of
the Rights.

     Section 4.  Form of Right Certificates.  The Right Certificates (and the
                 --------------------------
forms of election to purchase shares, certification and assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or trading system
on which the Rights may from time to time be listed or quoted, or to conform to
usage.  Subject to the terms and conditions hereof, the Right Certificates,
whenever issued, shall be dated as of the Record Date, and shall show the date
of countersignature by the Rights Agent, and on their face shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the price per one one-hundredth of a
Preferred Share set forth therein (the "Purchase Price"), but the number of such
one one-hundredths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.

     Section 5.  Countersignature and Registration. The Right Certificates shall
                 ---------------------------------
be executed on behalf of the Company by its Chairman of the Board of Directors,
the Chief Executive Officer, President or any Vice President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature.  The Right
Certificates shall be countersigned, either manually or by facsimile signature,
by an authorized signatory of the Rights Agent, but it shall not be necessary
for the same signatory to countersign all of the Right Certificates hereunder.
No Right Certificate shall be valid for any purpose unless so countersigned.  In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.

     Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder.  Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates, the certificate number of each of
the Right Certificates and the date of each of the Right Certificates.

     Section 6.  Transfer, Split Up, Combination and Exchange of Right
                 -----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.  Subject
---------------------------------------------------------------------
to the provisions of Section

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11.1.2 and Section 14, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11.1.2 or that
have been exchanged pursuant to Section 27) may be transferred, split up or
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up or combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender, together
with any required form of assignment and certificate duly completed, the Right
Certificate or Right Certificates to be transferred, split up or combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Right
Certificate or Right Certificates until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate or Right Certificates and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment from the holders of Right Certificates of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up or combination or exchange of such Right Certificates.

     Subject to the provisions of Section 11.1.2 , at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

     Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights.
                 -------------------------------------------------------------

          7.1.   Exercise of Rights.  Subject to Section 11.1.2 and except as
                 ------------------
otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price for the
total number of one one-hundredths of a Preferred Share (or other securities,
cash or other assets) as to which the Rights are exercised, at or prior to the
time (the "Expiration Date") that is the earliest of (i) the close of business
on January 9, 2011 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 (the "Redemption Date"), (iii) the
closing of any merger or other acquisition transaction involving the Company
pursuant to an agreement of the type

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described in Section 13.3 at which time the Rights are deemed terminated, or
(iv) the time at which the Rights are exchanged as provided in Section 27.

          7.2.   Purchase.  The Purchase Price for each one one-hundredth of a
                 --------
Preferred Share pursuant to the exercise of a Right shall be initially $60,
shall be subject to adjustment from time to time as provided in Sections 11, 13
and 26 and shall be payable in lawful money of the United States of America in
accordance with Section 7.3.

          7.3.   Payment Procedures.  Upon receipt of a Right Certificate
                 ------------------
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the aggregate Purchase
Price for the total number of one one-hundredths of a Preferred Share to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder of such Right Certificate in accordance with Section 9, in cash or
by certified or cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i)(A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent) certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of Preferred Shares issuable upon exercise of the
Rights hereunder with a depository agent, requisition from the depositary agent
depositary receipts representing interests in such number of one one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with all such requests, (ii) when appropriate, requisition from
the Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 14 or otherwise in accordance with Section
11.1.3, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt, promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate.  In the event that the Company is obligated to issue other
securities of the Company, pay cash and/or distribute other property pursuant to
Section 11.1.3, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate.

          7.4.   Partial Exercise.  In case the registered holder of any Right
                 ----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14.

          7.5.   Full Information Concerning Ownership.  Notwithstanding
                 -------------------------------------
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder of Rights upon the occurrence of any purported exercise as set forth in
this Section 7 unless the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with such additional evidence
of the identity of the

                                       9
<PAGE>

Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

     Section 8.  Cancellation and Destruction of Right Certificates.  All Right
                 --------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement.  The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent shall
deliver all canceled Right Certificates to the Company within eighteen months
after cancellation of the Certificates.  The Company may then destroy the
Certificates after any retention period required by the Securities and Exchange
Commission.

     Section 9.  Reservation and Availability of Capital Stock.  The Company
                 ---------------------------------------------
covenants and agrees that from and after the Distribution Date it will cause to
be reserved and kept available out of its authorized and unissued Preferred
Shares (and, following the occurrence of a Trigger Event, out of its authorized
and unissued Common Shares or other securities or out of its shares held in its
treasury) the number of Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) that will be sufficient to
permit the exercise in full of all outstanding Rights.

     So long as the Preferred Shares (and, following the occurrence of a Trigger
Event, Common Shares and/or other securities) issuable upon the exercise of
Rights may be listed on any national securities exchange or traded in the over-
the-counter market and quoted on the National Association of Securities Dealers,
Inc. Automated Quotation System ("Nasdaq") (including the National Market or
Small Cap Market), the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed or admitted to trading on such exchange or quoted on
Nasdaq upon official notice of issuance upon such exercise.

     The Company covenants and agrees that it will take all such action as may
be necessary to ensure that all Preferred Shares (and, following the occurrence
of a Trigger Event, Common Shares  and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.

     From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance of
Preferred Shares upon the exercise of Rights, to register and qualify such
Preferred Shares under the Securities Act and any applicable state securities or
"Blue Sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Expiration Date.  The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and

                                       10
<PAGE>

permit it to become effective. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement under the Securities Act (if
required) shall have been declared effective.

     The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates for Preferred Shares (or Common Shares and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.

     Section 10.    Preferred Shares Record Date. Each person in whose name any
                    ----------------------------
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open.  Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

     Section 11.    Adjustment of Purchase Price, Number of Shares or Number of
                    -----------------------------------------------------------
Rights. The Purchase Price, the number of Preferred Shares or other securities
------
or property purchasable upon exercise of each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.

                                       11
<PAGE>

          11.1.     Post-Execution Events.
                    ---------------------

                    11.1.1.   Corporate Dividends, Reclassifications, Etc. In
                              --------------------------------------------
the event the Company shall at any time after the date of this Agreement (A)
declare and pay a dividend on the Preferred Shares payable in Preferred Shares,
(B) subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11.1, the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11.1.1 and Section 11.1.2, the adjustment provided
for in this Section 11.1.1 shall be in addition to, and shall be made prior to,
the adjustment required pursuant to, Section 11.1.2.

          11.1.2.   Acquiring Person Events; Triggering Events.  Subject to
                    ------------------------------------------
Sections 23.1 and 27, in the event that a Trigger Event occurs, then, from and
after the first occurrence of such event, each holder of a Right, except as
provided below, shall thereafter have a right to receive, upon exercise thereof
at a price per Right equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable (without giving effect to this Section 11.1.2), in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (without giving effect to this
Section 11.1.2) and (y) dividing that product by 50% of the current per share
market price of the Common Shares (determined pursuant to Section 11.4) on the
first of the date of the occurrence of, or the date of the first public
announcement of, a Trigger Event (the "Adjustment Shares"); provided that the
Purchase Price and the number of Adjustment Shares shall thereafter be subject
to further adjustment as appropriate in accordance with Section 11.6.
Notwithstanding the foregoing, upon the occurrence of a Trigger Event, any
Rights that are or were acquired or beneficially owned by (1) any Acquiring
Person or any Associate or Affiliate thereof, (2) a transferee of any Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (3) a transferee of any Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,

                                       12
<PAGE>

arrangement or understanding which has as a primary purpose or effect avoidance
of this Section 11.1.2, and subsequent transferees, shall become void without
any further action, and any holder (whether or not such holder is an Acquiring
Person or an Associate or Affiliate of an Acquiring Person) of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement or otherwise. From and after the Trigger Event, no Right Certificate
shall be issued pursuant to Section 3 or Section 6 that represents Rights that
are or have become void pursuant to the provisions of this paragraph, and any
Right Certificate delivered to the Rights Agent that represents Rights that are
or have become void pursuant to the provisions of this paragraph shall be
canceled.

     The Company shall use all reasonable efforts to ensure that the provisions
of this Section 11.1.2 are complied with, but shall have no liability to any
holder of Right Certificates or other Person as a result of its failure to make
any determinations with respect to any Acquiring Person or its Affiliates,
Associates or transferees hereunder.

     From and after the occurrence of an event specified in Section 13.1, any
Rights that theretofore have not been exercised pursuant to this Section 11.1.2
shall thereafter be exercisable only in accordance with Section 13 and not
pursuant to this Section 11.1.2.

          11.1.3.   Insufficient Shares.  The Company may at its option
                    -------------------
substitute for a Common Share issuable upon the exercise of Rights in accordance
with the foregoing Section 11.1.2 a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share. In the event that upon the occurrence of a Trigger
Event there shall not be sufficient Common Shares authorized but unissued, or
held by the Company as treasury shares, to permit the exercise in full of the
Rights in accordance with the foregoing Section 11.1.2, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights, provided, however, that if the Company
determines that it is unable to cause the authorization of a sufficient number
of additional Common Shares, then, in the event the Rights become exercisable,
the Company, with respect to each Right and to the extent necessary and
permitted by applicable law and any agreements or instruments in effect on the
date hereof to which it is a party, shall: (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value"), over (2) the Purchase Price (such excess, the "Spread") and
(B) with respect to each Right (other than Rights which have become void
pursuant to Section 11.1.2), make adequate provision to substitute for the
Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2)
a reduction in the Purchase Price, (3) Preferred Shares or other equity
securities of the Company (including, without limitation, shares, or fractions
of shares, of preferred stock which, by virtue of having dividend and
liquidation rights substantially comparable to those of the Common Shares, the
Board of Directors of the Company has deemed in good faith to have substantially
the same value as Common Shares) (each such share of preferred stock or
fractions of shares of preferred stock constituting a "common stock
equivalent"), (4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized investment
banking firm selected in good faith by the Board of Directors of the Company;
provided, however, that if the Company shall not

                                       13
<PAGE>

have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the occurrence of a Trigger Event, then the
Company shall be obligated to deliver, to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date hereof to
which it is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, such number or fractions of Preferred Shares (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is unlikely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended and re-
extended to the extent necessary, but not more than ninety (90) days following
the occurrence of a Trigger Event, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period as may be extended, the "Substitution Period"). To the extent that the
Company determines that some action need be taken pursuant to the second and/or
third sentences of this Section 11.1.3, the Company (x) shall provide that such
action shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11.1.3, the
value of a Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger
Event and the value of any "common stock equivalent" shall be deemed to have the
same value as the Common Shares on such date. The Board of Directors of the
Company may, but shall not be required to, establish procedures to allocate the
right to receive Common Shares upon the exercise of the Rights among holders of
Rights pursuant to this Section 11.1.3.

          11.2.     Dilutive Rights Offering.  In case the Company shall fix a
                    ------------------------
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
securities having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred stock")) or securities convertible into Preferred
Shares or equivalent preferred stock at a price per Preferred Share or per share
of equivalent preferred stock (or having a conversion or exercise price per
share, if a security convertible into or exercisable for Preferred Shares or
equivalent preferred stock) less than the current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4) on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
and shares of equivalent preferred stock outstanding on such record date plus
the number of Preferred Shares and shares of equivalent preferred stock which
the aggregate offering price of the total number of Preferred Shares and/or
shares of equivalent preferred stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the
number of Preferred Shares and shares of equivalent preferred stock outstanding
on such record date plus the number of additional Preferred Shares

                                       14
<PAGE>

and/or shares of equivalent preferred stock to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Preferred Shares and shares of equivalent preferred stock
owned by or held for the account of the Company or any Subsidiary of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.

          11.3.     Distributions.  In case the Company shall fix a record date
                    -------------
for the making of a distribution to all holders of the Preferred Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness, cash, securities or assets (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A))) or convertible securities, or
subscription rights or warrants (excluding those referred to in Section 11.2),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price of the Preferred Shares (as determined pursuant to Section 11.4) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets,
securities or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4); provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right.  Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.

          11.4.     Current Per Share Market Value.
                    ------------------------------

                    11.4.1.   General.  For the purpose of any computation
                              -------
hereunder, the "current per share market price" of any security (a "Security"
for the purpose of this Section 11.4.1) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the thirty
(30) consecutive Trading Days (as such term is hereinafter defined)

                                       15
<PAGE>

immediately prior to such date; provided, however, that in the event that the
current per share market price of the Security is determined during any period
following the announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of thirty (30)
Trading Days after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "current per share market price" shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use,
or, if on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company. If on any such date no such market maker is making a market in
the Security, the fair value of the Security on such date as determined in good
faith by the Board of Directors of the Company shall be used. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the transaction
of business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day. If the Security is not publicly
held or not so listed or traded, or if on any such date the Security is not so
quoted and no such market maker is making a market in the Security, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company or, if at the time of such
determination there is an Acquiring Person, by a nationally recognized
investment banking firm selected by the Board of Directors, which shall have the
duty to make such determination in a reasonable and objective manner, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

          11.4.2.   Preferred Shares.  Notwithstanding Section 11.4.1, for the
                    ----------------
purpose of any computation hereunder, the "current per share market price" of
the Preferred Shares shall be determined in the same manner as set forth above
in Section 11.4.1 (other than the last sentence thereof). If the current per
share market price of the Preferred Shares cannot be determined in the manner
described in Section 11.4.1, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the current per share market
price of the Common Shares (as determined pursuant to Section 11.4.1). If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, or if on any such date neither the Common Shares nor the
Preferred Shares are so quoted and no such market maker is making a market in
either the Common Shares or the Preferred Shares, "current per share market
price" of the Preferred Shares shall mean the fair

                                       16
<PAGE>

value per share as determined in good faith by the Board of Directors of the
Company, or, if at the time of such determination there is an Acquiring Person,
by a nationally recognized investment banking firm selected by the Board of
Directors of the Company, which shall have the duty to make such determination
in a reasonable and objective manner, which determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For purposes of this Agreement, the "current per share market price"
of one one-hundredth of a Preferred Share shall be equal to the "current per
share market price" of one Preferred Share divided by 100.

          11.5.     Insignificant Changes.  No adjustment in the Purchase Price
                    ---------------------
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price. Any adjustments which by reason of this
Section 11.5 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one-hundred thousandth of a
Preferred Share or the nearest one-hundredth of a Common Share or other share or
security, as the case may be.

          11.6.     Shares Other Than Preferred Shares.  If as a result of an
                    ----------------------------------
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1,
11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the provisions of Sections 7, 9, 10,
13 and 14 with respect to the Preferred Shares shall apply on like terms to any
such other shares.

          11.7.     Rights Issued Prior to Adjustment.  All Rights originally
                    ---------------------------------
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-hundredths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.

          11.8.     Effect of Adjustments.  Unless the Company shall have
                    ---------------------
exercised its election as provided in Section 11.9, upon each adjustment of the
Purchase Price as a result of the calculations made in Sections 11.2 and 11.3,
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a Preferred Share (calculated to the nearest
one-hundred thousandth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.

          11.9.     Adjustment in Number of Rights.  The Company may elect on or
                    ------------------------------
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share issuable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of

                                       17
<PAGE>

Rights shall be exercisable for the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one-hundredth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11.9, the Company may, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.

          11.10.    Right Certificates Unchanged.  Irrespective of any
                    ----------------------------
adjustment or change in the Purchase Price or the number of one one-hundredths
of a Preferred Share issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of one one-hundredths of a Preferred
Share which were expressed in the initial Right Certificates issued hereunder.

          11.11.    Par Value Limitations.  Before taking any action that would
                    ---------------------
cause an adjustment reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares or other shares of capital stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Preferred
Shares or other such shares at such adjusted Purchase Price.

          11.12.    Deferred Issuance.  In any case in which this Section 11
                    -----------------
shall require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date of that number of Preferred Shares and shares of other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the Preferred Shares and shares of other capital stock or other
securities, assets or cash of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

                                       18
<PAGE>

          11.13.    Reduction in Purchase Price.  Anything in this Section 11 to
                    ---------------------------
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares
at less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or exchangeable
for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Preferred Shares
shall not be taxable to such stockholders.

          11.14.    Company Not to Diminish Benefits of Rights.  The Company
                    ------------------------------------------
covenants and agrees that after the earlier of the Shares Acquisition Date or
Distribution Date it will not, except as permitted by Section 23, Section 26 or
Section 27, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.

          11.15.    Adjustment of Rights Associated with Common Shares.
                    --------------------------------------------------
Notwithstanding anything contained in this Agreement to the contrary, in the
event that the Company shall at any time after the date hereof and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding Common
Shares payable in Common Shares, (ii) effect a subdivision or consolidation of
the outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares), or (iii) combine the outstanding
Common Shares into a greater or lesser number of Common Shares, then in any such
case, the number of Rights associated with each Common Share then outstanding,
or issued or delivered thereafter but prior to the Distribution Date or in
accordance with Section 22 shall be proportionately adjusted so that the number
of Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction, the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11.15
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.

     Section 12.    Certificate of Adjusted Purchase Price or Number of Shares.
                    ----------------------------------------------------------
Whenever an adjustment is made as provided in Sections 11 or 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25.  The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.

                                       19
<PAGE>

     Section 13.    Consolidation, Merger or Sale or Transfer of Assets or
                    ------------------------------------------------------
Earning Power.
-------------

          13.1.     Certain Transactions.  In the event that, from and after the
                    --------------------
first occurrence of a Trigger Event, directly or indirectly, (A) the Company
shall consolidate with, or merge with and into, any other Person and the Company
shall not be the continuing or surviving corporation, (B) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or (C) the Company shall sell, exchange,
mortgage or otherwise transfer (or one or more of its Subsidiaries shall sell,
exchange, mortgage or otherwise transfer), in one or more transactions, assets
or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or one or more wholly-owned Subsidiaries of the Company
in one or more transactions each of which complies with Section 11.14), then,
and in each such case, proper provision shall be made so that (i) each holder of
a Right (other than Rights which have become void pursuant to Section 11.1.2)
shall thereafter have the right to receive, upon the exercise thereof at a price
per Right equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently
adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12), in
accordance with the terms of this Agreement and in lieu of Preferred Shares or
Common Shares, such number of validly authorized and issued, fully paid, non-
assessable and freely tradable Common Shares of the Principal Party (as such
term is hereinafter defined) not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result obtained
by (x) multiplying the then current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right was exercisable immediately
prior to the first occurrence of a Trigger Event (as subsequently adjusted
pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12) and (y) dividing
that product by 50% of the then current per share market price of the Common
Shares of such Principal Party (determined pursuant to Section 11.4) on the date
of consummation of such consolidation, merger, sale or transfer; provided, that
the price per Right so payable and the number of Common Shares of such Principal
Party so receivable upon exercise of a Right shall thereafter be subject to
further adjustment as appropriate in accordance with Section 11.6 to reflect any
events covered thereby occurring in respect of the Common Shares of such
Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; provided that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Purchase Price as provided in this Section 13.1, such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the

                                       20
<PAGE>

Common Shares of the Principal Party receivable upon the exercise of a Right
pursuant to this Section 13.1, and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement confirming that the
requirements of this Section 13.1 and Section 13.2 shall promptly be performed
in accordance with their terms and that such consolidation, merger, sale or
transfer of assets shall not result in a default by the Principal Party under
this Agreement as the same shall have been assumed by the Principal Party
pursuant to this Section 13.1 and Section 13.2 and providing that, as soon as
practicable after executing such agreement pursuant to this Section 13, the
Principal Party, at its own expense, shall

          (1)  prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date and similarly comply with
applicable state securities laws;

          (2)  use its best efforts, if the Common Shares of the Principal Party
shall be listed or admitted to trading on the New York Stock Exchange or on
another national securities exchange, to list or admit to trading (or continue
the listing of) the Rights and the securities purchasable upon exercise of the
Rights on the New York Stock Exchange or such securities exchange, or, if the
Common Shares of the Principal Party shall not be listed or admitted to trading
on the New York Stock Exchange or a national securities exchange, to cause the
Rights and the securities receivable upon exercise of the Rights to be
authorized for quotation on Nasdaq or on such other system then in use;

          (3)  deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act; and

          (4)  obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject to
purchase upon exercise of outstanding Rights.

     In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or
common stock equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11.4) or
securities exercisable for, or convertible into, Common Shares or common stock
equivalents of such Principal Party at less than such then current market price
(other than to holders of Rights pursuant to this Section 13), or (ii) providing
for any

                                       21
<PAGE>

special payment, taxes or similar provision in connection with the issuance of
the Common Shares of such Principal Party pursuant to the provision of Section
13, then, in such event, the Company hereby agrees with each holder of Rights
that it shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights
Agent a supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.

     The Company covenants and agrees that it shall not, at any time after the
Trigger Event, enter into any transaction of the type described in clauses (A)
through (C) of this Section 13.1 if (i) at the time of or immediately after such
consolidation, merger, sale, transfer or other transaction there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (ii) prior to, simultaneously with or immediately
after such consolidation, merger, sale, transfer or other transaction, the
stockholders of the Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13.2 shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights. The provisions of this Section 13 shall
similarly apply to successive transactions of the type described in clauses (A)
through (C) of this Section 13.1.

     13.2.     Principal Party.  "Principal Party" shall mean:
               ---------------

               (i)  in the case of any transaction described in (A) or (B) of
the first sentence of Section 13.1: (i) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (ii) if no securities are so issued, (x) the Person that is the other party
to the merger, if such Person survives said merger, or, if there is more than
one such Person, the Person the Common Shares of which have the greatest
aggregate market value of shares outstanding or (y) if the Person that is the
other party to the merger does not survive the merger, the Person that does
survive the merger (including the Company if it survives) or (z) the Person
resulting from the consolidation; and

               (ii) in the case of any transaction described in (C) of the first
sentence in Section 13.1, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause (i)
or (ii) of this Section 13.2, if the Common Shares of such Person are not at
such time or have not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, then (1) if such Person is a
direct or indirect Subsidiary of another Person the Common Shares of which are
and have been so registered, the term "Principal Party" shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or indirectly,

                                       22
<PAGE>

of more than one Person, the Common Shares of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such Persons
is the issuer of Common Shares having the greatest aggregate market value of
shares outstanding, or (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all of such joint
venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.

          13.3.     Approved Acquisitions.  Notwithstanding anything contained
                    ---------------------
herein to the contrary, upon the consummation of any merger or other acquisition
transaction of the type described in clause (A), (B) or (C) of Section 13.1
involving the Company pursuant to a merger or other acquisition agreement
between the Company and any Person (or one or more of such Person's Affiliates
or Associates) which agreement has been approved by the Board of Directors of
the Company prior to any Person becoming an Acquiring Person, this Agreement and
the rights of holders of Rights hereunder shall be terminated in accordance with
Section 7.1.

     Section 14.    Fractional Rights and Fractional Shares.
                    ---------------------------------------

          14.1.     Cash in Lieu of Fractional Rights.  The Company shall not be
                    ---------------------------------
required to issue fractions of Rights or to distribute Right Certificates which
evidence fractional Rights (except prior to the Distribution Date in accordance
with Section 11.15). In lieu of such fractional Rights, there shall be paid to
the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14.1, the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the current market
value of the Rights on such date shall be the fair value of the Rights as
determined in good faith by the Board of Directors of the Company, or, if at the
time of such determination there is an Acquiring Person, by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company, which shall have the duty to make such determination in a reasonable
and objective manner, which determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.

                                       23
<PAGE>

          14.2.     Cash in Lieu of Fractional Preferred Shares.  The Company
                    -------------------------------------------
shall not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share) upon exercise or exchange of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised or exchanged as herein provided an amount in
cash equal to the same fraction of the current per share market price of one
Preferred Share (as determined in accordance with Section 14.1) for the Trading
Day immediately prior to the date of such exercise or exchange.

          14.3.     Cash in Lieu of Fractional Common Shares.  The Company shall
                    ----------------------------------------
not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares upon the exercise or
exchange of Rights. In lieu of such fractional Common Shares, the Company shall
pay to the registered holders of the Right Certificates with regard to which
such fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common Share
(as determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.

          14.4.     Waiver of Right to Receive Fractional Rights or Shares.  The
                    ------------------------------------------------------
holder of a Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise or exchange
of a Right, except as permitted by this Section 14.

     Section 15.    Rights of Action.  All rights of action in respect of this
                    ----------------
Agreement, except the rights of action given to the Rights Agent under Section
18, are vested in the respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered holders of the Common
Shares); and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce this Agreement, and may institute and maintain any suit, action
or proceeding against the Company to enforce this Agreement, or otherwise
enforce or act in respect of his right to exercise the Rights evidenced by such
Right Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person (including, without limitation, the Company) subject to this
Agreement.

                                       24
<PAGE>

     Section 16.    Agreement of Right Holders.  Every holder of a Right by
                    --------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

          (a)       prior to the Distribution Date, the Rights will be
     transferable only in connection with the transfer of the Common Shares;

          (b)       as of and after the Distribution Date, the Right
     Certificates are transferable only on the registry books of the Rights
     Agent if surrendered at the office of the Rights Agent designated for such
     purpose, duly endorsed or accompanied by a proper instrument of transfer
     with all required certifications completed; and

          (c)       the Company and the Rights Agent may deem and treat the
     Person in whose name the Right Certificate (or, prior to the Distribution
     Date, the associated Common Shares certificate) is registered as the
     absolute owner thereof and of the Rights evidenced thereby (notwithstanding
     any notations of ownership or writing on the Right Certificates or the
     associated Common Shares certificate made by anyone other than the Company
     or the Rights Agent) for all purposes whatsoever, and neither the Company
     nor the Rights Agent shall be affected by any notice to the contrary.

     Section 17.    Right Certificate Holder Not Deemed a Stockholder.  No
                    -------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.

     Section 18.    Concerning the Rights Agent.  The Company agrees to pay to
                    ---------------------------
the Rights Agent reasonable compensation for all services rendered by it
hereunder in accordance with a fee schedule to be mutually agreed upon and, from
time to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without negligence, bad faith
or willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending against any
claim of liability arising therefrom, directly or indirectly.

     The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or the Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney,

                                       25
<PAGE>

endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.

     Section 19.    Merger or Consolidation or Change of Name of Rights Agent.
                    ---------------------------------------------------------
Any corporation or limited liability company into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation or limited liability company resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation or limited liability company succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation or limited liability
company would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.

     In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.

     Section 20.    Duties of Rights Agent.  The Rights Agent undertakes the
                    ----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:

          20.1.     Legal Counsel.  The Rights Agent may consult with legal
                    -------------
counsel selected by it (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.

          20.2.     Certificates as to Facts or Matters.  Whenever in the
                    -----------------------------------
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board of Directors, the Chief Executive Officer,
the President, the Chief Financial Officer, any Vice President, the Treasurer,
the Secretary or any Assistant

                                       26
<PAGE>

Treasurer or Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.

          20.3.     Standard of Care.  The Rights Agent shall be liable
                    ----------------
hereunder only for its own negligence, bad faith or willful misconduct.

          20.4.     Reliance on Agreement and Right Certificates.  The Rights
                    --------------------------------------------
Agent shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Right Certificates (except as to
its countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the Company
only.

          20.5.     No Responsibility as to Certain Matters.  The Rights Agent
                    ---------------------------------------
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 11.1.2) or any adjustment required under the provisions of
Sections 3, 11, 13, 23 or 27 or responsible for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when so
issued, be validly authorized and issued, fully paid and nonassessable.

          20.6.     Further Assurance by Company.  The Company agrees that it
                    ----------------------------
will perform, execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of this
Agreement.

          20.7.     Authorized Company Officers.  The Rights Agent is hereby
                    ---------------------------
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman of the Board of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Agreement, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer or for any delay in acting
while waiting for these instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable to

                                       27
<PAGE>

the Company for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified therein (which date shall not be less than three business days after
the date any such officer actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking of any such action (or the effective date in the case of omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.

          20.8.     Freedom to Trade in Company Securities.  The Rights Agent
                    --------------------------------------
and any stockholder, director, officer or employee of the Rights Agent may buy,
sell or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.

          20.9.     Reliance on Attorneys and Agents.  The Rights Agent may
                    --------------------------------
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, omission, default, neglect or
misconduct, provided that reasonable care was exercised in the selection and
continued employment thereof.

          20.10.    Incomplete Certificate.  If, with respect to any Rights
                    ----------------------
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has not been
completed to certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof), the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with the
Company.

          20.11.    Rights Holders List.  At any time and from time to time
                    -------------------
after the Distribution Date, upon the request of the Company, the Rights Agent
shall promptly deliver to the Company a list, as of the most recent practicable
date (or as of such earlier date as may be specified by the Company), of the
holders of record of Rights.

     Section 21.    Change of Rights Agent.  The Rights Agent or any successor
                    ----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and/or Preferred Shares, as applicable, by
registered or certified mail. Following the Distribution Date, the Company shall
promptly notify the holders of the Right Certificates by first-class mail of any
such resignation. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares and/or Preferred Shares, as applicable, by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the resigning, removed, or incapacitated Rights Agent shall
remit to the Company, or

                                       28
<PAGE>

to any successor Rights Agent designated by the Company, all books, records,
funds, certificates or other documents or instruments of any kind then in its
possession which were acquired by such resigning, removed or incapacitated
Rights Agent in connection with its services as Rights Agent hereunder, and
shall thereafter be discharged from all duties and obligations hereunder.
Following notice of such removal, resignation or incapacity, the Company shall
appoint a successor to such Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the laws
of the United States or of the State of New York or the State of California (or
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of New York or California)
in good standing, having an office in the State of New York or the State of
California, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by Federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $10 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and/or Preferred Shares, as
applicable, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

     Section 22.    Issuance of New Right Certificates.  Notwithstanding any of
                    ----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the Expiration Date, the Company shall, with respect to Common Shares
so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded, or upon exercise, conversion
or exchange of securities hereinafter issued by the Company, in each case
existing prior to the Distribution Date, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Right Certificate shall be issued if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Right Certificate would be issued and (ii) no
such Right

                                       29
<PAGE>

Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

     Section 23.    Redemption.
                    ----------

          23.1.     Right to Redeem.  The Board of Directors of the Company may,
                    ---------------
at its option, at any time prior to a Trigger Event, redeem all but not less
than all of the then outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"), and
the Company may, at its option, pay the Redemption Price in Common Shares (based
on the "current per share market price," determined pursuant to Section 11.4, of
the Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors may be made effective at such time, on such
basis and subject to such conditions as the Board of Directors in its sole
discretion may establish.

          23.2.     Redemption Procedures.  Immediately upon the action of the
                    ---------------------
Board of Directors of the Company ordering the redemption of the Rights (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. The Company shall promptly give public notice of such redemption;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. The Company shall promptly
give, or cause the Rights Agent to give, notice of such redemption to the
holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 27, and other than in connection with the purchase, acquisition or
redemption of Common Shares prior to the Distribution Date.

     Section 24.    Notice of Certain Events.  In case the Company shall propose
                    ------------------------
at any time after the earlier of the Shares Acquisition Date and the
Distribution Date (a) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the
payment of such dividends, or a stock dividend on, or a subdivision, combination
or reclassification of the Common Shares), or (b) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its

                                       30
<PAGE>

Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (d) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to
a merger or other acquisition agreement of the type described in Section
1.3(ii)(A)(z)), or (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to declare or pay any dividend on the Common Shares payable
in Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, in accordance with Section 25,
a notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares, whichever shall be the earlier.

     In case any event set forth in Section 11.1.2 or Section 13 shall occur,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to the Rights Agent and to each holder of a Right Certificate, in
accordance with Section 25, a notice of the occurrence of such event, which
notice shall describe the event and the consequences of the event to holders of
Rights under Section 11.1.2 and Section 13, and (ii) all references in this
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.

     Notwithstanding anything in this Agreement to the contrary, prior to the
Distribution Date a filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the holders of securities of
the Company, including the Rights, for purposes of this Agreement and no other
notice need be given.

     Section 25.  Notices.  Notices or demands authorized by this Agreement to
                  -------
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                  TiVo Inc.
                  2160 Gold Street
                  P.O. Box 2160
                  Alviso, CA 95002
                  Attention: Secretary

                                       31
<PAGE>

Subject to the provisions of Section 21 and Section 24, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:

                 Wells Fargo Shareowner Services
                 161 North Concord Exchange
                 South St. Paul, Minnesota 55075
                 Attention:  Shareholder Services Division

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing Common
Shares) shall be sufficiently given or made if sent by first-class mail,
postage-prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.

  Section 26.    Supplements and Amendments.  For so long as the Rights are then
                 --------------------------
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of Rights or
Common Shares. From and after the time that the Rights are no longer redeemable,
the Company may, and the Rights Agent shall, if the Company so directs, from
time to time supplement or amend this Agreement without the approval of any
holders of Rights (i) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein or (ii) to make any other changes or provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable, including but not limited to extending the Final Expiration Date;
provided, however, that no such supplement or amendment shall adversely affect
the interests of the holders of Rights as such (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person), and no such supplement or
amendment may cause the Rights again to become redeemable or cause this
Agreement again to become amendable other than in accordance with this sentence;
provided further, that the right of the Board of Directors to extend the
Distribution Date shall not require any amendment or supplement hereunder. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Without limiting the foregoing, at any time prior to such time as any Person
becomes an Acquiring Person, the Company and the Rights Agent may amend this
Agreement to lower the thresholds set forth in Sections 1.1 and 3.1 to not less
than the greater of (i) any percentage greater than the largest percentage of
the outstanding Common Shares then known by the Company to be beneficially owned
by any Person (other than an Exempt Person) and (ii) 10%.

  Section 27.    Exchange.
                 --------

          27.1.  Exchange of Common Shares for Rights.  The Board of
                 ------------------------------------
Directors of the Company may, at its option, at any time after the occurrence of
a Trigger Event, exchange Common Shares for all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11.1.2) by

                                       32
<PAGE>

exchanging at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such amount per Right being hereinafter
referred to as the "Exchange Consideration"). Notwithstanding the foregoing, the
Board of Directors shall not be empowered to effect such exchange at any time
after any Acquiring Person shall have become the Beneficial Owner of 50% or more
of the Common Shares then outstanding. From and after the occurrence of an event
specified in Section 13.1, any Rights that theretofore have not been exchanged
pursuant to this Section 27.1 shall thereafter be exercisable only in accordance
with Section 13 and may not be exchanged pursuant to this Section 27.1. The
exchange of the Rights by the Board of Directors may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish.

          27.2.   Exchange Procedures.  Immediately upon the action of the
                  -------------------
Board of Directors of the Company ordering the exchange for any Rights pursuant
to Section 27.1 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive the Exchange Consideration.  The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange.  The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent.  Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice.  Each such notice of exchange
shall state the method by which the exchange of the Common Shares for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged.  Any partial exchange shall be effected pro rata based
on the number of Rights (other than the Rights that have become void pursuant to
the provisions of Section 11.1.2) held by each holder of Rights.

          27.3.   Insufficient Shares.  The Company may at its option
                  -------------------
substitute, and, in the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit an exchange of
Rights for Common Shares as contemplated in accordance with this Section 27, the
Company shall substitute to the extent of such insufficiency, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Preferred Shares or fraction thereof (or equivalent preferred stock, as such
term is defined in Section 11.2) such that the current per share market price
(determined pursuant to Section 11.4) of one Preferred Share (or equivalent
preferred share) multiplied by such number or fraction is equal to the current
per share market price of one Common Share (determined pursuant to Section 11.4)
as of the date of such exchange.

  Section 28.     Successors.  All the covenants and provisions of this
                  ----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

  Section 29.     Benefits of this Agreement.  Nothing in this Agreement shall
                  --------------------------
be construed to give to any Person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for

                                       33
<PAGE>

the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares).

  Section 30.     Determination and Actions by the Board of Directors.  The
                  ---------------------------------------------------
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or amend this Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that are done or
made by the Board of Directors of the Company in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.

  Section 31.     Severability.  If any term, provision, covenant or restriction
                  ------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

  Section 32.     Governing Law.  This Agreement and each Right Certificate
                  -------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of California and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.

  Section 33.     Counterparts.  This Agreement may be executed in any number of
                  ------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

  Section 34.     Descriptive Heading.  Descriptive headings of the several
                  -------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

                            [Signature Page Follows]

                                       34
<PAGE>

  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
             executed, as of the day and year first above written.

                    TIVO INC.

                    By /s/ David H. Courtney
                       -------------------------------
                       David H. Courtney
                       CFO & Senior Vice President, Finance & Administration

                    WELLS FARGO SHAREOWNER SERVICES

                    By /s/ Corbin B. Connell
                       -------------------------------
                       Name: Corbin B. Connell
                       Title: Assistant Vice President

                                       35
<PAGE>

                                                                       EXHIBIT A
                                                                       ---------
                                    FORM OF

                          CERTIFICATE OF DESIGNATIONS

                                      of

                 SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

                                      of

                                   TIVO INC.

                        (Pursuant to Section 151 of the
                       Delaware General Corporation Law)

                         _____________________________

     TiVo Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on January 9, 2001.

     RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation of this Corporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $.001 per share (the "Preferred Stock"), of
the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, powers and preferences, and qualifications,
limitations and restrictions thereof as follows:

     Section 1.  Designation and Amount.  The shares of such series shall be
                 ----------------------
designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be 700,000.  Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series B Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series B Preferred Stock.

     Section 2.  Dividends and Distributions.
                 ---------------------------

                 (A)  Subject to the prior and superior rights of the holders of
     any shares of any class or series of stock of this Corporation ranking
     prior and superior to the Series B Preferred Stock with respect to
     dividends, the holders of shares of Series B Preferred Stock, in preference
     to the holders of Common Stock, par value $.001 per share (the "Common
     Stock"), of the Corporation, and of any other stock ranking junior to the
     Series

                                      A-1
<PAGE>

  B Preferred Stock, shall be entitled to receive, when, as and if declared by
  the Board of Directors out of funds legally available for the purpose,
  quarterly dividends payable in cash on the first day of March, June, September
  and December in each year (each such date being referred to herein as a
  "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
  Payment Date after the first issuance of a share or fraction of a share of
  Series B Preferred Stock, in an amount per share (rounded to the nearest cent)
  equal to the greater of (a) $1.00 or (b) subject to the provision for
  adjustment hereinafter set forth, 100 times the aggregate per share amount of
  all cash dividends, and 100 times the aggregate per share amount (payable in
  kind) of all non-cash dividends or other distributions, other than a dividend
  payable in shares of Common Stock or a subdivision of the outstanding shares
  of Common Stock (by reclassification or otherwise), declared on the Common
  Stock since the immediately preceding Quarterly Dividend Payment Date or, with
  respect to the first Quarterly Dividend Payment Date, since the first issuance
  of any share or fraction of a share of Series B Preferred Stock. In the event
  the Corporation shall at any time declare or pay any dividend on the Common
  Stock payable in shares of Common Stock, or effect a subdivision, combination
  or consolidation of the outstanding shares of Common Stock (by
  reclassification or otherwise than by payment of a dividend in shares of
  Common Stock) into a greater or lesser number of shares of Common Stock, then
  in each such case the amount to which holders of shares of Series B Preferred
  Stock were entitled immediately prior to such event under clause (b) of the
  preceding sentence shall be adjusted by multiplying such amount by a fraction,
  the numerator of which is the number of shares of Common Stock outstanding
  immediately after such event and the denominator of which is the number of
  shares of Common Stock that were outstanding immediately prior to such event.

           (B)    The Corporation shall declare a dividend or distribution on
  the Series B Preferred Stock as provided in paragraph (A) of this Section 2
  immediately after it declares a dividend or distribution on the Common Stock
  (other than a dividend payable in shares of Common Stock); provided that, in
  the event no dividend or distribution shall have been declared on the Common
  Stock during the period between any Quarterly Dividend Payment Date and the
  next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share
  on the Series B Preferred Stock shall nevertheless be payable on such
  subsequent Quarterly Dividend Payment Date.

           (C)    Dividends shall begin to accrue and be cumulative on
  outstanding shares of Series B Preferred Stock from the Quarterly Dividend
  Payment Date next preceding the date of issue of such shares, unless the date
  of issue of such shares is prior to the record date for the first Quarterly
  Dividend Payment Date, in which case dividends on such shares shall begin to
  accrue from the date of issue of such shares, or unless the date of issue is a
  Quarterly Dividend Payment Date or is a date after the record date for the
  determination of holders of shares of Series B Preferred Stock entitled to
  receive a quarterly dividend and before such Quarterly Dividend Payment Date,
  in either of which events such dividends shall begin to accrue and be
  cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
  dividends shall not bear interest. Dividends paid on the shares of Series B
  Preferred Stock in an amount less than the total amount of such dividends at
  the time accrued and payable on such shares shall be allocated pro rata on a
  share-by-share basis among all such shares at the time outstanding.

                                      A-2
<PAGE>

  The Board of Directors may fix a record date for the determination of holders
  of shares of Series B Preferred Stock entitled to receive payment of a
  dividend or distribution declared thereon, which record date shall be not more
  than 60 days prior to the date fixed for the payment thereof.

  Section 3.   Voting Rights.  The holders of shares of Series B Preferred Stock
               -------------
shall have the following voting rights:

               (A)  Subject to the provision for adjustment hereinafter set
  forth, each share of Series B Preferred Stock shall entitle the holder thereof
  to 100 votes on all matters submitted to a vote of the stockholders of the
  Corporation. In the event the Corporation shall at any time declare or pay any
  dividend on the Common Stock payable in shares of Common Stock, or effect a
  subdivision, combination or consolidation of the outstanding shares of Common
  Stock (by reclassification or otherwise than by payment of a dividend in
  shares of Common Stock) into a greater or lesser number of shares of Common
  Stock, then in each such case the number of votes per share to which holders
  of shares of Series B Preferred Stock were entitled immediately prior to such
  event shall be adjusted by multiplying such number by a fraction, the
  numerator of which is the number of shares of Common Stock outstanding
  immediately after such event and the denominator of which is the number of
  shares of Common Stock that were outstanding immediately prior to such event.

               (B)  Except as otherwise provided herein, in any other
  Certificate of Designations creating a series of Preferred Stock or any
  similar stock, or by law, the holders of shares of Series B Preferred Stock
  and the holders of shares of Common Stock and any other capital stock of the
  Corporation having general voting rights shall vote together as one class on
  all matters submitted to a vote of stockholders of the Corporation.

               (C)  Except as set forth herein, or as otherwise provided by law,
  holders of Series B Preferred Stock shall have no special voting rights and
  their consent shall not be required (except to the extent they are entitled to
  vote with holders of Common Stock as set forth herein) for taking any
  corporate action.

  Section 4.   Certain Restrictions.
                 --------------------

               (A)  Whenever quarterly dividends or other dividends or
  distributions payable on the Series B Preferred Stock as provided in Section 2
  are in arrears, thereafter and until all accrued and unpaid dividends and
  distributions, whether or not declared, on shares of Series B Preferred Stock
  outstanding shall have been paid in full, the Corporation shall not:

                    (i)    declare or pay dividends, or make any other
       distributions, on any shares of stock ranking junior (either as to
       dividends or upon liquidation, dissolution or winding up) to the Series B
       Preferred Stock;

                    (ii)   declare or pay dividends, or make any other
       distributions, on any shares of stock ranking on a parity (either as to
       dividends or upon

                                      A-3
<PAGE>

       liquidation, dissolution or winding up) with the Series B Preferred
       Stock, except dividends paid ratably on the Series B Preferred Stock and
       all such parity stock on which dividends are payable or in arrears in
       proportion to the total amounts to which the holders of all such shares
       are then entitled;

                    (iii)  redeem or purchase or otherwise acquire for
       consideration shares of any stock ranking junior (either as to dividends
       or upon liquidation, dissolution or winding up) to the Series B Preferred
       Stock, provided that the Corporation may at any time redeem, purchase or
       otherwise acquire shares of any such junior stock in exchange for shares
       of any stock of the Corporation ranking junior (both as to dividends and
       upon dissolution, liquidation or winding up) to the Series B Preferred
       Stock; or

                    (iv)   redeem or purchase or otherwise acquire for
       consideration any shares of Series B Preferred Stock, or any shares of
       stock ranking on a parity with the Series B Preferred Stock, except in
       accordance with a purchase offer made in writing or by publication (as
       determined by the Board of Directors) to all holders of such shares upon
       such terms as the Board of Directors, after consideration of the
       respective annual dividend rates and other relative rights and
       preferences of the respective series and classes, shall determine in good
       faith will result in fair and equitable treatment among the respective
       series or classes.

              (B)   The Corporation shall not permit any subsidiary of the
  Corporation to purchase or otherwise acquire for consideration any shares of
  stock of the Corporation unless the Corporation could, under paragraph (A) of
  this Section 4, purchase or otherwise acquire such shares at such time and in
  such manner.

  Section 5.  Reacquired Shares.  Any shares of Series B Preferred Stock
              -----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof.  All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

  Section 6.  Liquidation, Dissolution or Winding Up. (A) Upon any liquidation,
              --------------------------------------
otherwise no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preferred Stock unless, prior thereto, the holders
of shares of Series B Preferred Stock shall have received an amount per share
(the "Series A Liquidation Preference") equal to $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series B Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series B Preferred Stock, except distributions

                                      A-4
<PAGE>

made ratably on the Series B Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event.

               (B) In the event, however, that there are not sufficient assets
  available to permit payment in full of the Series A Liquidation Preference and
  the liquidation preferences of all other classes and series of stock of the
  Corporation, if any, that rank on a parity with the Series B Preferred Stock
  in respect thereof, then the assets available for such distribution shall be
  distributed ratably to the holders of the Series B Preferred Stock and the
  holders of such parity shares in proportion to their respective liquidation
  preferences.

               (C) Neither the merger or consolidation of the Corporation into
  or with another corporation nor the merger or consolidation of any other
  corporation into or with the Corporation shall be deemed to be a liquidation,
  dissolution or winding up of the Corporation within the meaning of this
  Section 6.

  Section 7.   Consolidation, Merger, etc.  In case the Corporation shall
               ---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

  Section 8.   No Redemption.  The shares of Series B Preferred Stock shall
               -------------
not be redeemable by the Company.

                                      A-5
<PAGE>

  Section 9.     Rank.  The Series B Preferred Stock shall rank, with respect to
                 ----
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, junior to all series of any other class of the
Corporation's Preferred Stock, except to the extent that any such other series
specifically provides that it shall rank on a parity with or junior to the
Series B Preferred Stock.

  Section 10.    Amendment.  At any time any shares of Series B Preferred Stock
                 ---------
are outstanding, the Certificate of Incorporation of the Corporation shall not
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series B Preferred Stock, voting separately
as a single class.

  Section 11.    Fractional Shares.  Series B Preferred Stock may be issued in
                 -----------------
fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock.

     IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Secretary this 16th day of January, 2001.

                                      __________________________________
                                      Alan C. Mendelson, Secretary

                                      A-6
<PAGE>

                                                                       EXHIBIT B
                                                                       ---------

                          [Form of Right Certificate]

Certificate No. R-                                                _______ Rights

     NOT EXERCISABLE AFTER _________, ____ OR EARLIER IF NOTICE OF REDEMPTION OR
     EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO AN
     AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(z) OF THE AGREEMENT.
     THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT, AND TO EXCHANGE ON
     THE TERMS SET FORTH IN THE AGREEMENT. UNDER CERTAIN CIRCUMSTANCES
                                           ---------------------------
     (SPECIFIED IN SECTION 11.1.2 OF THE AGREEMENT), RIGHTS BENEFICIALLY OWNED
     --------------------------------------------------------------------------
     BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS DEFINED IN THE AGREEMENT), OR
     --------------------------------------------------------------------------
     ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID AND WILL NO
     --------------------------------------------------------------------------
     LONGER BE TRANSFERABLE.
     ----------------------

                               Right Certificate

                                   TIVO INC.

     This certifies that       , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of January 16, 2001, as the same may be amended from time to
time (the "Agreement"), between TiVo Inc., a Delaware corporation (the
"Company"), and Wells Fargo Shareowner Services, a Delaware corporation, as
Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date and prior to 5:00 P.M. (New York City time) on
January 9, 2011, at the offices of the Rights Agent, or its successors as Rights
Agent, designated for such purpose, one one-hundredth of a fully paid,
nonassessable share of Series B Junior Participating Preferred Stock, par value
$.001 per share (the "Preferred Shares") of the Company, at a purchase price of
$60 per one one-hundredth of a Preferred Share, subject to adjustment (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase and certification duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one one-
hundredths of a Preferred Share which may be purchased upon exercise thereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of ________, ____ based on the Preferred Shares as constituted
at such date. Capitalized terms used in this Right Certificate without
definition shall have the meanings ascribed to them in the Agreement. As
provided in the Agreement, the Purchase Price and the number of Preferred Shares
which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.

     This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description

                                      B-1
<PAGE>

of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates. Copies of the Agreement are on file at the principal offices of
the Company and the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon
surrender at the offices of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of one one-hundredths of a Preferred Share as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase.  If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.

     Subject to the provisions of the Agreement, the Board of Directors may, at
its option, (i) redeem the Rights evidenced by this Right Certificate at a
redemption price of $.01 per Right or (ii) exchange Common Shares for the Rights
evidenced by this Certificate, in whole or in part.

     No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions of Preferred Shares which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depository receipts), but in lieu
thereof a cash payment will be made, as provided in the Agreement.

     No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Agreement
or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Agreement.

     If any term, provision, covenant or restriction of the Agreement is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of the Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.

     This Right Certificate shall not be valid or binding for any purpose until
it shall have been countersigned by the Rights Agent.

                                      B-2
<PAGE>

     WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.  Dated as of _______________.

Attest:                                  TIVO INC.

By __________________________________    By __________________________________
   Title:                                   Title:

Countersigned:

WELLS FARGO SHAREOWNER SERVICES, as Rights Agent

By __________________________________
   Authorized Signature

                                      B-3
<PAGE>

                  [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

            (To be executed by the registered holder if such holder
                  desires to transfer the Right Certificate.)

FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
________________________________________________________________________________

                         (Please print name and address
                                 of transferee)

Rights evidenced by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint ___________
Attorney, to transfer the within Right Certificate on the books of the within-
named Company, with full power of substitution.

Dated:  __________________

                                         _________________________________
                                         Signature

Signature Medallion Guaranteed:

_________________________________

     Signatures must be medallion guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended.

________________________________________________________________________________

The undersigned hereby certifies that:

     (1) the Rights evidenced by this Right Certificate are not beneficially
owned by and are not being assigned to an Acquiring Person or an Affiliate or an
Associate thereof; and

     (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof.

Dated:  __________________

                                         ________________________________
                                         Signature

                                      B-4
<PAGE>

                          FORM OF ELECTION TO PURCHASE
                          ----------------------------

                      (To be executed if holder desires to
                        exercise the Right Certificate.)

To: TiVo Inc.

     The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights (or such other securities or property
of the Company or of any other Person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the name
of:

____________________________________________________________
(Please print name and address)

____________________________________________________________

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

____________________________________________________________
(Please print name and address)

____________________________________________________________

Dated:  __________________

                                         _____________________________
                                         Signature

Signature Medallion Guaranteed:

_________________________________

     Signatures must be medallion guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended.

                                      B-5
<PAGE>

The undersigned hereby certifies that:

     (1) the Rights evidenced by this Right Certificate are not beneficially
owned by and are not being assigned to an Acquiring Person or an Affiliate or an
Associate thereof; and

     (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned did not acquire the Rights evidenced by this Right Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate thereof.

Dated:  __________________

                                         _______________________________________
                                         Signature

________________________________________________________________________________

                                     NOTICE
                                     ------

     The signature in the foregoing Form of Assignment and Form of Election to
Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.

     In the event the certification set forth above in the Form of Assignment or
Form of Election to Purchase is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Right Certificate to be an
Acquiring Person or an Affiliate or Associate hereof and such Assignment or
Election to Purchase will not be honored.

                                      B-6
<PAGE>

                                                                       EXHIBIT C
                                                                       ---------
             As described in the Rights Agreement, Rights which are
             ------------------------------------------------------
         held by or have been held by an Acquiring Person or Associates
         --------------------------------------------------------------
     or Affiliates thereof (as defined in the Rights Agreement) and certain
     ----------------------------------------------------------------------
     transferees thereof shall become null and void and will no longer be
     --------------------------------------------------------------------
                                 transferable
                                 -------------

                         SUMMARY OF RIGHTS TO PURCHASE
                                PREFERRED SHARES

     On January 9, 2001, the Board of Directors of TiVo Inc. (the "Company")
declared a dividend of one preferred share purchase right (a "Right") for each
share of common stock, $.001 par value (the "Common Shares"), of the Company
outstanding at the close of business on January 31, 2001 (the "Record Date").
As long as the Rights are attached to the Common Shares, the Company will issue
one Right (subject to adjustment) with each new Common Share so that all such
shares will have attached Rights.  When exercisable, each Right will entitle the
registered holder to purchase from the Company one one-hundredth of a share of
Series B Junior Participating Preferred Stock (the "Preferred Shares") at a
price of $60 per one one-hundredth of a Preferred Share, subject to adjustment
(the "Purchase Price").  The description and terms of the Rights are set forth
in a Rights Agreement, dated as of January 16, 2001, as the same may be amended
from time to time (the "Agreement"), between the Company and Wells Fargo
Shareowner Services, as Rights Agent (the "Rights Agent").

     Until the earlier to occur of (i) ten (10) days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the Common Shares (an "Acquiring Person"), subject to limited exceptions, or
(ii) ten (10) business days (or such later date as may be determined by action
of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement or
announcement of an intention to make a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the Common Shares, subject to limited exceptions (the
earlier of (i) and (ii) being called the "Distribution Date"), the Rights will
be evidenced, with respect to any of the Common Share certificates outstanding
as of the Record Date, by such Common Share certificate together with a copy of
this Summary of Rights.

     The Agreement provides that until the Distribution Date (or earlier
redemption exchange, termination, or expiration of the Rights), the Rights will
be transferred with and only with the Common Shares.  Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the close of business on the Record Date upon transfer
or new issuance of the Common Shares will contain a notation incorporating the
Agreement by reference.  Until the Distribution Date (or earlier redemption,
exchange, termination or expiration of the Rights), the surrender for transfer
of any certificates for Common Shares, with or without such notation or a copy
of this Summary of Rights, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.  As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common

                                      C-1
<PAGE>

Shares as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.

     The Rights are not exercisable until the Distribution Date.  The Rights
will expire on January 9, 2011, subject to the Company's right to extend such
date (the "Final Expiration Date"), unless earlier redeemed or exchanged by the
Company or terminated.

     Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per Common Share.  In the event of
liquidation, dissolution or winding up of the Company, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $100 per share (plus any accrued but unpaid dividends) but will be entitled
to an aggregate payment of 100 times the payment made per Common Share.  Each
Preferred Share will have 100 votes and will vote together with the Common
Shares.  Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share.  Preferred Shares will
not be redeemable.  These rights are protected by customary antidilution
provisions.  Because of the nature of the Preferred Share's dividend,
liquidation and voting rights, the value of one one-hundredth of a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.

     The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).

     In the event that a Person becomes an Acquiring Person or if the Company
were the surviving corporation in a merger with an Acquiring Person or any
affiliate or associate of an Acquiring Person and the Common Shares were not
changed or exchanged, each holder of a Right, other than Rights that are or were
acquired or beneficially owned by the Acquiring Person (which Rights will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two times the then current
Purchase Price of the Right.  In the event that, after a person has become an
Acquiring Person, the Company were acquired in a merger or other business
combination transaction or more than 50% of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase

                                      C-2
<PAGE>

Price of the Right, that number of shares of common stock of the acquiring
company which at the time of such transaction would have a market value of two
times the then current Purchase Price of the Right.

     At any time after a Person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence of the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the
outstanding Common Shares, the Board of Directors may cause the Company to
exchange the Rights (other than Rights owned by an Acquiring Person which will
have become void), in whole or in part, for Common Shares at an exchange rate of
one Common Share per Right (subject to adjustment).

     No adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price.  No
fractional Preferred Shares or Common Shares will be issued (other than
fractions of Preferred Shares which are integral multiples of one one-hundredth
of a Preferred Share, which may, at the election of the Company, be evidenced by
depository receipts), and in lieu thereof, a payment in cash will be made based
on the market price of the Preferred Shares or Common Shares on the last trading
date prior to the date of exercise.

     The Rights may be redeemed in whole, but not in part, at a price of $.01
per Right (the "Redemption Price") by the Board of Directors at any time prior
to the time that an Acquiring Person has become such.  The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.

     Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.

     Any of the provisions of the Agreement may be amended by the Board of
Directors of the Company for so long as the Rights are then redeemable, and
after the Rights are no longer redeemable, the Company may amend or supplement
the Agreement in any manner that does not adversely affect the interests of the
holders of the Rights (other than an Acquiring Person or an affiliate or
associate of an Acquiring Person).  The Company may at any time prior to such
time as any person becomes an Acquiring Person amend the Agreement to lower the
thresholds described above to no less than the greater of (i) any percentage
greater than the largest percentage of the outstanding Common Shares then known
by the Company to be beneficially owned by any person or group of affiliated or
associated persons (other than an Exempt Person) and (ii) 10%.

     A copy of the Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Current Report on Form 8-K.  A copy of the
Agreement is available free of charge from the Company.  This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Agreement, which is incorporated herein by
reference.

                                      C-3<PAGE>

                                                                    EXHIBIT 10.1

                         AGREEMENT AND PLAN OF MERGER

                                 BY AND AMONG

                               AVT CORPORATION,

                           RAVEN ACQUISITION CORP.,

                         INFINITE TECHNOLOGIES, INC.,

                                      AND

                THE STOCKHOLDERS OF INFINITE TECHNOLOGIES, INC.

                          Dated as of January 3, 2001
<PAGE>

                                    CONTENTS

<TABLE>
<S>                                                                                                     <C>
ARTICLE I - THE MERGER; EFFECTIVE TIME; CLOSING.....................................................     1
         1.1      The Merger........................................................................     1
         1.2      Effective Time....................................................................     2
         1.3      Closing...........................................................................     2
         1.4      Tax Consequences..................................................................     2
ARTICLE II - TERMS OF MERGER........................................................................     2
         2.1      Articles of Incorporation.........................................................     2
         2.2      Bylaws............................................................................     2
         2.3      Directors.........................................................................     3
         2.4      Officers..........................................................................     3
ARTICLE III - CONVERSION OF SHARES IN MERGER; MERGER CONSIDERATION..................................     3
         3.1      Conversion of Shares in Merger....................................................     3
         3.2      Merger Consideration..............................................................     4
         3.3      Additional Consideration..........................................................     6
         3.4      No Fractional Shares..............................................................     8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE HOLDERS..........................     8
         4.1      Holder Matters....................................................................     8
         4.2      Company Organization, Good Standing, Power, Etc...................................    11
         4.3      Capitalization....................................................................    11
         4.4      Subsidiaries and Affiliates.......................................................    12
         4.5      No Approvals or Notices Required; No Conflicts With Instruments...................    12
         4.6      Financial Statements; Obligations.................................................    12
         4.7      Absence of Certain Changes or Events..............................................    13
         4.8      Taxes.............................................................................    15
         4.9      Property..........................................................................    18
         4.10     Contracts.........................................................................    20
         4.11     Customers and Suppliers...........................................................    21
         4.12     Orders, Commitments and Returns...................................................    22
         4.13     Claims and Legal Proceedings......................................................    22
         4.14     Labor Matters.....................................................................    22
         4.15     Employee Benefit Plans............................................................    23
         4.16     Intellectual Property.............................................................    26
         4.17     Accounts Receivable...............................................................    30
         4.18     Inventory.........................................................................    31
         4.19     Corporate Books and Records.......................................................    31
         4.20     Licenses, Permits, Authorizations, Etc............................................    31
         4.21     Compliance With Laws; Environmental Matters.......................................    31
         4.22     Insurance.........................................................................    33
         4.23     Brokers and Finders...............................................................    33
         4.24     Government Contracts..............................................................    34
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                                     <C>
         4.25     Absence of Questionable Payments..................................................    34
         4.26     Personnel.........................................................................    34
         4.27     Bank Accounts.....................................................................    34
         4.28     Insider Interests.................................................................    35
         4.29     Hart-Scott Rodino.................................................................    35
         4.30     Full Disclosure...................................................................    35
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF AVT AND ACQUISITION SUB...............................    36
         5.1      Organization, Good Standing, Power, Etc...........................................    36
         5.2      No Approvals or Notices Required; No Conflicts With Instruments...................    36
         5.3      Capital Structure.................................................................    36
         5.4      SEC Documents.....................................................................    37
         5.5      No Material Adverse Change........................................................    37
         5.6      Claims and Legal Proceedings......................................................    37
         5.7      Brokers and Finders...............................................................    37
         5.8      Full Disclosure...................................................................    37
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF AVT AND ACQUISITION SUB.........................    38
         6.1      Accuracy of Representations and Warranties........................................    38
         6.2      Performance of Agreements.........................................................    38
         6.3      Opinions of Counsel for the Company and the Holders...............................    38
         6.4      Approvals and Consents............................................................    38
         6.5      Officers' Certificate.............................................................    39
         6.6      Material Adverse Change...........................................................    39
         6.7      Proceedings and Documents; Secretary's Certificate................................    39
         6.8      Nonforeign Affidavit..............................................................    39
         6.9      Compliance With Laws; Release of Liens............................................    39
         6.10     Stockholder Approval..............................................................    39
         6.11     Legal Proceedings.................................................................    40
         6.12     Escrow Agreement..................................................................    40
         6.13     Due Diligence.....................................................................    40
         6.14     Termination of Consulting Contract................................................    40
         6.14     Employment Arrangements...........................................................    40
         6.15     Confidentiality and Nondisclosure.................................................    40
         6.16     Payout of Royalty Obligations; Renegotiation of Exclusive Contract................    40
         6.17     Retirement of Company Liability...................................................    41
         6.18     Delivery of Certificates..........................................................    41
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE HOLDERS.....................    41
         7.1      Accuracy of Representations and Warranties........................................    41
         7.2      Performance of Agreements.........................................................    41
         7.3      Opinion of Counsel for AVT and Acquisition Sub....................................    41
         7.4      Approvals and Consents............................................................    42
         7.5      Legal Proceedings.................................................................    42
</TABLE>

                                     -ii-
<PAGE>

<TABLE>
<S>                                                                                                     <C>
         7.6      Compliance With Laws..............................................................    42
         7.7      Material Adverse Change...........................................................    42
         7.8      Escrow Agreement..................................................................    42
         7.9      Employment Agreement..............................................................    42
ARTICLE VIII - COVENANTS............................................................................    43
         8.1      Conduct of Business by the Company Pending the Closing............................    43
         8.2      Access to Information; Confidentiality............................................    44
         8.3      No Alternative Transactions.......................................................    45
         8.4      Notification of Certain Matters...................................................    45
         8.5      Further Action....................................................................    46
         8.6      Publicity.........................................................................    46
         8.7      Waiver of Dissenter's Rights......................................................    46
         8.8      Termination of 401(k) Plan........................................................    46
         8.9      Offers of Employment..............................................................    47
         8.10     Baltimore Office..................................................................    47
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER......................................................    47
         9.1      Termination.......................................................................    47
         9.2      Effect of Termination.............................................................    48
         9.3      Amendment.........................................................................    48
         9.4      Waiver............................................................................    48
ARTICLE X - INDEMNIFICATION.........................................................................    48
         10.1     Survival..........................................................................    48
         10.2     Indemnification by the Holders....................................................    49
         10.3     Indemnification by AVT............................................................    50
         10.4     Threshold and Limitations.........................................................    50
         10.5     Procedure.........................................................................    51
         10.6     Remedies; Specific Performance....................................................    54
         10.7     Access to Escrow Amount...........................................................    54
ARTICLE XI - GENERAL................................................................................    54
         11.1     Expenses..........................................................................    54
         11.2     Entire Understanding..............................................................    54
         11.3     Waivers...........................................................................    55
         11.4     Counterparts......................................................................    55
         11.5     Headings..........................................................................    55
         11.6     Applicable Law; Venue.............................................................    55
         11.7     Assignment........................................................................    56
         11.8     Successors and Assigns............................................................    56
         11.9     Notices...........................................................................    56
         11.10    Severability......................................................................    57
         11.11    Tax Matters - Reorganization Treatment............................................    58
</TABLE>

                                     -iii-
<PAGE>

SCHEDULES
3.1 - 8.9, if applicable -- Included in Exhibit D

EXHIBITS

A  --  Articles of Merger
B  --  Escrow Agreement
C  --  Employment Agreement
D  --  Company Disclosure Memorandum
E  --  Opinion of Counsel for the Company
F  --  Real Property Tax Affidavit
G  --  Form of Confidentiality and Invention Assignment Agreement
H  --  Opinion of Counsel for AVT

                                     -iv-
<PAGE>

                         AGREEMENT AND PLAN OF MERGER

     This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of January 3, 2001 among AVT Corporation, a Washington corporation
("AVT"), Raven Acquisition Corp., a Washington corporation and a wholly owned
subsidiary of AVT ("Acquisition Sub"), Infinite Technologies, Inc., a Maryland
corporation (the "Company"), and the stockholders of the Company (each a
"Holder" and collectively the "Holders") listed on the signature page hereto.

                                   RECITALS

     WHEREAS, the Holders own all the issued and outstanding shares of capital
stock of the Company, consisting of 50 shares of Class A Common Stock, without
par value (the "Class A Common") and 61 shares of Class B Common Stock, without
par value (the "Class B Common" and together with the Class A Common, the
"Company Shares");

     WHEREAS, the Boards of Directors of Acquisition Sub and the Company each
have determined that it is in the best interests of their respective
shareholders for the Company to merge with and into Acquisition Sub upon the
terms and subject to the conditions of this Agreement (the "Merger");

     WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and

     WHEREAS, AVT, Acquisition Sub, the Company and the Holders desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger.

     NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:

                ARTICLE I - THE MERGER; EFFECTIVE TIME; CLOSING

1.1  The Merger

     Upon the terms and subject to the conditions hereof, (a) at the Effective
Time (as hereinafter defined) the separate existence of the Company shall cease
and the Company shall be merged with and into Acquisition Sub (Acquisition Sub
as the surviving corporation after the Merger is sometimes referred to herein as
the "Surviving Corporation") and (b) from and after the Effective Time, the
Merger shall have all the effects of a merger under the laws of the State of
Washington, the State of Maryland and other applicable law.
<PAGE>

1.2  Effective Time

     On the Closing Date and subject to the terms and conditions hereof, the
parties hereto shall cause the appropriate certificates (the "Articles of
Merger") in the form attached as Exhibit A complying with the applicable
                                 ---------
provisions of the Washington Business Corporation Act ("WBCA") and the Maryland
General Corporation Law ("Maryland Law") to be properly executed and filed with
the Secretary of State of the State of Washington (the "Washington Secretary of
State") and the Maryland State Department of Assessments and Taxation (the
"Maryland Department of Taxation"). The Merger shall become effective on the
date and at the time (the "Effective Time") of filing of the Articles of Merger
or at such other time as may be specified in the Articles of Merger as filed. If
the Washington Secretary of State or the Maryland Department of Taxation
requires any changes in the Articles of Merger as a condition to filing or to
issuing its certificate to the effect that the Merger is effective, AVT,
Acquisition Sub and the Company will execute any necessary revisions
incorporating such changes.

1.3  Closing

     The closing of the transactions contemplated by this Agreement (the
"Closing") will occur (a) at the offices of Perkins Coie LLP, 1201 Third Avenue,
48th Floor, Seattle, Washington, at 10:00 a.m. on January 3, 2001, though the
parties may transmit documents necessary for the Closing via electronic
facsimile or courier, or (b) at such other place and/or time and/or on such
other date as the parties hereto may agree (such date being the "Closing Date").

1.4  Tax Consequences

     It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code. The parties hereto
adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.

                         ARTICLE II - TERMS OF MERGER

2.1  Articles of Incorporation

     The Articles of Incorporation of Acquisition Sub in effect immediately
prior to the Effective Time will be the Articles of Incorporation of the
Surviving Corporation, until duly amended in accordance with the terms thereof
and of the WBCA.

2.2  Bylaws

     The Bylaws of Acquisition Sub in effect immediately prior to the Effective
Time will be the Bylaws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Articles of Incorporation of the
Surviving Corporation and of the WBCA.

                                      -2-
<PAGE>

2.3  Directors

     The directors of Acquisition Sub at the Effective Time will, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.

2.4  Officers

     The officers of Acquisition Sub at the Effective Time will, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly appointed or until their earlier death, resignation or
removal in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation.

      ARTICLE III - CONVERSION OF SHARES IN MERGER; MERGER CONSIDERATION

3.1  Conversion of Shares in Merger

     At the Effective Time, by virtue of the Merger and without any action by
the holders thereof, the shares of the constituent corporations will be
converted as follows:

          (a)  All shares of any class of capital stock of the Company held by
the Company as treasury shares shall be canceled.

          (b)  The Company Shares issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive (i) in the case
of Class B Common, the Class B Share Consideration and the Class B Cash
Consideration, and (ii) in the case of Class A Common, the Class A Share
Consideration, the Class A Cash Consideration and the Additional Consideration,
(each as hereinafter defined), as set forth in Sections 3.2 and 3.3 hereof. The
Class B Share Consideration, the Class B Cash Consideration, the Class A Share
Consideration, the Class A Cash Consideration and the Additional Consideration
are collectively referred to as the "Merger Consideration."

          (c)  The Company Shares will cease to be outstanding, will be canceled
and retired and will cease to exist, and each holder of a certificate
representing any such Company Shares will thereafter cease to have any rights
with respect to such Company Shares, except the right to receive that portion of
the Merger Consideration attributable to such Company Shares.

          (d)  Each share of common stock, par value $0.01 per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
will evidence the same number of shares of common stock of the Surviving
Corporation.

                                      -3-
<PAGE>

3.2  Merger Consideration

     (a)  Class B Common Merger Consideration. In exchange for all the
          ------------------------------------
outstanding shares of Class B Common, AVT shall pay a portion of the Merger
Consideration to the Holders as follows:

          (i)   Class B Share Consideration. On the Closing Date, AVT shall
                ----------------------------
issue to the Holders the Class B Share Consideration. The "Class B Share
Consideration" shall be that the number of shares of AVT Common Stock (the
"Class B Closing Shares") equal to $4,774,372 (the "Class B Closing Shares
Value"), divided by the average of the closing prices of AVT Common Stock as
reported on the Nasdaq National Market for each of the twenty (20) trading days
ending three trading days prior to the Closing Date (the "Closing Average"). The
Class B Share Consideration will be distributed to the Holders according to the
percentage of Class B Common owned by each Holder as set forth on Schedule
3.2(a) (with respect to each Holder, such Holder's "Class B Percentage
Interest"). Notwithstanding anything to the contrary in this Section 3.2(a)(i),
if the Closing Average is less than $3.00 per share, either AVT or the Holders
may elect to reduce the Class B Closing Shares Value by an amount mutually
agreed to by AVT and the Holders, negotiating in good faith, and to increase the
Class B Cash Consideration (as defined below) payable on the Cash Installment
Date (as defined below) by the amount of such reduction; provided, however, that
in no event shall the Class B Cash Consideration and the Class A Cash
Consideration (as defined below) together constitute more than sixty percent
(60%) of the total consideration paid on the Closing Date.

          (ii)  Class B Cash Consideration. On the Closing Date, AVT shall pay
                ---------------------------
to the Holders an aggregate amount equal to $6,030,086 (the "Class B Cash
Consideration"), $355,834 of which (the "Class B Cash Escrow Amount") will be
deposited with Mellon Investor Services LLC as Escrow Agent (the "Escrow Agent")
into an interest-bearing escrow and disbursed to the Holders or returned to AVT
in accordance with the terms of an escrow agreement substantially in the form of
Exhibit B hereto (the "Escrow Agreement") and the balance of which will be paid
---------
to the Holders by wire transfer of immediately available funds. The Class B Cash
Consideration will be distributed to each Holder according to such Holder's
Class B Percentage Interest. Wire transfers of funds will be to the Holders'
accounts as specified in notices given to AVT at least 24 hours before the
Closing Date.

     (b)  Class A Common Merger Consideration. In exchange for all the
          ------------------------------------
outstanding shares of Class A Common, AVT shall pay a portion of the Merger
Consideration to the Holder of the Class A Common (the "Class A Holder") as
follows:

          (i)   Class A Share Consideration. On the Closing Date, AVT shall
                ----------------------------
issue to the Class A Holder that number of shares of AVT Common Stock (the
"Class A Closing Shares" and, together with the Class B Closing Shares, the
"Closing Shares") equal to $3,297,056 (the "Class A Closing Shares Value")
divided by the Closing Average (the "Class A Share Consideration").
Notwithstanding anything to the contrary in this Section

                                      -4-
<PAGE>

3.2(b)(i), if the Closing Average is less than $3.00 per share, either AVT or
the Class A Holder may elect to reduce the Class A Closing Shares Value by an
amount mutually agreed to by AVT and the Class A Holder, negotiating in good
faith, and to increase the Class A Cash Consideration (as defined below) payable
on the Closing Date by the amount of such reduction; provided, however, that in
no event shall the Class A Cash Consideration and the Class B Cash Consideration
together constitute more the sixty percent (60%) of the total consideration paid
on the Closing Date.

          (ii)  Class A Cash Consideration. On the Closing Date, AVT shall pay
                ---------------------------
to the Class A Holder an aggregate amount equal to $1,750,000 (the "Class A Cash
Consideration"), $106,667 of which (the "Class A Cash Escrow Amount" and,
together with the Class B Escrow Amount and the Escrow Shares (as defined
below), the "Escrow Amount") will be deposited with the Escrow Agent into an
interest-bearing escrow and disbursed to the Class A Holder or returned to AVT
in accordance with the terms of the Escrow Agreement and the balance of which
will be paid to the Class A Holder by wire transfer of immediately available
funds. Wire transfers of funds will be to the Class A Holder's account as
specified in a notice given to AVT at least 24 hours before the Closing Date.

     (c)  Additional Consideration. AVT shall pay to the Class A Holder the
          -------------------------
additional consideration, if any, payable to him pursuant to Section 3.3 hereof
(the "Additional Consideration").

     (d)  Adjustment for Liabilities. The Company has delivered to AVT  a pro
          ---------------------------
forma balance sheet for the Company as of the Closing Date (the "Closing Balance
Sheet") which is attached hereto as Schedule 3.2(d). The Closing Balance Sheet
has been prepared by Company from the books and records of the Company on a
basis consistent with prior accounting periods and fairly presents the financial
position, results of operations and changes in financial position of the Company
as of the dates and for the periods indicated. The parties hereby agree that the
Company Liability (as defined below) reflected on the Closing Balance Sheet is
$973,869. "Company Liability" shall mean any long-term liability, notes payable,
loans, lease obligations or other debt of the Company (including any
indebtedness of the Company to AVT) and fees and expenses incident to the
negotiation, preparation and execution of this Agreement and the other
Transaction Documents (including legal and accounting fees and expenses and
finder's or broker's fees). AVT shall have the right to have the Closing Balance
Sheet audited by Arthur Andersen LLP or such other accounting firm as may be
selected by AVT (the "Audited Balance Sheet"). Changes to the Closing Balance
Sheet may be made in such audit to the extent necessary (a) to conform the
Closing Balance Sheet to generally accepted accounting principles, and (b) to
correct factual or computational errors in the Closing Balance Sheet. Such
audit, if any, must be completed no later than 90 days after the Closing Date.
If the dollar amount of the Company Liability presented in the Audited Balance
Sheet is greater than the dollar amount of the Company Liability reflected in
the Closing Balance Sheet, then the Merger Consideration shall be

                                      -5-
<PAGE>

decreased dollar for dollar by the amount of excess Company Liability reflected
in the Audited Balance Sheet.

     (e)  Escrow Shares. At the Effective Time, the Holders will be deemed to
          --------------
have received and deposited with the Escrow Agent (i) five percent (5%) of the
Class B Share Consideration (the "Class B Escrow Shares") and (ii) five percent
(5%) of the Class A Share Consideration (the "Class A Escrow Shares" and,
together with the Class B Escrow Shares, the "Escrow Shares"), without any act
of either Holder. The Class B Escrow Shares shall be allocated between the
Holders according to each Holders' Class B Percentage Interest. As soon as
practicable after the Effective Time, the Escrow Shares, without any act of
either Holder, will be deposited with the Escrow Agent, such deposit to
constitute a portion of the Escrow Amount to be governed by the terms set forth
in the Escrow Agreement.

3.3  Additional Consideration

     Additional consideration of up to an aggregate value of $6,848,487 will be
paid by AVT to the Class A Holder as follows:

          (a)  Annual Guaranteed Payments. Additional consideration of $978,355
               ---------------------------
(the "Annual Guaranteed Payments") will be paid by AVT to the Class A Holder
within 30 days after the end of each of the years ending December 31, 2001, 2002
and 2003 (each a "Guaranteed Payment Date") except in the event of the Class A
Holder's death or total disability (as defined below), in which case the
requirements of Section 3.3(e) shall govern. The Annual Guaranteed Payments with
respect to each Guaranteed Payment Date (each, an "Annual Guaranteed Payment")
will be payable 50% in cash and 50% by issuing that number of whole shares of
AVT Common Stock (the "Guaranteed Payment Shares") equal to 50% of such Annual
Guaranteed Payment divided by the average closing price of AVT Common Stock (as
reported by Nasdaq) for a period of 20 trading days ending on the applicable
Guaranteed Payment Date or, if such Guaranteed Payment Date is not a trading
day, the last trading day prior to such Guaranteed Payment Date (the "Guaranteed
Payment Closing Average"). Notwithstanding anything to the contrary in this
Section 3.3(a), in no event shall the Class A Holder receive more than 100,000
Guaranteed Payment Shares on any Guaranteed Payment Date. In the event that the
value of 100,000 Guaranteed Payment Shares issued on a Guaranteed Payment Date
is not equal to the value of 50% of the Annual Guaranteed Payment on such
Guaranteed Payment Date, AVT shall make up the difference in value (the
"Difference in Value") on subsequent Guaranteed Payment Dates, if any, by
issuing up to the number of shares of AVT Common Stock equal to the Difference
in Value divided by the Guaranteed Payment Closing Average applicable to such
subsequent Guaranteed Payment Date, provided that in no event shall the Class A
Holder be entitled to receive more than 100,000 shares of AVT Common Stock under
this Section 3.3(a) on any Guaranteed Payment Date. AVT shall reduce the cash
portion of the applicable Annual Guaranteed Payment so that such payment shall
not, when taken together with the Class A Cash Consideration, the Class B Cash
Consideration and the cash paid or payable as of such

                                      -6-
<PAGE>

Guaranteed Payment Date under this Section 3.3, constitute more the sixty
percent (60%) of the Merger Consideration.

          (b)  Annual Performance Earn-Out. Additional consideration of up to
               ----------------------------
$1,304,474 (the "Annual Performance Earn-Out") will paid by AVT to the Class A
Holder based on the achievement of specific business objectives, either by the
Class A Holder, AVT or both ("Objectives") for the years ending December 31,
2001, 2002 and 2003 (each, a "Period"). With respect to the Period ending
December 31, 2001, the Objectives are to be negotiated in good faith within 60
days of the Closing Date. The Objectives for the Periods ending December 31,
2002 and 2003 shall be negotiated in good faith by AVT and the Class A Holder
within 60 days after the end of the preceding Period. The portion of the Annual
Performance Earn-Out, if any, earned with respect to each Period (each, a
"Performance Earn-Out Payment") will be payable within 30 days after the end of
the applicable Period. Each Performance Earn-Out Payment, if any, will be
payable 50% in cash and 50% by issuing that number of whole shares of AVT Common
Stock (the "Performance Earn-Out Shares" and, together with the Guaranteed Earn-
Out Shares, the "Earn-Out Shares") equal to 50% of the applicable Performance
Earn-Out Payment divided by the average closing price of AVT Common Stock (as
reported by Nasdaq) for a period of 20 trading days ending on the last trading
day of the applicable Period (the "Performance Earn-Out Closing Average").
Notwithstanding anything to the contrary in this Section 3.3(b), in no event
shall the Class A Holder receive more than 133,333 Performance Earnout Shares
for any Period. AVT shall reduce the cash portion of the applicable Annual
Guaranteed Payment so that such payment shall not, when taken together with the
Class A Cash Consideration, the Class B Cash Consideration and the cash paid or
payable as of the end of the applicable Period under this Section 3.3,
constitute more the sixty percent (60%) of the Merger Consideration.

          (c)  Dispute Resolution. If AVT and the Class Holder are unable to
               -------------------
reach agreement with respect to the Objectives for any Period, the matter shall
be settled by binding arbitration in Seattle, Washington in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect (the "AAA Rules"), conducted by one arbitrator either mutually agreed
             ---------
upon by AVT and the Class A Holder or chosen in accordance with the AAA Rules.
The final decision of the arbitrator shall be furnished to AVT and the Class A
Holder in writing and shall constitute the conclusive determination of the issue
in question binding upon AVT and the Class A Holder and shall not be contested
by either of them. Such decision may be used in a court of law only for the
purpose of seeking enforcement of the arbitrators' decision. All fees and
expenses of the arbitrator shall be paid in accordance with the determination of
the arbitrator.

          (d)  Tax Treatment; Withholding. To the extent that any portion of the
               ---------------------------
Additional Consideration may be treated as compensation for services under
Section 61(a) of the Code, AVT will be entitled to deduct and withhold from the
Additional Consideration such amounts as AVT may be required to deduct and
withhold with respect to the making of such payments under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld, such amounts will be treated for all purposes of this

                                      -7-
<PAGE>

Agreement as having been paid to the Class A Holder in respect of whom such
deduction and withholding were made by AVT.

          (e)  Insurance. In the event of the Class A Holder's death or total
               ----------
disability (as defined below) on or prior to a Guaranteed Payment Date, the
Class A Holder shall not be entitled to any payments under Section 3.3(a) unless
and until: (i) the Class A Holder has obtained a life insurance policy on the
Class A Holder's life (with AVT as the named beneficiary) in the amount of $3.5
million dollars, such policy to be for a term of no less than three years from
the date hereof, and (ii) AVT has obtained disability insurance (with AVT as the
named beneficiary) that is payable in the event of the Class A Holder's total
disability (as defined below), provided that AVT shall make a good faith effort
to obtain such insurance on terms reasonably acceptable to AVT. The term "total
disability" shall have the meaning assigned to such term in the Employment
Agreement.

3.4  No Fractional Shares

     No certificates or scrip representing fractional shares of AVT Common Stock
shall be issued by virtue of the Merger. In lieu thereof, the parties agree that
fractional shares shall be rounded to the nearest whole share (with .5 being
rounded up to the nearest whole share).

                 ARTICLE IV - REPRESENTATIONS AND WARRANTIES
                        OF THE COMPANY AND THE HOLDERS

     The Company and the Holders jointly and severally represent and warrant to
AVT, which representations and warranties will survive the Closing to the extent
provided herein, as follows in this Article IV, except as set forth on a
Schedule referencing the applicable section of this Article including in the
Company Disclosure Memorandum attached hereto as Exhibit D.
                                                 ---------

4.1  Holder Matters

     (a)  Good Title. Each Holder represents with respect to himself only that
          -----------
he owns, beneficially and of record, the shares of common stock of the Company
listed opposite his name on Schedule 4.1(a). Such Company Shares are owned free
and clear of any lien, encumbrance, adverse claim, restriction on sale, transfer
or voting (other than restrictions imposed by applicable securities laws),
preemptive right, option or other right to purchase.

     (b)  Authority. Such Holder has all requisite power, right and authority to
          ----------
enter into this Agreement and the other agreements to be entered into pursuant
hereto (together with the Agreement, the "Transaction Documents"), to consummate
the transactions contemplated hereby and thereby, and to sell and transfer such
Company Shares without the consent or approval of any other person, corporation,
partnership, joint venture, association, organization, other entity or
government or regulatory authority ("Person"). Such Holder has taken, or will
take prior to the Closing, all actions necessary for the authorization,
execution, delivery and performance of this Agreement and the other Transaction
Documents.

                                      -8-
<PAGE>

     (c)  Enforceability. This Agreement has been, and the other Transaction
          ---------------
Documents to which such Holder is a party on the Closing will be, duly executed
and delivered by such Holder, and this Agreement is, and each of the other
Transaction Documents to which such Holder is a party on the Closing will be,
the legal, valid and binding obligation of such Holder, enforceable against such
Holder in accordance with its terms.

     (d)  No Approvals or Notices Required; No Conflicts. The execution,
          -----------------------------------------------
delivery and performance of this Agreement and the other Transaction Documents
by such Holder, and the consummation of the transactions contemplated hereby and
thereby, will not (i) constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of any law or any judgment,
decree, order, regulation or rule of any court, agency or other governmental
authority applicable to such Holder, (ii) require any consent, approval or
authorization of, or declaration, filing or registration with, any Person other
than compliance with applicable securities laws, (iii) result in a default (with
or without the giving of notice or lapse of time, or both) under, acceleration
or termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any agreement, lease, note or other restriction,
encumbrance, obligation or liability to which the Company is a party or by which
it is bound or to which any assets of the Company are subject, or (iv) result in
the creation of any lien or encumbrance upon the assets of such Holder, or upon
any Company Shares or other securities of the Company.

     (e)  Securities Law Representations and Warranties. Such Holder has been
          ----------------------------------------------
advised that the Closing Shares to be issued to such Holder and, with respect to
the Class A Holder, the Earn-Out Shares (together, the "Shares") are not being
registered under the Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws, but are being issued pursuant to exemptions
from such laws, and that AVT's reliance upon such exemptions is predicated in
part on such Holder's representations and warranties contained herein.

          (i)   Purchase Entirely for Own Account. The Shares will be acquired
                ----------------------------------
for investment for such Holder's own account, not as a nominee or agent, and not
with a view to distributing all or any part thereof; such Holder has no present
intention of selling, granting any participation in or otherwise distributing
any of the Shares in a manner contrary to the Act or any applicable state
securities law, and such Holder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person with respect to any of the
Shares.

          (ii)  Access to Information. Such Holder believes he has been given
                ----------------------
access to full and complete information regarding AVT, including, in particular,
the current financial condition of AVT and the risks associated therewith, and
has utilized such access to his satisfaction for the purpose of obtaining
information about AVT; particularly, such Holder has been given reasonable
opportunity to ask questions of, and receive answers from, AVT concerning the
business, properties, prospects and financial condition of AVT and to obtain

                                      -9-
<PAGE>

any additional information, to the extent reasonably available, necessary to
verify the accuracy of information provided to such Holder about AVT. No such
investigation, however, shall limit or qualify the representations and
warranties of AVT in this Agreement.

          (iii)  Sophistication. Such Holder, either alone or with the
                 ---------------
assistance of his professional advisor, is a sophisticated investor, is able to
fend for himself in the transactions contemplated by this Agreement, and has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of an investment in AVT.

          (iv)   Suitability. The investment in the Shares is suitable for such
                 ------------
Holder based upon his investment objectives and financial needs, and such Holder
has adequate net worth and means for providing for his current financial needs
and contingencies and has no need for liquidity of investment with respect to
the Shares. Such Holder's overall commitment to investments that are not readily
marketable is not disproportionate to his net worth, and an investment in the
Shares will not cause such overall commitment to become excessive.

          (v)    Restricted Securities. Such Holder realizes that the Shares
                 ----------------------
have not been registered under the Act, are characterized under the Act as
"restricted securities" and, therefore, cannot be sold or transferred unless
they are subsequently registered under the Act or an exemption from such
registration is available. Holder further realizes that a person who wishes to
sell restricted securities under Rule 144 of the Act must have beneficially
owned the restricted securities for at least one year. If Holder is not a
control person at the time of the sale, or during the preceding three months,
and has owned such restricted securities for at least two years prior to their
sale then, with certain qualifications, Holder may be able to sell such
securities free of all Rule 144 limitations under Rule 144(k).

          (vi)   Residency. Such Holder is a bona fide resident of, or is
                 ----------
domiciled in, the state identified in his address as set forth on Schedule
4.1(e)(vi).

          (vii)  Legends. Such Holder understands that the certificates
                 --------
evidencing the Shares will bear a legend substantially as follows:

     The securities evidenced by this certificate have not been
     registered under the Securities Act of 1933, as amended (the
     "Act") or applicable state securities laws, and no interest may
     be sold, distributed, assigned, offered, pledged or otherwise
     transferred unless (a) there is an effective registration
     statement under the Act and applicable state securities laws
     covering any such transaction involving said securities, (b) this
     corporation receives an opinion of legal counsel for the holder
     of these securities satisfactory to this corporation stating that
     such transaction is exempt from registration, or (c) this
     corporation otherwise satisfies itself that such transaction is
     exempt from registration.

                                      -10-
<PAGE>

          (viii)  Accreditation.  Such Holder is familiar with the term
                  --------------
"accredited investor" and its use in connection with private placements of
securities under applicable securities laws.  Except as set forth on Schedule
4.1(e)(viii), such Holder is an accredited investor as such term is defined in
Rule 501(a) under the Act and as defined pursuant to the provisions of
applicable state securities laws providing for an exemption from registration or
qualification of the issuance of the Shares.

4.2  Company Organization, Good Standing, Power, Etc.

     The Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of Maryland, and has all requisite
corporate power and authority to own, operate and lease its properties and
assets and to carry on its business as now conducted. The Company is duly
qualified and licensed as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of the Company's properties
occupied, owned or held under lease or the nature of the business conducted by
the Company makes such qualification or licensing necessary, except where the
failure to be so qualified or in good standing would not have a material adverse
effect on the Company's business, assets, operations, prospects or condition
(financial or other) (a "Company Material Adverse Effect").  The Company has
full corporate power and authority to enter into this Agreement and the other
Transaction Documents to be entered into pursuant hereto and to carry out the
transactions contemplated hereby and thereby.  This Agreement has been, and each
of the other Transaction Documents to be delivered on the Closing will be, duly
executed and delivered by the Company, and this Agreement is, and each of such
other Transaction Documents to which the Company is a party will be on the
Closing, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and general equitable principles,
including, but not limited to, those relating to the availability of the remedy
of specific performance.

4.3  Capitalization

     The Company's authorized capital stock consists of 5,000 shares of common
stock, without par value, of which (a) 2,000 shares are designated as Class A
Common, of which 50 shares are issued and outstanding and (b) 3000 shares are
designated as Class B Common, of which 61 shares are issued and outstanding.
The Holders are the record and beneficial owners of all of issued and
outstanding Company Shares in the amounts set forth on Schedule 4.1(a).  All
outstanding Company Shares are duly authorized, validly issued, fully paid and
nonassessable and issued in compliance with all applicable federal, state, and
foreign securities laws.  There are no outstanding options, warrants, rights or
agreements of any character that obligate the Company to issue any additional
shares of any of its capital stock or any securities convertible into any shares
of any such capital stock.  There are no voting trusts or other agreements or
understandings to which the Company or the Holders are a party or by which the
Company or the Holders are bound.

                                      -11-
<PAGE>

4.4  Subsidiaries and Affiliates

     The Company does not hold, directly or indirectly, any ownership, equity,
profits or voting interest in, or otherwise control, any corporation, limited
liability company, partnership, joint venture or other entity, and has no
agreement or commitment to purchase any such interest.

4.5  No Approvals or Notices Required; No Conflicts With Instruments

     The execution, delivery and performance of this Agreement and the other
Transaction Documents entered into by the Company pursuant hereto and the
consummation of the transactions contemplated hereby and thereby will not (a)
constitute a material violation (with or without the giving of notice or lapse
of time, or both) of any provision of any law or any judgment, decree, order,
regulation or rule of any court, agency or other governmental authority
applicable to the Company (b) except as set forth on Schedule 4.10, require any
consent, approval or authorization of, or declaration, filing or registration
with, any Person, except for compliance with applicable securities laws (the
consent of all such Persons to be duly obtained by the Company at or prior to
the Closing), (c) result in a default (with or without the giving of notice or
lapse of time, or both) under, or acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or cancel,
any agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Company is a party or by which it is bound or to which
its assets are subject that would have a Company Material Adverse Effect, (d)
result in the creation of any material lien or encumbrance on the Company's
assets or on the Company Shares, (e) conflict with or result in a breach of or
constitute a default under any provision of the Company's Articles of
Incorporation or Bylaws, or (f) invalidate or adversely affect any material
permit, license, authorization or status used in the conduct of the Company's
business.

4.6  Financial Statements; Obligations

     The Company has delivered to AVT (a) unaudited balance sheets and
statements of operations and stockholders' equity of the Company at and for the
fiscal years ended December 31, 1998 and December 31, 1999, (b) unaudited
balance sheets and unaudited statements of operations and stockholders' equity
of the Company at and for the following periods: March 31, 2000, June 30, 2000
and September 30, 2000 and (c) an unaudited balance sheet as of November 30,
2000 (the "November Balance Sheet"). All the foregoing financial statements
(including the notes thereto) are referred to as the "Company Financial
Statements." The Company Financial Statements have been prepared on a basis
consistent with prior accounting periods and fairly present the financial
position, results of operations and changes in financial position of the Company
as of the dates and for the periods indicated. The Company has no material
liabilities or obligations of any nature (absolute, accrued or contingent) that
are not fully reflected or reserved against in the November Balance Sheet except
(i) liabilities or obligations incurred since the date of the November Balance
Sheet in the ordinary course of business and consistent with past practice or
(ii) as

                                      -12-
<PAGE>

specifically set forth on Schedule 4.6. The Company maintains standard systems
of accounting that are adequate for its business. Except as disclosed on
Schedule 4.6, the Company is not a guarantor, indemnitor, surety or other
obligor of any indebtedness of any other Person. Schedule 4.6 sets forth all
promissory notes, loans, lines of credits or similar obligations pursuant to
which the Company is an obligor, together with all the amounts owed by the
Company under such obligations, as of the date hereof. Schedule 4.6 sets forth
all indebtedness and other obligations of the Holders relating to the Company,
together with all the amounts owed by the Holders in respect thereof, as of the
date hereof.

4.7  Absence of Certain Changes or Events

     Except as specifically contemplated by this Agreement, since the date of
the November Balance Sheet neither the Company nor any of its officers or
directors in their representative capacity on behalf of the Company have:

          (a)  received oral or written notice that there has been, will be or
may be a loss of, or contract cancellation by, any current customer, supplier or
licenser of the Company, which loss or cancellation would result in lost annual
revenues to the Company of at least $25,000, or formed the basis for any belief
that there may be such a loss or cancellation;

          (b)  taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business, including any commitments to pay any bonuses in connection with the
transactions contemplated by this Agreement;

          (c)  forgiven or canceled any indebtedness or waived any claims or
rights of material value (including, without limitation, any indebtedness owing
by any stockholder, officer, director or employee of the Company);

          (d)  granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of directors,
officers, employees, or consultants or any increase in the compensation payable
or to become payable to any director, officer, employee or consultant;

          (d)  suffered any material adverse change in its working capital,
assets, liabilities (whether absolute, accrued, contingent or otherwise),
earnings or reserves or in its business, business prospects, operations or
financial condition;

          (e)  borrowed or agreed to borrow any funds, assumed or become subject
to, whether directly or by way of guarantee or otherwise, any obligation or
liability (whether absolute, accrued, contingent or otherwise), or incurred any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
that exceed in the aggregate $10,000 (including obligations or liabilities
arising from one transaction or a series of similar transactions, and all
periodic installments or payments under any lease or other agreement providing
for

                                      -13-
<PAGE>

periodic installments or payments, as a single obligation or liability), except
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice, or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;

          (f)  paid, discharged or satisfied any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the November Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
November Balance Sheet;

          (g)  permitted or allowed any of its property or assets (whether real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge, except for
(i) conditional sales or similar security interests granted in connection with
the purchase of equipment or supplies in the ordinary course of business, (ii)
assessments for current taxes not yet due and payable, (iii) landlord's liens
for rental payments and other lease-related performance incurred in the ordinary
course of business and not yet due and payable, and (iv) mechanics',
materialmen's, carriers' and other similar liens securing indebtedness that is
in the aggregate less than $1,000, was incurred in the ordinary course of
business and is not yet due and payable;

          (h)  written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs that are in the aggregate less than $10,000, and were incurred in the
ordinary course of business and consistent with past practice;

          (i)  sold, transferred or otherwise disposed of any of its properties
or assets (whether real, personal or mixed, tangible or intangible), except in
the ordinary course of business and consistent with past practice;

          (j)  disposed of or permitted to lapse any rights to the use of any
material trademark, trade name, patent or copyright, or disposed of or disclosed
to any Person other than representatives of AVT any material trade secret,
formula, process or know-how not theretofore a matter of public knowledge;

          (k)  made any single capital expenditure or commitment in excess of
$5,000 or made aggregate capital expenditures or commitments in excess of
$10,000 for additions to property, plant, equipment or intangible capital
assets, relating to either purchased or leased assets;

          (l)  made any change in any method of accounting or accounting
practice or internal control procedure;

                                      -14-
<PAGE>

          (m)  issued any capital stock, other securities or options, or
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any Company Shares or other securities of the Company,
or otherwise permitted the withdrawal by the Holders of any cash or other assets
(whether real, personal or mixed, tangible or intangible), in compensation,
indebtedness or otherwise, other than payments of compensation in the ordinary
course of business and consistent with past practice;

          (n)  paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (whether real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any
stockholder or any of its officers, directors, or employees or any affiliate of
any stockholder or any of its officers, directors, or employees other than
ordinary compensation payments in accordance with past practice;

          (o)  received notice of, or otherwise obtained knowledge of: (i) any
claim, action, suit, arbitration, proceeding or investigation involving, pending
against or threatened against the Company or any employee of the Company before
or by any court or governmental or nongovernmental department, commission,
board, bureau, agency or instrumentality, or any other Person; (ii) any valid
basis for any claim, action, suit, arbitration, proceeding, investigation or the
application of any fine or penalty adverse to the Company or any officer or
director of the Company before or by any Person; or (iii) any outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company or
any officer, director or employee of the Company is a party that relate directly
to the transactions contemplated herein or that would have any Company Material
Adverse Effect;

          (p)  entered into or agreed to any sale, assignment, transfer or
license of any patents, trademarks, copyrights, trade secrets or other
intangible assets of the Company to a third party or any amendment or change to
any existing license or other agreement relating to intellectual property;

          (q)  incurred, assumed or guaranteed any indebtedness for borrowed
money other than in the ordinary and usual course of business, consistent with
past practice, and in amounts and on terms consistent with past practice;

          (s)  received notice of, or otherwise obtained knowledge of, any other
event or facts that could result in a material adverse change in the business,
assets, operations, prospects or condition (financial or other) of the Company;
or

          (t)  agreed, whether in writing or otherwise, to take any action
described in this Section 4.7.

4.8  Taxes

     (a)  The Company has duly and timely filed, including valid extensions,
with the appropriate governmental agencies (domestic and foreign) all Tax
Returns (as defined in

                                      -15-
<PAGE>

Section 4.8(m) hereof) for all Taxes (as defined in Section 4.8(l) hereof)
required to have been filed by it with respect to the Company and its business,
which Tax Returns are true, correct and complete. The Company has paid in full
or provided for all Taxes, whether or not reflected on any Tax Return, that are
due or claimed to be due by any governmental agency.

     (b)  The Company and the Holders represent and warrant that (i) no
unresolved claim for assessment or collection of Taxes has been asserted or, to
their knowledge, threatened against the Company, and no audit or investigation
by any governmental authority is under way with respect to Taxes, interest or
other governmental charges; (ii) to their knowledge, no circumstances exist or
have existed that would constitute grounds for assessment against the Company of
any Tax liability with respect to any period for which Tax Returns have been
filed; (iii) the Company has not filed or entered into, nor has the Company been
requested to file or enter into any election, consent or extension agreement or
any waiver that extends any applicable statute of limitations; (iv) any Taxes
incurred by the Company or accrued by it since the date of the November Balance
Sheet have arisen in the ordinary course of business and consistent with past
practice; (v) the Company has not filed any consent to the application of
Section 341(f)(2) of the Code, as amended to any assets held, acquired or to be
acquired by it; (vi) the Company has duly and timely withheld from employee
salaries, wages and other compensation and paid over to the appropriate
governmental authority all amounts required to be so withheld and paid over for
all periods under all applicable laws; and no amounts have been or would be
required to be withheld with respect to the lapse of restrictions on the Company
Shares; (vii) there are no Tax rulings, requests for rulings, or closing
agreements relating to the Company that could affect the liability for Taxes or
the amount of taxable income of the Company for any period (or portion of a
period) after the date hereof; (viii) any adjustment of Taxes of the Company
made by the Internal Revenue Service (the "IRS") in any examination that is
required to be reported to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect thereto
have been paid; and (ix) the Tax Returns of the Company do not contain a
disclosure under Section 6662 of the Code (or any predecessor provision or
comparable provision of state, local or foreign law); or (x) has agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or has notice that a governmental
authority has proposed any such adjustment or change in accounting method.

     (c)  There are no Tax liens on any property or assets of the Company other
than liens for current Taxes not yet payable.

     (d)  No claim has been made by an authority in any jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
taxation by such jurisdiction.

     (e)  The Company has not made any payment or payments, is not obligated to
make any payment or payments, and is not a party to (or participating employer
in) any

                                      -16-
<PAGE>

agreement or Employee Benefit Plan (as defined in Section 4.15) that could
obligate it, the Surviving Corporation or AVT to make any payment or payments
that constitute or will constitute an "excess parachute payment" as defined in
Section 280G of the Code (or any similar provisions of state, local or foreign
law) or that will otherwise not be deductible under Section 162(m) or Section
404 of the Code.

     (f)  The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(2)(i) of the Code.

     (g)  The Company is not a party to any Tax allocation or sharing agreement.

     (h)  The Company (i) is not and has not been a member of an affiliated
group filing a consolidated income Tax Return and (ii) does not have any
liability for Taxes of any person under Treasury Regulations (S) 1.1502-6 (or
any similar provision of state, local or foreign law) as a transferor or
successor by contract or otherwise.

     (i)  There has been no ownership change, as defined in Section 382(g) of
the Code (or any comparable provision of state, local or foreign law), with
respect to the Company during or after any taxable period in which the Company
incurred a net operating loss. Schedule 4.8(i) sets forth the amount of any net
operating loss, net capital loss, net-unrealized built-in loss (as defined under
Section 382 of the Code), unused investment or other credit, unused foreign tax
or excess charitable contribution allocable to the Company.

     (j)  The Company has never claimed or had in effect a valid election under
Section 1362(a) of the Code to be treated as an S corporation within the meaning
of Section 1361(a) of the Code (and any corresponding provisions of all
applicable state and local income tax laws).  Neither the Company nor the
Holders has taken action or failed to take action that could result in the
inaccuracy of the immediately preceding sentence.

     (k)  The Company does not have any unpaid liability for Taxes under
Sections 1363(d), 1374, or 1375 of the Code (or any successor or predecessor
provision) or any similar provision of state or local law for any period on or
prior to or including the Closing Date.

     (l)  "Taxes" shall mean (A) all foreign, federal, state, county or local
taxes, charges, fees, levies, imposts, duties and other assessments, including
any income, alternative minimum or add-on, estimated, gross income, gross
receipts, sales, use, transfer, transactions, intangibles, ad valorem, value-
added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including taxes under Section 59A of the Code)
or windfall profit tax, custom, duty or other tax, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest,
penalties or additions to tax; (B) any liability for payment of amounts
described in clause (A) whether as a result of transferee liability, of

                                      -17-
<PAGE>

being a member of an affiliated, consolidated, combined or unitary group for any
period, or otherwise through operation of law; and (C) any liability for the
payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and "Tax" means any of the
foregoing Taxes.

     (m)  "Tax Returns" means any return, declaration, report, claim for refund,
information return, statement or other similar document, including any schedule
or attachment thereto, and including any amendment thereof required to be filed
with respect to Taxes.

4.9  Property

     (a)  Schedule 4.9(a) contains a complete and accurate list of all real
property that the Company leases, rents or uses (the "Real Property").  The
Company owns no real property other than the leasehold interests described on
Schedule 4.9.  The Company has delivered to AVT true and complete copies of all
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
relating to the Real Property.

     (b)  The Company's leasehold interest in each parcel of Real Property is
free and clear of all liens, mortgages, pledges, deeds of trust, security
interests, conditional sales agreements, charges, encumbrances and other adverse
claims or interests of any kind (each an "Encumbrance").  Each lease of any
portion of the Real Property is valid, binding and enforceable in accordance
with its terms against the parties thereto and, to the knowledge of the Company
and the Holders, against all other Persons with an interest in such Real
Property; the Company has performed all material obligations imposed on it
thereunder; and neither the Company nor, the knowledge of the Company and the
Holders, any other party thereto is in default thereunder nor is there any event
that with the giving of notice or lapse of time, or both, would constitute a
default thereunder.  Except as set forth on Schedule 4.9(b), no consent is
required from any Person under any lease of the Real Property in connection with
the consummation of the transactions contemplated hereby, and the Company has
not received notice that any party to any such lease intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder.  The Company has not granted any lease,
sublease, tenancy or license of, or entered into any rental agreement or
contract of sale with respect to, any portion of the Real Property.

     (c)  Schedule 4.9(c) contains a complete and accurate list of each item of
personal property having a value in excess of $1,000 that is owned, leased,
rented or used by the Company (the "Personal Property"), provided that such list
need not describe the Technology or the IP Rights (as defined in Sections
4.16(b) and 4.16(e), respectively).  The Company has delivered to AVT true and
complete copies of all leases, subleases, rental agreements, contracts of sale,
tenancies or licenses of any portion of the Personal Property.  The Real
Property and the Personal Property include all properties and assets (whether
real, personal or mixed, tangible or intangible) (other than, in the case of the
Personal Property,

                                      -18-
<PAGE>

property rights with an individual value of less than $1,000 and intellectual
property listed or described in Section 4.16) reflected in the November Balance
Sheet and all properties and assets purchased by the Company since the date of
the November Balance Sheet (except for such properties or assets sold since the
date of the November Balance Sheet in the ordinary course of business and
consistent with past practice). The Real Property and the Personal Property
include all property used in the Company's business as presently conducted;
provided, however, that for the Personal Property, this representation is only
made with respect to property having an individual value in excess of $1,000.

     (d)  The plants, structures and Personal Property are in good operating
condition and repair (at a level consistent with industry standards, normal wear
and tear excepted), are adequate for the uses to which they are being put and
comply with material applicable safety and other laws and regulations.

     (e)  Except for (i) assessments for current Taxes not yet due and payable,
(ii) landlord's liens for rental payments and other lease-related performance in
respect of the Real Property incurred in the ordinary course of business and not
yet due and payable, and (iii) mechanics', materialmen's, carriers' and other
similar liens securing indebtedness that is in the aggregate less than $1,000,
was incurred in the ordinary course of business and is not yet due and payable,
the Personal Property is free and clear of all Encumbrances, and, other than
leased Personal Property as noted on Schedule 4.9(e), the Company owns such
Personal Property.

     (f)  Each lease, license, rental agreement, contract of sale or other
agreement to which the Personal Property is subject is valid, binding and
enforceable in accordance with its terms against the parties thereto, the
Company has performed all material obligations imposed on it thereunder and
neither the Company nor, the knowledge of the Company and the Holders, any other
party thereto is in default thereunder, nor is there any event that with the
giving of notice or lapse of time, or both, would constitute a default
thereunder. No consent is required from the owner or lessor under any lease of
Personal Property in connection with the consummation of the transactions
contemplated hereby, and the Company has not received notice that any party to
any such lease, license, rental agreement, contract of sale or other agreement
intends to cancel, terminate or refuse to renew the same or to exercise or
decline to exercise any option or other right thereunder. The Company has not
granted any leases, subleases, tenancies or licenses of any portion of the
Personal Property.

     (g)  Neither the whole nor any portion of the leaseholds or any other
assets or property of the Company is subject to any currently outstanding
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor nor, the knowledge of the Company and the Holders, has any such
condemnation, expropriation or taking been proposed.

                                      -19-
<PAGE>

4.10 Contracts

     Schedule 4.10 contains a complete and accurate list of all material
contracts, oral or written, to which the Company is a party or by which the
Company is bound, including, without limitation, security agreements, license
agreements, credit agreements, instruments relating to the borrowing of money,
purchase contracts, sale contracts and broker or distributorship agreements;
provided, however, that Schedule 4.10 need not include purchase orders received
by the Company from its customers or issued by the Company to its suppliers and
vendors in the ordinary course of business involving less than $10,000. Except
as set forth on Schedule 4.10, all contracts set forth in such Schedule are
valid, binding and enforceable in accordance with their terms against each party
thereto and are in full force and effect; the Company has performed all material
obligations imposed on it thereunder; and neither the Company nor, to the
knowledge of the Company or the Holders, any other party thereto is in default
thereunder, nor is there any event that with the giving of notice or lapse of
time, or both, would constitute a default thereunder. True and complete copies
of each such contract or, in the case of oral contacts, written summaries
thereof, have been delivered to AVT. Except as set forth on Schedule 4.10, the
Company does not have, is not a party to nor is it bound by:

          (a)  any collective bargaining agreements,

          (b)  any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations,

          (c)  any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,

          (d)  any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or any consulting or
sales agreement, contract or commitment under which any firm or other
organization provides services to the Company,

          (e)  any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,

          (f)  any fidelity or surety bond or completion bond,

          (g)  any lease of personal property having a value individually in
excess of $10,000,

          (h)  any agreement of indemnification or guaranty,

                                      -20-
<PAGE>

          (i)  any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business anywhere
in the world or to compete with any person,

          (j)  any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000,

          (k)  any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's business,

          (l)  any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (h) hereof,

          (m)  any purchase order or contract for the purchase of raw materials
involving $10,000 or more,

          (n)  any construction contracts,

          (o)  any distribution, joint marketing or development agreement,

          (p)  any agreement pursuant to which the Company has granted or may
grant in the future, to any party, a source-code license or option or other
right to use or acquire source-code,

          (q)  any noncompetition or nonsolicitation agreement with any employee
or other third party, or

          (r)  any other agreement, contract or commitment that involves $25,000
or more or is not cancelable without penalty within thirty (30) days.

      Except as set forth on Schedule 4.10, no consent is required from any
Person under any contract, agreement, arrangement or understanding set forth on
Schedule 4.10 in connection with the consummation of the transactions
contemplated by this Agreement, and the Company has not received notice, and is
not otherwise aware, that any party to any such contract, agreement, arrangement
or understanding intends to cancel, terminate or refuse to renew such contract,
agreement, arrangement or understanding or to exercise or decline to exercise
any option or right thereunder.

4.11  Customers and Suppliers

      Schedule 4.11 sets forth (a) a list of the Company's customers which
accounted for, directly or indirectly, 2% or more of the Company's sales during
the fiscal year ended December 31, 1999 and the eleven months ended November 30,
2000, showing the

                                      -21-
<PAGE>

approximate total sales by the Company to each such customer during such
periods, and (b) a current list of the Company's suppliers from whom the Company
purchased more than 5% of its goods and services during the fiscal year ended
December 31, 1999 and the eleven months ended November 30, 2000. The Company has
no basis to expect any material modification to its relationship with any
customer or supplier listed on Schedule 4.11.

4.12  Orders, Commitments and Returns

      The Company's total backlog of orders (including all accepted and
unfulfilled sales orders) as of the date hereof was not materially less than the
amount set forth on Schedule 4.12, and the aggregate of all purchase orders
issued by the Company (which include all contracts or commitments for the
purchase by the Company of materials or other supplies) at such date was not
substantially more than the amount set forth on Schedule 4.12.  All such sales
and purchase commitments were made in the ordinary course of business.

      Schedule 4.12 sets forth the Company's warranties currently made with
respect to its business, products and services, and current policies with
respect to returns of products in the course of the Company's conduct of the
business.  As of the date hereof, there are no outstanding claims against the
Company to return in excess of an aggregate of $10,000 of merchandise by reason
of alleged overshipments, defective merchandise, missed delivery dates,
incorrect quantities or otherwise, or of merchandise in the hands of customers
under an understanding that such merchandise would be returnable.

4.13  Claims and Legal Proceedings

      There are no pending claims, actions, suits, arbitrations, proceedings or
investigations involving or, to the knowledge of the Company and the Holders,
threatened against, the Company before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person.  To the knowledge of the Company and the
Holders, there is no valid basis for any claim, action, suit, arbitration,
proceeding or investigation materially adverse to the Company's business,
business prospects, assets, operations or condition (financial or other) before
or by any Person.  There are no outstanding or unsatisfied judgments, orders,
decrees or stipulations to which the Company is a party that involve the
transactions contemplated hereby or that would have a Company Material Adverse
Effect.

4.14  Labor Matters

      There are no labor disputes, employee grievances or disciplinary actions
pending or, to the knowledge of the Company and the Holders, threatened
involving the Company or any of its present or former employees.  The Company
has complied with all material provisions of law relating to employment and
employment practices, terms and conditions of employment, wages and hours.  The
Company is not engaged in any unfair labor practice and has no material
liability for any arrears of wages or Taxes or penalties for failure to comply
with any such provisions of law.  There is no labor strike, dispute, slowdown or
stoppage

                                      -22-
<PAGE>

pending or, to the knowledge of the Company and the Holders, threatened against
or affecting the Company, and the Company has not experienced any work stoppage
or other material labor difficulty. No collective bargaining agreement is
binding on the Company. The Holders and the Company have no knowledge of any
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company, and the Company has not
been requested by any group of employees or others to enter into any collective
bargaining agreement or other agreement with any labor union or other employee
organization. Each current and former employee who was employed by the Company
at any time during the four year preceding the Closing Date, officer of, and
consultant to, the Company has executed a nondisclosure agreement in the form
provided to AVT. To the knowledge of the Company and the Holders, no employee
(or person performing similar functions) of the Company is in violation of any
such agreement or any employment agreement, noncompetition agreement, patent
disclosure agreement, invention assignment agreement, proprietary information
agreement or other contract or agreement relating to the relationship of such
employee with the Company or any other party.

4.15  Employee Benefit Plans

      (a) As used in this Agreement, the following terms shall have the
following meanings:

          (i)    "COBRA" means the health care continuation provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (as set forth
in Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code).

          (ii)   "DOL" means the United States Department of Labor.

          (iii)  "Employee Benefit Plan" means any retirement, pension, profit
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit or other employee
benefit plan, fund, policy, program, contract, arrangement or payroll practice
(including any "employee benefit plan," as defined in Section 3(3) of ERISA) or
any employment, consulting or personal services contract, whether written or
oral, qualified or nonqualified, funded or unfunded, or domestic or foreign, (A)
sponsored, maintained or contributed to by the Company or to which the Company
is a party, (B) covering or benefiting any current or former officer, employee,
agent, director or independent contractor of the Company (or any dependent or
beneficiary of any such individual), or (C) with respect to which the Company
has (or could have) any obligation or liability.

          (iv)   "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

                                      -23-
<PAGE>

          (v)    "HIPAA" means the Health Insurance Portability and
Accountability Act of 1997, as amended.

     (b)  Schedule 4.15 contains a complete and accurate list of all Employee
Benefit Plans. The Company does not have any agreement, arrangement, commitment
or obligation, whether formal or informal, whether written or unwritten and
whether legally binding or not, to create, enter into or contribute to any
additional Employee Benefit Plan, or to modify or amend any existing Employee
Benefit Plan. There has been no amendment, interpretation or other announcement
(written or oral) by the Company or any other Person relating to, or change in
participation or coverage under, any Employee Benefit Plan that, either alone or
together with other such items or events, could materially increase the expense
of maintaining such Employee Benefit Plan (or the Employee Benefit Plans taken
as a whole) above the level of expense incurred with respect thereto for the
most recent fiscal year included in the Company Financial Statements. The terms
of each Employee Benefit Plan permit the Company to amend or terminate such
Employee Benefit Plan at any time and for any reason without penalty and without
material liability or expense. None of the rights of the Company under any
Employee Benefit Plan will be impaired in any way by this Agreement or the
consummation of the transactions contemplated by this Agreement.

     (c)  The Company has delivered to AVT true, correct and complete copies
(or, in the case of unwritten Employee Benefit Plans, descriptions) of all
Employee Benefit Plans (and all amendments thereto), along with, to the extent
applicable to the particular Employee Benefit Plan, copies of the following: (i)
the last three annual reports (Form 5500 series) filed with respect to such
Employee Benefit Plan; (ii) all summary plan descriptions, summaries of material
modifications and all employee manuals or communications filed or distributed
with respect to such Employee Benefit Plan during the last three years; (iii)
all contracts and agreements (and any amendments thereto) relating to such
Employee Benefit Plan, including, without limitation, trust agreements,
investment management agreements, annuity contracts, insurance contracts, bonds,
indemnification agreements and service provider agreements; (iv) the most recent
determination letter issued by the IRS with respect to such Employee Benefit
Plan; (v) all written communications relating to the amendment, creation or
termination of such Employee Benefit Plan, or an increase or decrease in
benefits, acceleration of payments or vesting or other events that could result
in liability to the Company since the date of the most recently completed and
filed annual report; (vi) all correspondence to or from any governmental entity
or agency relating to such Employee Benefit Plan; (vii) samples of all
administrative forms currently in use, including, without limitation, all COBRA
and HIPAA forms and notices; (viii) all coverage, nondiscrimination, top heavy
and Code Section 415 tests performed with respect to such Employee Benefit Plan
for the last three years; and (ix) the most recent registration statement,
annual report (Form 11-K) and prospectus prepared in connection with such
Employee Benefit Plan.

     (d)  With respect to each Employee Benefit Plan: (i) such Employee Benefit
Plan is, and at all times since inception has been, maintained, administered,
operated and funded in all respects in accordance with its terms and in
compliance with all applicable requirements

                                      -24-
<PAGE>

of all applicable laws, statutes, orders, rules and regulations, including,
without limitation, ERISA, COBRA, HIPAA and the Code; (ii) the Company and all
other Persons (including, without limitation, all fiduciaries) have, at all
times, properly performed all of their duties and obligations under or with
respect to such Employee Benefit Plan (whether such duties and obligations arise
by operation of law or by contract), including, without limitation, all
reporting, disclosure and notification obligations; (iii) all Returns and other
information relating to such Employee Benefit Plan required to be filed with any
governmental entity or agency have been accurately completed and timely and
properly filed; (iv) all notices, statements, reports and other disclosure
required to be given or made to participants in such Employee Benefit Plan or
their beneficiaries have been accurately completed and timely and properly
disclosed or provided; (v) neither the Company nor any fiduciary of such
Employee Benefit Plan has engaged in any transaction or acted or failed to act
in a manner that violates the fiduciary requirements of ERISA or any other
applicable law; (vi) no transaction or event has occurred or is threatened or
about to occur (including any of the transactions contemplated in or by this
Agreement) that constitutes or could constitute a prohibited transaction under
Section 406 or 407 of ERISA or under Section 4975 of the Code for which an
exemption is not available; and (vii) the Company has not incurred, and there
exists no condition or set of circumstances in connection with which the
Company, the Surviving Corporation or AVT could incur, directly or indirectly,
any material liability or expense (except for routine contributions and benefit
payments) under ERISA, the Code or any other applicable law, statute, order,
rule or regulation, or pursuant to any indemnification or similar agreement,
with respect to such Employee Benefit Plan.

     (e)  Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is, and at all times since inception has been, so
qualified and its related trust is, and at all times since inception has been,
exempt from taxation under Section 501(a) of the Code.  Each such Employee
Benefit Plan either (i) is the subject of an unrevoked favorable determination
letter from the IRS with respect to such Employee Benefit Plan's qualified
status under the Code, as amended by the Tax Reform Act of 1986 and all
subsequent legislation, or (ii) has remaining a period of time under the Code or
applicable Treasury regulations or IRS pronouncements in which to apply to the
IRS for such a letter and to make any amendments necessary to obtain such a
letter from the IRS.  No fact exists or is reasonably expected by the Company or
either of the Sellers to arise, that could adversely affect the qualification or
exemption of any such Employee Benefit Plan or its related trust.  No such
Employee Benefit Plan is a "top-heavy plan," as defined in Section 416 of the
Code.

     (f)  All contributions, premiums and other payments due or required to be
paid to (or with respect to) each Employee Benefit Plan have been timely paid,
or, if not yet due, have been accrued as a liability on the November Balance
Sheet.  All income taxes and wage taxes that are required by law to be withheld
from benefits derived under the Employee Benefit Plans have been properly
withheld and remitted to the proper depository.

                                      -25-
<PAGE>

     (g)  The Company is not, and has never been, a member of (i) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (ii) a
group of trades or businesses under common control, within the meaning of
Section  414(c) of the Code, (iii) an affiliated service group, within the
meaning of Section 414(m) of the Code, or (iv) any other group of Persons
treated as a single employer under Section 414(o) of the Code.

     (h)  The Company does not maintain or contribute to, and has never
maintained or contributed to (or been obligated to contribute to), (i) a
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA or
414(f) of the Code, (ii) a multiple employer plan within the meaning of Section
4063 or 4064 of ERISA or Section 413(c) of the Code, (iii) an employee benefit
plan, fund, program, contract or arrangement that is subject to Section 412 of
the Code, Section 302 of ERISA or Title IV of ERISA, or (iv) a multiple employer
welfare arrangement as defined in Section 3(40) of ERISA.

     (i)  Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company, other than (i)
continuation coverage mandated by Sections 601 through 608 of ERISA and Section
4980B(f) of the Code, (ii) retirement benefits under any Employee Benefit Plan
that is qualified under Section 401(a) of the Code, and (iii) deferred
compensation that is accrued as a current liability on the November Balance
Sheet.

     (j)  There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company or either of the Holders,
threatened with respect to (or against the assets of) any Employee Benefit Plan,
nor, to the knowledge of the Company or either of the Holders, is there a basis
for any such action, suit or claim.  No Employee Benefit Plan is currently under
investigation, audit or review, directly or indirectly, by the IRS, the DOL or
any other governmental entity or agency, and, to the knowledge of the Company
and each of the Holders, no such action is contemplated or under consideration
by the IRS, the DOL or any other governmental entity or agency.

     (k)  Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement, will (i)
entitle any individual to severance pay, unemployment compensation or any other
payment from the Company, the Surviving Corporation, AVT or any Employee Benefit
Plan, (ii) otherwise increase the amount of compensation due to any individual,
(iii) result in any benefit or right becoming established or increased, or
accelerate the time of payment or vesting of any benefit, under any Employee
Benefit Plan, or (iv) require the Company, the Surviving Corporation or AVT to
transfer or set aside any assets to fund or otherwise provide for any benefits
for any individual.

4.16  Intellectual Property

      (a)  General.  The Company owns or is licensed and has all rights in and
           --------
to the following as required to conduct its business as now conducted and as
proposed to be

                                      -26-
<PAGE>

conducted: (i) all products, tools, computer programs, specifications, source
code, object code, graphics, devices, techniques, algorithms, methods,
processes, procedures, packaging, trade dress, formulae, drawings, designs,
improvements, discoveries, concepts, user interfaces, software, "look and feel,"
development and other tools, content, inventions (whether or not patentable or
copyrightable and whether or not reduced to practice), designs, logos, themes,
know-how, concepts and other technology that are now, or during the two years
prior to the date of this Agreement have been, or currently are proposed to be,
developed, produced, used, marketed or sold by the Company (collectively, the
"Technology-Related Assets"); and (ii) all intellectual property and other
proprietary rights in the Technology-Related Assets, including, without
limitation, all trade names, trademarks, domain names, service marks, logos,
brand names and other identifiers, trade secrets, copyrights and domestic and
foreign letters patent, and the registrations, applications, renewals,
extensions and continuations (in whole or in part) thereof, all goodwill
associated therewith and all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated
therewith.

     (b)  Company Technology.  Schedule 4.16(b) sets forth a list of all
          -------------------
products and tools developed, produced, used, marketed or sold by the Company
during the two years prior to the date of this Agreement, together with all
prior versions, predecessors or precursors to such products or tools
(collectively, the "Products"). Except for the Third Party Technologies (as
defined in Section 4.16(c)), the Company owns all right, title and interest in
and to the following (collectively, the "Technology"), free and clear of all
Encumbrances: (i) the Products, together with any and all codes, techniques,
software tools, formats, designs, user interfaces, content and "look and feel"
related thereto; (ii) any and all updates, enhancements, corrections,
modifications, improvements and new releases related to the items set forth in
clause (i) above; (iii) any and all technology and work in progress related to
the items set forth in clauses (i) and (ii) above; and (iv) all inventions,
discoveries, processes, designs, trade secrets, know-how and other confidential
or proprietary information related to the items set forth in clauses (i), (ii),
and (iii) above. The Technology, excluding the Third Party Technologies (as
defined below), is sometimes referred to herein as the "Company Technology."

     (c)  Third Party Technology.  Schedule 4.16(c) sets forth a list of all
          -----------------------
Technology used in the Company's business for which the Company does not own all
right, title and interest (collectively, the "Third Party Technologies"), and
all license agreements or other contracts pursuant to which the Company has the
right to use (in the manner used by the Company, or intended or necessary for
use with the Company Technology) the Third Party Technologies (the "Third Party
Licenses"), indicating, with respect to each of the Third Party Technologies
listed therein, the owner thereof and the Third Party License applicable
thereto.  The Company has the lawful right to use (free of any material
restriction not expressly set forth in the Third Party Licenses) (i) all Third
Party Technology that is incorporated in or used in the development or
production of the Company Technology and (ii) all other Third Party Technology
necessary for the conduct of the Company's business as now conducted and as
proposed to be conducted in any written materials furnished by the Company to
AVT.  All

                                      -27-
<PAGE>

Third Party Licenses are valid, binding and in full force and effect, the
Company and, to the knowledge of the Company and the Holders, each other party
thereto have performed in all material respects their obligations thereunder,
and neither the Company nor, to the knowledge of the Company and the Holders,
any other party thereto is in default thereunder, nor to the knowledge of the
Company and the Holders has there occurred any event or circumstance that with
notice or lapse of time or both would constitute a default or event of default
on the part of the Company or, to the knowledge of the Company and the Holders,
any other party thereto or give to any other party thereto the right to
terminate or modify any Third Party License. The Company has not received notice
that any party to any Third Party License intends to cancel, terminate or refuse
to renew (if renewable) such Third Party License or to exercise or decline to
exercise any option or right thereunder.

     (d)  Trademarks.  Schedule 4.16(d) sets forth a list of all trademarks,
          -----------
trade names, brand names, service marks, logos or other identifiers for the
Products or otherwise used by the Company in its business (the "Marks").  The
Company has full legal and beneficial ownership, free and clear of any
Encumbrances, of all rights conferred by use of the Marks in connection with the
Products or otherwise in the Company's business and, as to those Marks that have
been registered in the United States Patent and Trademark Office, by federal
registration of the Marks.

     (e)  Intellectual Property Rights. Schedule 4.16(e) sets forth all patents,
          -----------------------------
patent applications, copyright registrations (and applications therefor) and
trademark registrations (and applications therefor) (collectively, the "IP
Registrations") associated with the Company Technology and the Marks.  The
Company owns all right, title and interest, free and clear of any Encumbrances,
in and to the IP Registrations, together with any other rights in or to any
copyrights (registered or unregistered), rights in the Marks (registered or
unregistered), trade secret rights and other intellectual property rights
(including, without limitation, rights of enforcement) contained or embodied in
the Company Technology and the Marks (collectively, the "IP Rights").

     (f)  Maintenance of Rights.  The Company has not conducted its business,
          ----------------------
and has not used or enforced (or, to the knowledge of the Company or the
Holders, failed to use or enforce) the IP Rights, in a manner that would result
in the abandonment, cancellation or unenforceability of any item of the IP
Rights or the IP Registrations, and the Company has not taken (or, to the
knowledge of the Company and the Holders, failed to take) any action that would
result in the forfeiture or relinquishment of any IP Rights or IP Registrations,
in each case where such abandonment, cancellation, unenforceability, forfeiture
or relinquishment would have a Company Material Adverse Effect. Except as set
forth in Schedule 4.16(f), the Company has not granted to any third party any
rights or permissions to use any of the Technology or the IP Rights. To the best
of the Company's knowledge, except pursuant to reasonably prudent safeguards,
(i) no third party has received any confidential information relating to the
Technology or the IP Rights and (ii) the Company is not under any contractual or
other obligation to disclose to any third party any Company Technology.

                                      -28-
<PAGE>

     (g)  Third Party Claims.  (i) The Company has not received any notice or
          -------------------
claim (whether written, oral or otherwise) challenging the Company's ownership
or rights in the Company Technology or the IP Rights or claiming that any other
person or entity has any legal or beneficial ownership with respect thereto;
(ii) all the IP Rights are legally valid and enforceable without any material
qualification, limitation or restriction on their use, and the Company has not
received any notice or claim (whether written, oral or otherwise) challenging
the validity or enforceability of any of the IP Rights; and (iii) to the
knowledge of the Company and the Holders, no other person or entity is
infringing or misappropriating any part of the IP Rights or otherwise making any
unauthorized use of the Company Technology.

     (h)  Infringement by the Company.  (i) The use of any of the Technology in
          ----------------------------
the Company's business does not and will not infringe, violate or interfere with
or constitute an appropriation of any right, title or interest (including,
without limitation, any patent, copyright or trade secret right) held by any
other person or entity, and there have been no claims made with respect thereto;
(ii) the use of any of the Marks and other IP Rights in the Company's business
will not infringe, violate or interfere with or constitute an appropriation of
any right, title or interest (including, without limitation, any patent,
copyright, trademark or trade secret right) held by any other person or entity,
and there have been no claims made with respect thereto; and (iii) the Company
has not received any notice or claim (whether written, oral or otherwise)
regarding any infringement, misappropriation, misuse, abuse or other
interference with any third party intellectual property or proprietary rights
(including, without limitation, infringement of any patent, copyright, trademark
or trade secret right of any third party) by the Company, the Technology or the
Marks or other IP Rights, or claiming that any other entity has any claim of
infringement with respect thereto.

     (i)  Confidentiality.  (i) The Company has not disclosed any source code
          ----------------
regarding the Technology to any person or entity other than an employee of the
Company who is under a written nondisclosure agreement; (ii) the Company has at
all times maintained and diligently enforced commercially reasonable procedures
to protect all confidential information relating to the Technology; (iii)
neither the Company nor any escrow agent is under any contractual or other
obligation to disclose the source code or any other proprietary information
included in or relating to the Technology; and (iv) the Company has not
deposited any source code relating to the Technology into any source code
escrows or similar arrangements.  If, as disclosed on Schedule 4.16(i) the
Company has deposited any source code to the Technology into source code escrows
or similar arrangements, no event has occurred that has or could reasonably form
the basis for a release of such source code from such escrows or arrangements.

     (j)  Warranty Against Defects.  The Technology is free from known material
          -------------------------
defects and substantially conforms to the applicable specifications,
documentation and samples of such Technology.

     (k)  Domain Names.  Schedule 4.16(k) sets forth a list of all Internet
          -------------
domain names used by the Company in its business (collectively, the "Domain
Names").  The

                                      -29-
<PAGE>

Company has, and after the Closing the Surviving Corporation will have, a valid
registration and all material rights (free of any material restriction) in and
to the Domain Names, including, without limitation, all rights necessary to
continue to conduct the Company's business as it is currently conducted.

     (l)  Year 2000.  Each hardware, software and firmware product used by the
          ----------
Company in its business (collectively, the "Software") will accurately process
date data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including,
without limitation, leap year calculations, without a decrease in the
functionality of the Software.  The Software is designed to be used prior to,
during and after the calendar year 2000 A.D. and will operate during each such
time period without error relating to date data, specifically including any
error relating to, or the product of, date data that represents or references
different centuries or more than one century.  Without limiting the generality
of the foregoing, the Software (i) will not abnormally end or provide invalid or
incorrect results as a result of date data, specifically including date data
that represents or references different centuries or more than one century; (ii)
has been designed to ensure year 2000 compatibility, including, but not limited
to, date data century recognition, calculations that accommodate same century
and multi-century formulas and date values, and date data interface values that
reflect the century; and (iii) includes "Year 2000 Capabilities," meaning that
the Software (A) will manage and manipulate data involving dates, including
single century formulas and multicentury formulas, and will not cause an
abnormally ending scenario within the application or generate incorrect values
or invalid results involving such dates; (B) provides that all date-related user
interface functionalities and data fields include the indication of century; and
(C) provides that all date-related data interface functionalities include the
indication of century.

     (m)  Indemnification.  The Company has not entered into any agreement or
          ----------------
offered to indemnify any Person against any charge of infringement by the
Technology or IP Rights, or any other intellectual property or right.  The
Company has not entered into any agreement granting any Person the right to
bring any infringement action with respect to, or otherwise to enforce, any of
the Technology or IP Rights.

     (n)  Restrictions on Intellectual Property.  None of the Company's
          --------------------------------------
officers, employees, consultants, distributors, agents, representatives or
advisors has entered into any agreement relating to the Company's business
regarding know-how, trade secrets, assignment of rights in inventions, or
prohibition or restriction of competition or solicitation of customers, or any
other similar restrictive agreement or covenant, whether written or oral, with
any Person other than the Company.

4.17 Accounts Receivable

     All accounts receivable of the Company reflected in the Company Balance
Sheet, or existing at the Closing, represent sales actually made in the ordinary
course of business.  The Company's bad debt reserves and sales return allowances
as reflected in the November

                                      -30-
<PAGE>

Balance Sheet are adequate. Set forth on Schedule 4.17 is a full and complete
list of all accounts receivable of the Company existing as of November 30, 2000.
In addition, a current complete list of all accounts receivable of the Company
will be delivered to AVT immediately prior to the Closing. All accounts existing
and remaining unpaid at the time of Closing will be collectible by AVT or
Acquisition Sub, as the case may be, in the ordinary course of business
consistent with past practice.

4.18  Inventory

      Subject to such reserves and write-downs as may be reflected in the
Company Financial Statements, all items of inventory reflected in the November
Balance Sheet or as currently owned by the Company are of a quality and quantity
usable and salable in the ordinary course of business. Such inventory consists
of materials and supplies used or sold in the Company's business.

4.19  Corporate Books and Records

      The Company has furnished to AVT or its representatives for their
examination true and complete copies of its (a) Articles of Incorporation and
Bylaws, including all amendments thereto, (b) minute books, and (c) stock
transfer books.  Such minutes reflect all meetings of the Company's
stockholders, Board of Directors and any committees thereof since the Company's
inception, and such minutes accurately reflect the events of and actions taken
at such meetings.  Such stock transfer books accurately reflect all issuances
and transfers of shares of capital stock of the Company since its inception.

4.20  Licenses, Permits, Authorizations, Etc.

      The Company has received all currently required governmental approvals,
authorizations, consents, licenses, orders, registrations and permits of all
agencies, whether federal, state, local or foreign, the failure to obtain which
might, in the aggregate, have a Company Material Adverse Effect.  The Company
has not received any notifications of any asserted present failure by it to have
obtained any such governmental approval, authorization, consent, license, order,
registration or permit, or past and unremedied failure to obtain such items.

4.21  Compliance With Laws; Environmental Matters

      (a)  The Company is and has been in compliance with all federal, state,
local and foreign laws, rules, regulations, ordinances, decrees and orders
applicable to the operation of its business, to its employees, or to its
property, including, without limitation, all such laws, rules, ordinances,
decrees and orders relating to antitrust, consumer protection, currency
exchange, environmental protection, equal opportunity, health, occupational
safety, good laboratory practices, pension, securities and trading-with-the-
enemy matters.  The Company has not received any notification of any asserted
present or past unremedied failure by the Company to comply with any of such
laws, rules, ordinances, decrees or orders.

                                      -31-
<PAGE>

     (b)  To the knowledge of the Company and/or the Holders, the Company is not
in violation of, and has not violated, in connection with the ownership, use,
maintenance or operation of the Real Property or the Personal Property or the
conduct of its business, any applicable foreign, federal, state, county and
local statutes, laws, regulations, guidances, rules, ordinances, codes,
licenses, permits, judgments, writs, decrees, injunctions or orders of any
governmental entity relating to environmental (air, water, groundwater, soil,
natural resource, noise and odor) matters, including, by way of illustration and
not by way of limitation, the Clean Air Act, the Federal Water Pollution Control
Act, the Resource Conservation and Recovery Act and the regulations issued
thereunder, the Comprehensive Environmental, Response, Compensation, and
Liability Act, the Clean Water Act, the Hazardous Materials Transportation Act,
the Toxic Substances Control Act, the Hazardous Waste Control Act, the Model
Toxics Control Act and other comparable federal, state and local laws, and the
regulations issued thereunder (collectively, "Environmental Laws").

     (c)  To the knowledge of the Company and/or the Holders, the Company has
not transported, stored, treated, recycled, handled or disposed of, or allowed
or arranged for any third party to transport, store, treat, recycle, handle or
dispose of (i) any flammable substances, explosives, radioactive materials,
hazardous substances, hazardous wastes, toxic substances, pollutants,
contaminants or any wastes, materials or substances identified in or regulated
by any Environmental Laws; (ii) asbestos, polychlorinated biphenyls, urea
formaldehyde, nuclear fuel or material, chemical waste, carcinogens and radon,
all to the extent regulated by any Environmental Laws; and (iii) gasoline, oil
and other petroleum products (all of the foregoing collectively, "Regulated
Substances"), to or at any location in violation of any Environmental Laws.

     (d)  To the knowledge of the Company and/or the Holders, no part of the
Real Property, including, but not limited to, all surface and subsurface soil,
sediments, groundwater and surface water located on, in or under the Real
Property, was or is contaminated with any Regulated Substances or constituents
thereof, which contamination has given or may give rise to any obligation of the
Company under any applicable Environmental Laws, the common law or otherwise. To
the knowledge of the Company and/or the Holders, no real property adjacent to or
adjoining the Real Property has been or is being so contaminated. There are no
Regulated Substances (other than gasoline, oil or other petroleum products as
described on Disclosure Schedule 4.21(d)) present in or on the Real Property or
in any equipment located therein.

     (e)  The Company has reported, recorded or filed, and has provided to AVT,
true, accurate and complete copies of all reports with respect to any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment (including the
abandonment or discarding of drums, barrels, containers or other closed
receptacles) (any of the foregoing, a "Release"), required by applicable
Environmental Laws to be filed by the Company with any government authority.
The Company has maintained all environmental and operating documents and records
in the manner and for the time periods required by applicable Environmental
Laws.

                                      -32-
<PAGE>

      (f)  The Company has not caused or permitted the Release of any Regulated
Substances or constituents thereof on, from or off-site of its Real Property, or
of any Release from any facility owned or operated by third parties but with
respect to which the Company is alleged to have liability, including, but not
limited to, liability for personal injury, cleanup or restoration, which Release
caused or could reasonably be Expected to cause a material loss to the Company.

      (g)  To the knowledge of the Company and/or the Holders, there are no
tanks which, when considered with all associated piping, are underground storage
tanks located either wholly or partially below the surface of the ground, and,
without regard to whether they are in contact with soil, within a building or
containment structure or otherwise are located in, on or under the Real
Property.

      (h)  The manner in which the Company has manufactured, packaged, shipped,
advertised, labeled and sold its products complies with all applicable laws and
regulations pertaining thereto, the failure to comply with which would have a
Company Material Adverse Effect.

4.22  Insurance

      Schedule 4.22 sets forth a true and correct list of all insurance policies
maintained by the Company.  The Company maintains (a) insurance on all of its
property (including leased premises) that insures against loss or damage by fire
or other casualty (including extended coverage) and (b) insurance against
liabilities, claims and risks of a nature and in such amounts as are normal and
customary in the Company's industry.  All insurance policies of the Company are
in full force and effect, all premiums covering all periods up to and including
the Closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy or binder.  Such policies or
binders are sufficient for compliance with all requirements of law currently
applicable to the Company and of all agreements to which the Company is a party,
will remain in full force and effect through the respective expiration dates of
such policies or binders without the payment of additional premiums, and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.  The Company has not been refused
any insurance with respect to its respective assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance.

4.23  Brokers and Finders

      The Company represents and warrants that no director, officer, agent or
employee acting on its behalf or on behalf of the Holders has retained any
broker or finder in connection with the transactions contemplated hereby.

                                      -33-
<PAGE>

4.24  Government Contracts

      The Company has never been suspended or debarred from bidding on contracts
or subcontracts for any agency of the U.S. government or any foreign government,
nor has such suspension or debarment been threatened or action for suspension or
debarment been commenced.  The Company has not been nor is it now being audited
or, to its knowledge, investigated by the United States Government Accounting
Office, the United States Department of Justice, the United States Department of
Defense or any of its agencies, the Defense Contract Audit Agency or the
inspector general or other authorities of any agency of the U.S. government or
any foreign government (each, a "Government Contract Authority"), nor, to the
knowledge of the Company and Holders, has such audit or investigation been
threatened.  To the knowledge of the Company and the Holders, there is no valid
basis for the Company's suspension or debarment from bidding on contracts or
subcontracts for any agency of the U.S. government, and there is no valid basis
for a claim pursuant to an audit or investigation by any Government Contract
Authority.  The Company has never had a contract or subcontract terminated for
default or been determined to be nonresponsible by any agency of the U.S.
government or any foreign government.  The Company has no outstanding
agreements, contracts or commitments that require it to obtain or maintain a
government security clearance.

4.25  Absence of Questionable Payments

      Neither the Company nor any director, officer, agent, employee or other
Person acting on its behalf has to the knowledge of the Company and the Holders
used any Company funds for improper or unlawful contributions, payments, gifts
or entertainment, or made any improper or unlawful expenditures relating to
political activity to government officials or others.  The Company has adequate
financial controls to prevent such improper or unlawful contributions, payments,
gifts, entertainment or expenditures.  Neither the Company nor any current
director, officer, agent, employee or other Person acting on its behalf has
accepted or received any improper or unlawful contributions, payments, gifts or
expenditures.  The Company has at all times complied, and is in compliance in
all respects, with the applicable provisions of the U.S. Foreign Corrupt
Practices Act, as amended, and other applicable domestic and foreign laws and
regulations relating to corrupt practices and similar matters.

4.26  Personnel

      Schedule 4.26 sets forth a true and complete list of:  (a) the names and
current salaries of all directors and officers of the Company and the family
relationships, if any, among such persons and (b) the wage rates for nonsalaried
and nonexecutive salaried employees of the Company by classification.

4.27  Bank Accounts

      Schedule 4.27 sets forth the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Company

                                      -34-
<PAGE>

maintains safe deposit boxes or accounts of any nature and the names of all
Persons authorized to make withdrawals therefrom, draw thereon or have access
thereto.

4.28  Insider Interests

      The Company represents and warrants that no officer, director or key
employee of the Company has any interest in (a) any property, real or personal,
tangible or intangible, used in or directly pertaining to the Company's
business, including, without limitation, inventions, patents, trademarks, trade
names or other intellectual property, or (b) any agreement, contract,
arrangement or obligation relating to the Company, its present or prospective
business or its operations, except for employment agreements or any agreement to
be entered into between any officer and AVT at the Closing.  None of the
officers or directors is indebted to the Company, and the Company is not
indebted to any officer or director, except for indebtedness relating to
compensation for employment, including salary, benefits and reimbursements for
business expenses incurred and payable by the Company in the normal course of
business.  None of the Company's officers and, to the Company's knowledge, none
of the Company's employees, consultants, distributors or agents has entered into
any agreement regarding know-how, trade secrets, assignment of rights in
inventions, or prohibition or restriction of competition or solicitation of
customers, or any other similar restrictive agreement or covenant, whether
written or oral, with any Person other than the Company that would materially
and adversely affect the ability of such officer, employee, consultant,
distributor or agent to perform its services and/or fulfill any obligations to
the Company.  To the knowledge of the Company and/or the Holders, neither the
Company nor any of its officers, directors, employees, contractors or
consultants has any interest, either directly or indirectly, in any entity that
presently (i) provides any services, produces and/or sells any products or
product lines, or engages in any activity that is the same, similar to or
competitive with any activity or business in which the Company is now engaged or
proposes to engage or (ii) is a supplier, customer or creditor, or has an
existing contractual relationship with any of the Company's employees (or
persons performing similar functions).

4.29  Hart-Scott-Rodino

      The Company is its own ultimate parent entity as defined under the rules
and regulations promulgated under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act").  The Company is not a $10 million
person as defined thereunder.  The Company is not "engaged in manufacturing" for
purposes of the HSR Act.

4.30  Full Disclosure

      No information furnished by the Company or the Holders to AVT in
connection with this Agreement (including, but not limited to, the Company
Financial Statements and all information in the Schedules and Exhibits hereto)
contains any untrue statement of a material fact or omits any statement required
to make the statements made, in light of the circumstances in which they were
made, not misleading.

                                      -35-
<PAGE>

                        ARTICLE V - REPRESENTATIONS AND
                     WARRANTIES OF AVT AND ACQUISITION SUB

     AVT and Acquisition Sub represent and warrant to the Company and the
Holders, which representations and warranties will survive the Closing to the
extent provided herein, as follows:

5.1  Organization, Good Standing, Power, Etc.

     Each of AVT and Acquisition Sub is a corporation duly organized and validly
existing under the laws of the state of Washington.  Each of AVT and Acquisition
Sub has full corporate power and authority to enter into this Agreement and the
other Transaction Documents to be entered into pursuant hereto and to carry out
the transactions contemplated hereby and thereby.  This Agreement has been, and
each of such other Transaction Documents on the Closing will be, duly executed
and delivered by AVT or Acquisition Sub, and this Agreement is, and each of the
other agreements to which AVT or Acquisition Sub is a party will be on the
Closing, a legal, valid and binding obligation of AVT or Acquisition Sub,
enforceable against AVT or Acquisition Sub in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the rights of creditors generally, and general equitable
principles, including, but not limited to, those relating to the availability of
the remedy of specific performance.

5.2  No Approvals or Notices Required; No Conflicts With Instruments

     The execution, delivery and performance of this Agreement and the other
Transaction Documents by AVT and Acquisition Sub, as applicable,  pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
will not (a) constitute a violation (with or without the giving of notice or
lapse of time, or both) of any provision of law or any judgment, decree, order,
regulation or rule of any court, agency or other governmental authority
applicable to AVT or Acquisition Sub, (b) require any consent, approval or
authorization of, or declaration, filing or registration with, any Person, or
(c) conflict with or result in a breach of or constitute a default under any
provision of AVT's or Acquisition Sub's Articles of Incorporation or bylaws,
which, in any of the foregoing cases, might materially and adversely affect the
ability of AVT to pay the Merger Consideration or the ability of AVT or
Acquisition Sub to meet their obligations hereunder.

5.3  Capital Structure

     (a)  The authorized stock of AVT consists of 60,000,000 shares of Common
Stock, of which 30,697,543 shares were issued and outstanding as of October 28,
2000, and 2,000,000 shares of Preferred Stock, of which no shares are issued or
outstanding as of the date hereof.  The authorized capital stock of Acquisition
Sub consists of 1,000 shares of Common Stock, all of which, as of the date
hereof, are issued and outstanding and are held by AVT.  All such shares of AVT
and Acquisition Sub have been duly authorized, and all such issued and
outstanding shares are validly issued, fully paid and nonassessable.

                                      -36-
<PAGE>

     (b)  The shares of AVT Common Stock to be issued pursuant to the Merger,
when issued, will be duly authorized, validly issued, fully paid and
nonassessable.

5.4  SEC Documents

     AVT has made available to the Holders true and complete copies of its
Annual Report on Form 10-K for the fiscal year ending December 31, 1999, its
Quarterly Reports on Form 10-Q for the fiscal quarters ending March 31, 2000,
June 30, 2000 and September 30, 2000, all Forms 8-K filed after the date of the
last of the Form 10-K or Forms 10-Q, and its Proxy Statement relating to its
2000 Annual Meeting of Shareholders (collectively, the "SEC Documents").  As of
their respective filing dates, each of the SEC Documents complied in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.

5.5  No Material Adverse Change

     Since the date of the balance sheet included in AVT's most recently filed
report on Form 10-Q, AVT has conducted its business in the ordinary course and
there has not occurred:  (a) any material adverse change in the financial
condition, liabilities, assets or business of AVT; (b) any amendment or change
in the Articles of Incorporation or Bylaws of AVT; or (c) any damage to,
destruction or loss of any assets of AVT (whether or not covered by insurance)
that materially and adversely affects the financial condition or business of
AVT.

5.6  Claims and Legal Proceedings

     There are no pending claims, actions, suits, arbitrations, proceedings or
investigations involving or, to AVT's knowledge, threatened against AVT before
or by any court or governmental or nongovernmental department, commission,
board, bureau, agency or instrumentality, or any other Person, that question the
validity of this Agreement or any action taken or to be taken by AVT pursuant to
this Agreement or in connection with the transactions contemplated hereby.

5.7  Brokers and Finders

     AVT represents and warrants that no director, officer, agent or employee
acting on its behalf has retained any broker or finder in connection with the
transactions contemplated hereby.

5.8  Full Disclosure

     No information furnished by AVT or Acquisition Sub to the Company or the
Holders in connection with this Agreement contains any untrue statement of a
material fact, or omits

                                      -37-
<PAGE>

any statement required to make the statements made, in light of the
circumstances in which they were made, not misleading.

                     ARTICLE VI - CONDITIONS PRECEDENT TO
                    OBLIGATIONS OF AVT AND ACQUISITION SUB

     AVT's and Acquisition Sub's obligations to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived in writing by AVT:

6.1  Accuracy of Representations and Warranties

     Each of the representations and warranties of the Company and the Holders
contained in this Agreement and the other Transaction Documents to which each is
a party (including applicable Exhibits or Schedules) shall be true and correct
as of the date hereof and at and as of the Closing Date as though made on that
date; except to the extent such representations and warranties are made as of a
specified date, in which case such representations and warranties shall be true
and correct as of the specified date.

6.2  Performance of Agreements

     The Company and the Holders shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement or any other Transaction Document to be performed and complied with by
them at or prior to the Closing.

6.3  Opinions of Counsel for the Company and the Holders

     AVT will have received an opinion of Venable, Baetjer and Howard, legal
counsel for the Company and the Holders, dated the Closing Date, substantially
in the form of Exhibit E hereto.
               ---------

6.4  Approvals and Consents

     The Company shall have received and shall have delivered to AVT written
consents to the Merger from each of the parties (other than the Company) to
those agreements, leases, notes or other documents identified on Schedules 4.5,
4.9 and 4.10, which consents must in all respects be satisfactory to AVT in its
sole and absolute discretion.  All transfers of permits or licenses and all
approvals, applications or notices to public agencies, federal, state, local or
foreign, the granting or delivery of which is necessary for consummation of the
transactions contemplated hereby or for the continued operation of the Company,
will have been obtained or delivered, as applicable, and all waiting periods
specified by law will have passed.

                                      -38-
<PAGE>

6.5  Officers' Certificate

     AVT shall have received a certificate of the President of the Company,
dated the Closing Date, in form and substance reasonably satisfactory to AVT,
certifying that the conditions set forth in Sections 6.1, 6.2, 6.4, and 6.6 have
been fulfilled.

6.6  Material Adverse Change

     Since the date hereof and through the Closing, there shall not have
occurred (or be threatened) any material adverse change in the business,
operations, assets, liabilities, earnings, condition (financial or other), or
prospects of the Company, other than with respect to, or as a result of, the
pre-payments set forth on the Closing Balance Sheet.

6.7  Proceedings and Documents; Secretary's Certificate

     All corporate and other proceedings in connection with the transactions
contemplated hereby and by the other Transaction Documents, and all documents
and instruments incident to such transactions, shall have been approved by AVT's
counsel.  AVT shall have received a certificate of the Secretary of the Company,
in form and substance satisfactory to AVT, as to the authenticity and
effectiveness of the actions of the Board of Directors and stockholders of the
Company authorizing the Merger and the transactions contemplated by this
Agreement and the other Transaction Documents.  Copies of the Company's Articles
of Incorporation, certified by the Maryland Department of Taxation, and Bylaws,
certified by the Secretary of the Company, shall be attached to such
certificate.

6.8  Nonforeign Affidavit

     AVT shall have received from the Company, pursuant to Section 1445 of the
Code, a Foreign Investment in Real Property Tax Act Affidavit substantially in
the form of Exhibit F.
            ---------

6.9  Compliance With Laws; Release of Liens

     The consummation of the transactions contemplated by this Agreement and the
other Transaction Documents shall be legally permitted by all laws and
regulations to which AVT or the Company is subject.  In addition, Company shall
have obtained the release of any and all Encumbrances with respect to any of the
Company's assets except for such Encumbrances referred to in 4.9(e)(i)-(iii) and
any Encumbrances listed on Schedule 4.9.

6.10 Stockholder Approval

     The principal terms of this Agreement shall have been approved by the
Company's stockholders as required by the Company's Articles of Incorporation
and applicable law.

                                      -39-
<PAGE>

6.11  Legal Proceedings

      No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Transaction Documents, and no litigation, investigation or
administrative proceeding shall be pending or threatened that would enjoin,
restrain, condition or prevent consummation of this Agreement or any other
Transaction Document.

6.12  Escrow Agreement

      The Holders and the  Escrow Agent shall have executed and delivered the
Escrow Agreement.

6.13  Due Diligence

      The results of AVT's due diligence investigation of the Company shall be
satisfactory in all respects to AVT in its sole and absolute discretion.  The
Company shall have used its best efforts to deliver to AVT and its counsel ten
(10) business days prior to the Closing Date, an invalidity opinion from legal
counsel for the Company, in form and substance acceptable to AVT in its sole
discretion, with respect to the infringement or alleged infringement by the
Technology of any Geoworks Corporation patent.

6.14  Termination of Consulting Contract

      The Company shall have entered into a agreement with J. Paul Provance
terminating the Consulting Agreement between the Company and Mr. Provance, dated
December 31, 1996, and neither the Company, AVT nor Acquisition Sub shall have
any further obligations, including with respect to compensation, to Mr. Provance
under such Consulting Agreement.

6.14  Employment Arrangements

      Brett Warthen shall have executed and delivered to AVT the Employment
Agreement.

6.15  Confidentiality and Nondisclosure

      Each officer, employee and consultant of the Company shall have executed
and delivered a Confidentiality and Nondisclosure Agreement to AVT in
substantially the form attached hereto as Exhibit G.
                                          ---------

6.16  Payout of Royalty Obligations; Renegotiation of Exclusive Contract

      The Company shall have concluded its royalty obligations and fully pay-up
its licenses under the agreements listed on Schedule 6.16.  The Company shall
have successfully

                                      -40-
<PAGE>

renegotiated the exclusive contract listed on Schedule 6.16 on terms reasonably
acceptable to AVT.

6.17  Retirement of Company Liability

      The Company shall have fully paid or retired all Company Liability, unless
AVT agrees to assume in writing all or a portion of such Company Liability.

6.18  Delivery of Certificates

      Each Holder shall have delivered to AVT certificates representing all of
the Company Shares; together with assignments separate from certificate endorsed
in blank, a fully completed and duly executed Letter of Transmittal and other
such documentation as AVT may reasonably prescribe to carry out the purposes of
this Agreement.

               ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS
                        OF THE COMPANY AND THE HOLDERS

      The obligations of the Company and the Holders to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by them
at or before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived in writing on behalf of the Company by
the President of the Company:

7.1  Accuracy of Representations and Warranties

     Each of the representations and warranties of AVT and Acquisition Sub
contained in this Agreement and the other Transaction Documents to which AVT or
Acquisition Sub is a party shall be true and correct as of the date hereof and
at and as of the Closing Date as though made on that date, except to the extent
such representations and warranties are made as of a specified date, in which
case such representations and warranties shall be true and correct as of the
specified date.

7.2  Performance of Agreements

     AVT and Acquisition Sub shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement or any other Transaction Document to be performed and complied with by
them at or prior to the Closing.

7.3  Opinion of Counsel for AVT and Acquisition Sub

     The Holders will have received an opinion of Perkins Coie LLP, legal
counsel for AVT and Acquisition Sub, dated the Closing Date, substantially in
the form of Exhibit H hereto.
            ---------

                                      -41-
<PAGE>

7.4  Approvals and Consents

     AVT and Acquisition Sub will have received all written consents to the
purchase of the Company Shares and all approvals, applications or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for consummation of the transactions contemplated hereby.
All approvals, applications or notices to public agencies, federal, state, local
or foreign, the granting or delivery of which is necessary for the consummation
of the transactions contemplated hereby or the continued operation of AVT or
Acquisition Sub, will have been obtained or delivered, as applicable, and all
waiting periods specified by law will have passed.

7.5  Legal Proceedings

     No order of any court or administrative agency shall be in effect that
enjoins, restrains, conditions or prohibits consummation of this Agreement or
any other Transaction Documents, and no litigation, investigation or
administrative proceeding shall be pending or threatened that would enjoin,
restrain, condition or prevent consummation of this Agreement or any other
Transaction Document.

7.6  Compliance With Laws

     The consummation of the transactions contemplated by this Agreement and the
other Transaction Documents shall be legally permitted by all laws and
regulations to which AVT or the Company is subject.

7.7  Material Adverse Change

     Since the date hereof and through the Closing, there shall not have
occurred (or be threatened) any material adverse change in the business,
operations, assets, liabilities, earnings, condition (financial or other), or
prospects of AVT.

7.8  Escrow Agreement

     The Company and the Escrow Agent shall have executed and delivered the
Escrow Agreement.

7.9  Employment Agreement

     AVT shall have executed and delivered to Brett Warthen the Employment
Agreement.

                                      -42-
<PAGE>

                           ARTICLE VIII - COVENANTS

8.1  Conduct of Business by the Company Pending the Closing

     Unless AVT shall otherwise agree in writing, the business of the Company
shall be conducted only in, and the Company shall not take any action except in,
and the directors and officers of the Company and the stockholders shall cause
the Company to be conducted in, the ordinary course of business and in a manner
consistent with past practice and in accordance with applicable law; and the
Company shall use its reasonable best efforts to preserve substantially intact
the business organization of the Company, to keep available the services of the
current directors, officers, employees and consultants of the Company and to
preserve the current relationships of the Company with customers, suppliers and
other persons with which the Company has significant business relations.  By way
of amplification and not limitation, except as otherwise contemplated by this
Agreement, the Company shall not, between the date of this Agreement and the
time of Closing, directly or indirectly do, or propose to do, any of the
following without giving AVT prior written notice of and receiving AVT's prior
written consent:

          (a)  amend or otherwise change its Articles of Incorporation or
Bylaws;

          (b)  issue, sell, pledge, dispose of, grant, encumber or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of
capital stock of any class of the Company, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock, or any other ownership interest (including, without limitation, any
phantom interest), of the Company or (ii) any assets of the Company;

          (c)  declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock property or otherwise, with respect to any
of its capital stock;

          (d)  reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

          (e)  (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) or form any corporation,
partnership, other business organization or division thereof, or acquire
directly or indirectly any material amount of assets; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice which loans shall
be on terms and conditions satisfactory to AVT; (iii) enter into any contract or
agreement other than in the ordinary course of business, consistent with past
practice; (iv) authorize any single capital expenditure that is in excess of
$5,000 or capital expenditures that are, in the aggregate, in excess of $25,000;
or (v) enter into or amend any contract, agreement, commitment or arrangement
with respect to any matter set forth in this subsection (e);

                                      -43-
<PAGE>

          (f)  enter into any employment, consulting or agency agreement, or
increase the compensation payable or to become payable to its officers,
employees or consultants, except for increases in accordance with existing
agreements or past practices for employees of the Company who are not officers
of the Company, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer employee of the
Company, or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;

          (g)  take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable);

          (h)  make any Tax election inconsistent with past practices or settle
or compromise any federal, state, local or foreign income Tax liability;

          (i)  pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the November Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice;

          (j)  enter into any equipment lease; or

          (k)  take or agree to take any action specified in Section 4.7, or
enter into any other material transaction other than those specified above; or

          (l)  agree to do any of the foregoing.

8.2  Access to Information; Confidentiality

     From the date hereof to the time of Closing, the Company and the Holders
shall, and shall cause their representatives to, afford AVT and its
representatives reasonable access at all reasonable times to the officers,
employees, agents, properties, offices, plants and other facilities, books and
records of the Company and shall furnish AVT with all financial, operating and
other data and information as AVT may reasonably request and as such access is
necessary to the consummation of the transactions contemplated hereby.  From the
date hereof until the time of Closing, the Company shall provide AVT with
monthly and other financial statements of the Company as they become available
internally at the Company, all of which financial statements shall be prepared
in conformity with GAAP and shall fairly present the financial position and
results of operations of the Company as of the dates and for the periods
specified.  All information obtained by either party pursuant to this Section
8.2

                                      -44-
<PAGE>

shall be subject to the provisions of and kept confidential in accordance with
the Reciprocal Nondisclosure Agreement, dated August 7, 2000, between AVT, the
Company and the Holders.

8.3  No Alternative Transactions

     The Company and the Holders shall not, directly or indirectly, through any
officer, director, agent, investment banker, attorney or otherwise, solicit,
initiate or encourage the submission of any proposal, offer, inquiry or contact
from any Person relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any portion of the assets of, or any equity
interest in, the Company or any business combination with the Company, or
participate in any negotiations or discussions regarding, or furnish to any
other Person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person, to do or seek any of the foregoing.  The Company
and the Sellers immediately shall cease and cause to be terminated with no
obligation, financial or otherwise, on the part of the Company or the Holders,
all existing discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.

     The Company and the Holders shall notify AVT promptly if any such proposal
or offer, or any inquiry or contact with any Person with respect thereto, is
made and shall, in any such notice to AVT, indicate in reasonable detail the
identity of the Person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact.  The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party.

8.4  Notification of Certain Matters

     The Company and/or the Holders shall give prompt written notice to AVT, and
AVT shall give prompt written notice to the Company and/or the Holders, of (a)
the occurrence or nonoccurrence of any event which would be likely to (i) cause
any representation or warranty of the Company and/or the Holders on the one
hand, or AVT and/or Acquisition Sub on the other hand, contained in this
Agreement to be materially untrue or inaccurate or (ii) result in the material
failure to satisfy a closing condition in Article VI or VII; (b) any material
failure of the Company and/or the Holders on the one hand, or AVT and/or
Acquisition Sub, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by them; and (c) any written communication from
any Person alleging that the consent of such Person may be required in
connection with the transactions contemplated by this Agreement; provided,
however, that the delivery of any notice pursuant to this Section 8.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.

                                      -45-
<PAGE>

8.5  Further Action

     Upon the terms and subject to the conditions hereof, each of the parties
shall (a) make promptly its respective filings, and thereafter make any other
required submissions, under applicable laws with respect to the transactions
contemplated hereby and shall cooperate with the other parties with respect to
such filings and submissions and (b) use its best efforts to take, or cause to
be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, including,
without limitation, using its best efforts to obtain all waivers, licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts as are necessary for the
consummation of the transactions contemplated hereby and to fulfill the
conditions to the Merger.  In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, each party to this Agreement shall use its best efforts to take all
such action.  None of AVT, Acquisition Sub, the Company or the Holders will
undertake any course of action inconsistent with this Agreement or that would
make any representations, warranties or agreements made by such party in this
Agreement untrue or any conditions precedent to this Agreement unable to be
satisfied at or prior to the Closing.

8.6  Publicity

     None of the parties shall disclose, make or issue, or cause to be
disclosed, made or issued, any statement or announcement concerning this
Agreement or the transactions contemplated hereby to any third parties (other
than its officers, directors, employees, authorized representatives, legal
advisors and financial advisors who need to know such information in connection
with carrying out or facilitating the transactions contemplated hereby) without
the prior written consent of the other parties, except as required by law or any
listing or other agreement with any public securities trading exchange or market
to which AVT is a party and after providing written notice to the other parties
of such required disclosure.

8.7  Waiver of Dissenter's Rights

     The Holders hereby irrevocably and unconditionally waive, and agree to
cause to be waived and to prevent the exercise of, any rights of appraisal, any
dissenters' rights and any similar rights relating to the Merger that the Holder
may have by virtue of the ownership of any outstanding Company Shares.

8.8  Termination of 401(k) Plan

     The Company agrees to terminate its 401(k) plan prior to the Effective
Time, unless AVT or Acquisition Sub, in its sole and absolute discretion, agrees
to sponsor and maintain such plan by providing the Company with written notice
of such election at least three (3) days before the Effective Time.  Unless AVT
or Acquisition Sub provides such notice to the

                                      -46-
<PAGE>

Company, AVT shall receive, prior to the Effective Time, from the Company
evidence that the Company's 401(k) plan has been terminated pursuant to
resolutions of the Company's Board of Directors (the form and substance of such
resolutions shall be subject to advance review and approval by AVT), effective
not later than the day immediately preceding the day on which the Effective Time
occurs.

8.9  Offers of Employment

     AVT agrees to offer employment to the employees of the Company listed on
Schedule 8.9(a) on terms and conditions no less favorable than the terms and
conditions under which such employees were employed by Company thirty (30)
business days prior to the Closing Date.  Schedule 8.9(b) contains a complete
                                          ---------------
and correct payroll roster of Company listing all employees of Company and their
rates of pay as of the date hereof.  AVT agrees to offer the Company employees
listed on Schedule 8.9(c) the cash bonuses listed opposite each such employee's
name on Schedule 8.9(c) and, on the condition that said employees agree to
continued employment with AVT, the Stock Options listed opposite each such
employee's name on Schedule 8.9(c).

8.10 Baltimore Office

     AVT agrees to maintain an office in the Baltimore, Maryland metropolitan
area for three years from the Closing Date.

                ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER

9.1  Termination

     This Agreement may be terminated at any time prior to the Closing
(notwithstanding any approval of this Agreement by the Holders):

          (a)  by mutual written consent of the Company and AVT;

          (b)  by the Company, if AVT shall have materially breached any of its
representations, warranties or agreements and such breach has not been cured
within five (5) business days after written notice to AVT (provided that, no
cure period shall be required for a breach which by its nature cannot be cured);

          (c)  by AVT, if the Company and/or the Holders shall have materially
breached any of its or their representations, warranties or agreements and such
breach has not been cured within five (5) business days after written notice to
the Company (provided that, no cure period shall be required for a breach which
by its nature cannot be cured);

          (d)  by either the Company or AVT if the Closing has not occurred by
January 10, 2001, provided, however, that the right to terminate this Agreement
under this subsection (d) shall not be available to any party whose failure to
fulfill any obligation under

                                      -47-
<PAGE>

this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date;

          (e)  by either the Company or AVT, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining AVT, Acquisition Sub or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this subsection (e) shall have
used all reasonable efforts to remove such judgment, injunction, order or
decree; or

9.2   Effect of Termination

      In the event of the termination of this Agreement pursuant to Section 9.1,
there shall be no further obligation on the part of any party, except that the
confidentiality obligations under Section 8.2 shall survive any such termination
and nothing shall relieve any party from liability for any breach.

9.3   Amendment

      AVT, the Company and the Holders may amend, modify or supplement this
Agreement at any time, but only in writing duly executed on behalf of each of
the parties to be bound thereby.

9.4   Waiver

      At any time prior to the Closing, any party may (a) extend the time for
the performance of any obligation or other act of any other party, (b) waive any
inaccuracy in the representations and warranties contained in any Transaction
Document, or (c) waive compliance with any agreement or condition in any
Transaction Document. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound.
The failure of any party at any time or times to require performance of any
provisions shall in no manner affect its right at a later time to enforce the
same. No waiver by any party of any condition or of any breach of any terms,
covenants, representations, warranties or agreements contained in this Agreement
shall be deemed to be a further or continuing waiver of any such condition or
breach in other instances or a waiver of any other condition or any breach of
any other terms, covenants

                          ARTICLE X - INDEMNIFICATION

10.1  Survival

      All representations and warranties contained in this Agreement or in the
other Transaction Documents or in any certificate delivered pursuant hereto or
thereto shall survive the Closing until 45 days after the date on which AVT's
independent accountants issue an

                                      -48-
<PAGE>

audit report for AVT and its consolidated subsidiaries for the year ended
December 31, 2001 (the "Survival Period"), and shall not be deemed waived or
otherwise affected by any investigation made or any knowledge acquired with
respect thereto, or by any notice delivered pursuant to Section 8.4; provided,
however, (a) that any claim based on fraud shall survive the Closing
indefinitely, (b) that any claim based on Section 4.1.1 (Good Title), 4.1.2
(Authority), 4.2 (Company Organization, Good Standing, Power, Etc.) and 4.3
(Capitalization) shall survive the Closing indefinitely, (c) that any claim
based Sections 4.8 (Taxes), 4.15 (Employee Benefit Plans) and 4.21(b) - (h)
(Environmental Matters) will survive for 30 days after the expiration of the
applicable statute of limitations (including any extensions and waivers
thereof), and (d) that any claim based on Section 4.16 (Intellectual Property)
shall survive for a period of five years after the Closing. The covenants and
agreements contained in this Agreement or in the other Transaction Documents
shall survive the Closing and shall continue until all obligations with respect
thereto shall have been performed or satisfied or shall have been terminated in
accordance with their terms.

10.2  Indemnification by the Holders

      Subject to the limitations set forth in Section 10.4, from and after the
Closing Date, the Holders jointly and severally shall indemnify and hold AVT,
Acquisition Sub, their respective officers, directors and affiliates (as
"affiliate" is defined in Rule 12b-2 of the Exchange Act) (the "AVT Indemnified
Parties") harmless from and against, and shall reimburse the AVT Indemnified
Parties for, any and all losses, damages, debts, liabilities, obligations,
judgments, orders, awards, writs, injunctions, decrees, fines, penalties, taxes,
costs or expenses (including but not limited to any legal and accounting fees
and expenses) ("Losses") arising out of or in connection with:

          (a)  any inaccuracy in or other breach of any representation or
warranty made by the Company or the Holders in this Agreement or in any other
Transaction Document;

          (b)  any failure by the Company or either Holder to perform or comply,
in whole or in part, with any covenant or agreement in this Agreement or any
other Transaction Document to which it is a party;

          (c)  any claim, demand, cause of action, suit, proceeding, hearing or
investigation by any person or entity relating to the Company's operation of the
business on or before the Closing Date;

          (d)  any claim, demand, cause of action, suit, proceeding, hearing or
investigation by any person or entity relating to or arising from the
infringement or alleged infringement  by the Technology of any Geoworks
Corporation patent;

          (e)  all liability for Taxes of the Company assessed during or
attributable to any taxable period ending on or prior to the Effective Time, and
the portion of any taxable

                                      -49-
<PAGE>

period that includes, but does not end on, the Effective Time to the extent such
Taxes exceed the Tax liability reflected on the face of the Closing Balance
Sheet; or

          (f)  the amount of any Company Liability existing as of the Closing
Date and not reflected on the Closing Balance Sheet.

10.3  Indemnification by AVT

      Subject to the limitations set forth in Section 10.4, from and after the
Closing Date, AVT shall indemnify and hold the Holders (the "Holder Indemnified
Parties" and together with the Buyer Indemnified Parties, the "Indemnified
Parties") harmless from and against, and shall reimburse the Holder Indemnified
Parties for, any and all Losses arising out of or in connection with:

          (a)  any inaccuracy in or other breach of any representation or
warranty made by AVT or Acquisition Sub in this Agreement or in any other
Transaction Document; or

          (b)  any failure by AVT or Acquisition Sub to perform or comply, in
whole or in part, with any covenant or agreement in this Agreement or any other
Transaction Document to which it is a party

          (c)  any claim, demand, cause of action, suit, proceeding, hearing or
investigation by any person or entity relating to operation of the Company's
business after the Closing Date.

10.4  Threshold and Limitations

      (a) The Indemnified Parties shall be not be entitled to receive any
indemnification payment with respect to any claims for indemnification under
Sections 10.2(a), 10.2(b), 10.2(c) and 10.3(a) and 10.3(b) (the "Indemnified
Claims") until the aggregate Losses in respect of Indemnified Claims for which
such Indemnified Parties would be otherwise entitled to receive indemnification
exceed $25,000 (the "Threshold"); provided, however, that once such aggregate
Losses exceed the Threshold, such Indemnified Parties shall be entitled to
indemnification for the aggregate amount of all Losses without regard to the
Threshold.

      (b) Except for Losses based on fraud, or arising in connection with
Sections 4.1.1 (Good Title), 4.1.2 (Authority), 4.2 (Company Organization, Good
Standing, Power, Etc.) 4.3 (Capitalization), 4.8 (Taxes) (which Sections are
discussed below), the aggregate liability of the Holders in respect of
Indemnified Claims shall be limited to $10,000,000.  Liability based on Sections
4.1.1 (Good Title), 4.1.2 (Authority), 4.2 (Company Organization, Good Standing,
Power, Etc), 4.3 (Capitalization) and 4.8 (Taxes) shall be without limit.
Liability based on Section 10.2(d) shall be limited to $24,500,000.

                                      -50-
<PAGE>

      (c)   An indemnifying party shall not be obligated to defend and hold
harmless an indemnified party, or otherwise be liable to such party, with
respect to any claims made by the indemnified party after the expiration of the
Survival Period or other applicable time limitation described in Section 10.1,
except that indemnity may be sought after the expiration of the Survival Period
or other applicable time limitation if a Claim Notice (as defined in the Escrow
Agreement) shall have been delivered to the Holders prior to the expiration of
such time period.

10.5  Procedure

      (a)   Stockholder Representative. By approving the Merger at a special
            ---------------------------
meeting of Holders or by written consent of the Holders, each Holder of the
Company shall have irrevocably authorized and appointed Brett Warthen (the
"Stockholder Representative"), with full power of substitution and
 --------------------------
resubstitution, as his representative and true and lawful attorney-in-fact and
agent to act in his name, place and stead as contemplated by this  Article X and
to execute in the name and on behalf of such stockholder the Escrow Agreement
and any other agreement, certificate, instrument or document to be delivered by
the stockholders in connection with the Escrow Agreement.

      (b)   Claim Notice. In the event that the Indemnified Parties sustain or
            -------------
incur any Losses in respect of which indemnification may be sought pursuant to
Article X of the Agreement, such Indemnified Party (the "Claiming Party") will
assert a claim for indemnification by giving written notice (the "Claim Notice")
to the Stockholder Representative or AVT, as the case may be (the "Defending
Party"), and in the case of a claim for indemnification by an AVT Indemnified
Party, to the Escrow Agent, which will describe in reasonable detail the facts
and circumstances on which the asserted claim for indemnification is based;
provided, however, that the failure or delay to so notify the Defending Party
shall not relieve the Defending Party of any obligation or liability that the
Defending Party may have to the Claiming Party except to the extent that the
Defending Party demonstrates that the Defending Party's ability to defend or
resolve such claim is adversely affected thereby.  The Claim Notice will also
specify how the Claiming Party intends to recover such funds pursuant to the
Agreement.  Unless the claim described in the Claim Notice is contested by the
Defending Party by written notice to the Claiming Party of the amount of the
claim that is contested, given within thirty (30) days of the receipt by the
Defending Party of the Claim Notice, the Claiming Party may recover such
undisputed amount of the claim described in the Claim Notice from the Defending
Party.  If the undisputed claim is against the Holders, such claim may be paid
out of the Escrow Amount by giving written notice of such claim to the Escrow
Agent in accordance with the terms of the Escrow Agreement  The Escrow Agent
shall be entitled to rely on any such notice and distribute the undisputed claim
amount from the Escrow Amount in accordance with the terms of the Escrow
Agreement.

      (c)   If, within thirty (30) days of the receipt by the Defending Party of
the Claim Notice, the Defending Party contests in writing to the Claiming Party
and the Escrow Agent

                                      -51-
<PAGE>

(if such claim is against the Holders) that such Losses constitute an
indemnifiable claim pursuant to Article X of the Agreement (the "Dispute
Notice"), then the Claiming Party and the Defending Party, acting in good faith,
shall attempt to reach agreement with respect to such claim. If the Claiming
Party and the Defending Party should so agree, a memorandum setting forth such
agreement shall be prepared and signed by the Claiming Party and the Defending
Party and shall be furnished to the Escrow Agent if the claim is to be made
against the Escrow Amount. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute the requested amount from the Escrow Amount in
accordance with the terms thereof and of the Escrow Agreement.

      (d)   The Defending Party shall not object to any Claim Notice unless (i)
he believes in good faith that the Claiming Party is not entitled to be
indemnified with respect to the Losses specified therein, or (ii) he lacks
sufficient information to assess the validity or amount of the claim. If the
Defending Party objects to a Claim Notice on the basis that he lacks sufficient
information, the Defending Party shall promptly request from the Claiming Party
any additional information reasonably necessary to assess such claim and the
Claiming Party shall, to the extent the Claiming Party reasonably can, provide
additional information reasonably requested. Upon receipt of such additional
information, the Defending Party shall review it as soon as reasonably
practicable and notify the Claiming Party of any withdrawal or modification of
the objection.

      (e)   Dispute Resolution. If the Defending Party and the Claiming Party
            -------------------
are unable to resolve any such dispute within 45 days after delivery of the
Dispute Notice, the matter shall be settled by binding arbitration in Seattle,
Washington. All claims shall be settled by three arbitrators in accordance with
the Commercial Arbitration Rules then in effect of the American Arbitration
Association (the "AAA Rules"). The Defending Party and the Claiming Party shall
each designate one arbitrator within 15 days after the termination of such 45-
day period. The Defending Party and the Claiming Party shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within seventy (70) days of
delivery of the Dispute Notice, the third arbitrator shall be appointed in
accordance with the AAA Rules and (ii) if either the Defending Party or the
Claiming Party fails to timely designate an arbitrator, the dispute shall be
resolved by the one arbitrator timely designated. Except as provided in the
Escrow Agreement, all of the fees and expenses of the three arbitrators shall be
paid in accordance with the determination of the arbitrators based on the
outcome of the dispute. The Defending Party and the Claiming Party shall cause
the arbitrators to decide the matter to be arbitrated within 30 days after the
appointment of the last arbitrator. The arbitrators' decision shall relate
solely to whether the Claiming Party is entitled to receive the contested amount
(or a portion thereof) pursuant to the applicable terms of this Agreement and
the Escrow Agreement if applicable. The final decision of the majority of the
arbitrators shall be furnished to the Defending Party, the Claiming Party and
the Escrow Agent, if such claim is against the Holders, in writing and shall
constitute the conclusive determination of the issue in question binding upon
the Defending Party, the Holders, the Claiming Party and the

                                      -52-
<PAGE>

Escrow Agent, and shall not be contested by any of them. Such decision may be
used in a court of law only for the purpose of seeking enforcement of the
arbitrators' decision.

      (f)   Third Party Claims. With respect to claims for indemnification
            -------------------
resulting from or in connection with any legal proceeding commenced by a third
party, the Claiming Party shall give the Claim Notice to the Defending Party
(and to the Escrow Agent if such claim is against the Holders) no later than
twenty (20) days prior to the time any initial answer or response to the
asserted claim is legally required under any applicable court or procedural
rule; provided, however, that the failure or delay to so notify the Defending
Party, or the Escrow Agent, if applicable, shall not relieve the Defending Party
of any obligation or liability that it may have to such Claiming Party except to
the extent that the Defending Party demonstrates that the Defending Party's
ability to defend or resolve such third party claim is adversely affected
thereby.

      (g)   Subject to the rights of any insurer or other third party having
potential liability therefor, the Defending Party shall have the right, upon
written notice by the Defending Party given to such Claiming Party and the
Escrow Agent (if the claim is against the Holders) within 30 days after receipt
of the Claim Notice relating to a third party claim, to assume the defense or
handling of such third party claim, at the Defending Party's sole expense.  The
Defending Party shall select counsel reasonably acceptable to the Claiming Party
in connection with conducting the defense or handling of such third party claim,
and the Defending Party shall defend or handle the same in consultation with the
Claiming Party and shall keep the Claiming Party timely apprised of the status
of such third party claim.  The Defending Party shall not, without the prior
written consent of the Claiming Party, agree to a settlement of any third party
claim, unless (i) the settlement provides an unconditional release and discharge
of the Claiming Party and the Claiming Party is reasonably satisfied with such
discharge and release and (ii) the Claiming Party shall not have reasonably
objected to any such settlement on the ground that the circumstances surrounding
the settlement could result in an adverse impact on the business, operations,
assets, liabilities (absolute, accrued, contingent or otherwise), condition
(financial or otherwise) or prospects of AVT.  The Claiming Party shall
cooperate with the Defending Party and shall be entitled to participate in the
defense or handling of such third party claim with its own counsel and at its
own expense.

      (h)   If, within 30 days after receipt of a Claim Notice relating to a
third party claim, the Defending Party does not give written notice to the
Claiming Party and the Escrow Agent (if the claim is against the Holders) of the
Defending Party's election to assume the defense or handling of such third party
claim, the Claiming Party may, at the Defending Party's expense (which shall be
paid from time to time by the Defending Party as such expenses are incurred by
the Claiming Party), select counsel in connection with conducting the defense or
handling of such third party claim and defend or handle such third party claim
in such manner as it may deem appropriate, provided, however, that the Claiming
Party shall keep the Defending Party timely apprised of the status of such third
party claim and shall not settle such third party claim without the prior
written consent of the Defending Party, which consent shall not be unreasonably
withheld. If the Claiming Party defends or handles such

                                      -53-
<PAGE>

third party claim, the Defending Party shall cooperate with the Claiming Party
and shall be entitled to participate in the defense or handling of such third
party claim with its own counsel and at its own expense.

10.6  Remedies; Specific Performance

      Except as otherwise provided, the indemnification provisions of this
Article X, together with the Escrow Agreement, shall be the sole and exclusive
remedy of any party to this Agreement for a breach of any representation,
warranty or covenant contained herein.  Notwithstanding the preceding sentence,
each of the parties acknowledges and agrees that the other parties hereto would
be damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties hereto agrees that the other parties hereto
shall be entitled to an injunction to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof (including the indemnification provisions hereof) in any
competent court having jurisdiction over the parties, in addition to any other
remedy to which they may be entitled at law or in equity.

10.7  Access to Escrow Amount

      The satisfaction of any Losses owed to AVT or Acquisition Sub under this
Article X shall be made by delivery by the Escrow Agent to AVT or Acquisition
Sub, as the case may be, in accordance with the terms of the Escrow Agreement,
of all or a portion of the Escrow Amount.  Any liability of the Holders for
indemnification under this Article X shall (subject to the limitations set forth
in Section 10.4) be satisfied, first, from the Escrow Amount and, second, to the
extent the Escrow Amount is insufficient to satisfy any such liability, from
other assets of the Holders, including by offset of amounts otherwise owed by
AVT to the Holders under Section 3.3 hereof.

                             ARTICLE XI - GENERAL

11.1  Expenses

      Whether or not the transactions contemplated by this Agreement are
consummated, each Party shall pay its own fees and expenses incident to the
negotiation, preparation and carrying out of this Agreement and the other
Transaction Documents (including legal and accounting fees and expenses).
Should any action be brought hereunder, the attorneys' fees and expenses of the
prevailing party shall be paid by the other party to such action.  The Sellers
shall pay any transfer or similar taxes that may be payable in connection with
the transactions contemplated by this Agreement.

11.2  Entire Understanding

      This Agreement and the Reciprocal Nondisclosure Agreement between AVT, the
Company and the Holders, dated August 7, 2000, and the other Transaction
Documents

                                      -54-
<PAGE>

constitute the entire agreement among the parties with respect to this subject
matter and supersede all prior agreements and undertakings, both written and
oral, among the parties with respect to this subject matter, including, but not
limited to, the Term Sheet dated November 3, 2000, between AVT, the Company and
the Holders.

11.3  Waivers

      Any terms, covenants, representations, warranties or agreements of any
party hereto may be waived at any time by an instrument in writing executed by
the party for whose benefit such terms, covenants, representations, warranties
or agreements exist.  The failure of any party at any time or times to require
performance of any provisions hereof will in no manner affect its right at a
later time to enforce the same.  No waiver by any party of any condition or of
any breach of any terms, covenants, representations, warranties or agreements
contained in this Agreement will be effective unless in writing, and no waiver
in any one or more instances will be deemed to be a further or continuing waiver
of any such condition or breach in other instances or a waiver of any other
condition or any breach of any other terms, covenants, representations,
warranties or agreements.

11.4  Counterparts

      This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.  To expedite the process of entering into this
Agreement, the parties acknowledge that Transmitted Copies of this Agreement
will be equivalent to original documents until such time as original documents
are completely executed and delivered.  "Transmitted Copies" will mean copies
that are reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.

11.5  Headings

      The headings used herein are for convenience only and will not in any way
affect the construction of, or be taken into consideration in interpreting this
Agreement.

11.6  Applicable Law; Venue

      This Agreement, including all matters of construction, validity and
performance, will be governed by and construed and enforced in accordance with
the laws of the state of Washington, as applied to contracts executed and to be
fully performed in such state by citizens thereof.  The parties irrevocably
consent to the jurisdiction and venue of the state and federal courts located in
King County, Washington in connection with any actions relating to this
Agreement.

                                      -55-
<PAGE>

11.7  Assignment

      This Agreement shall not be assigned by operation of law or otherwise,
except that AVT may assign all or any of its rights and obligations to any of
its affiliates.  In the event of any such permitted assignment, AVT shall
guarantee the performance of such obligations by such assignee.

11.8  Successors and Assigns

      All the terms and provisions of this Agreement will be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto.

11.9  Notices

      Any notice or request required or permitted to be given hereunder must be
in writing given by personal delivery, overnight courier, certified or
registered mail or facsimile, addressed as respectively set forth below or to
such other address as any party has previously designated by such a notice.  The
effective date of any notice or request sent by certified or registered mail is
three days from the date it is sent by the addressor so long as it is, in fact,
received within five days, or when sent by facsimile or personally delivered.

      Notices to AVT, the Company and Sellers shall be sent as follows:

      AVT:

               AVT Corporation
               11410 N.E. 122nd Way
               P.O. Box 97025
               Kirkland, WA 98083
               Fax:  (425) 823-3606
               Attention:  Catherine Romero Wright

      With a copy to:

               Perkins Coie LLP
               1201 Third Avenue, 48th Floor
               Seattle, WA 98101-3099
               Fax:  (206) 583-8500
               Attention:  Andrew Moore

                                      -56-
<PAGE>

      HOLDERS:

               Brett Warthen
               1013 Hook Road
               -------------------------
               Westminster, MD  21157
               -------------------------

               John Madill
               15 White Willow Court
               -------------------------
               Owings Mills, MD  21117
               -------------------------

      With a copy to:

               Venable, Baetjer and Howard
               210 Alleghany Avenue
               Towson, Maryland  21204
               Fax:  410-821-0147
               Attention:  Charles E. Rosolio

      THE COMPANY:

               Infinite Technologies, Inc.
               11433 Cronridge Drive, Suite H
               Owings Mills, Maryland  21117
               Fax: 410-363-3779
                    -----------------------
               Attention:  Brett Warthen

      With a copy to:

               Venable, Baetjer and Howard
               210 Alleghany Avenue
               Towson, Maryland  21204
               Fax:  410-821-0147
               Attention:  Charles E. Rosolio

11.10 Severability

      If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement, and
the balance of this

                                      -57-
<PAGE>

Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.

11.11 Tax Matters - Reorganization Treatment

      Unless otherwise required by law, the parties hereto shall treat the
Merger as a reorganization under Section 368(a) of the Code and the underlying
Treasury Regulations for all Tax reporting purposes; provided, however, neither
AVT nor Acquisition Sub makes any representation or warranty with respect to,
and expressly disclaims any responsibility for, any Tax consequences to the
Company or the Holders arising out of the structure or terms of this Agreement.

               [Remainder of this page intentionally left blank.]

                                      -58-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.

                                             AVT CORPORATION

                                             By  /s/ David Anastasi
                                                ------------------------------

                                                Its President & CEO
                                                    --------------------------

                                             RAVEN ACQUISITION SUB

                                             By /s/ David Anastasi
                                                ------------------------------

                                                Its President
                                                    --------------------------

                                             INFINITE TECHNOLOGIES, INC.

                                             By /s/ Brett Warthen
                                                ------------------------------

                                                Its President
                                                    --------------------------

                                             BRETT WARTHEN

                                             By /s/ Brett Warthen
                                                ------------------------------

                                             JOHN MADILL

                                             By /s/ John Madill
                                                ------------------------------

                                      -59-
<PAGE>

                                   Exhibit A

                              Articles of Merger
<PAGE>

                                   Exhibit B

                               Escrow Agreement
<PAGE>

                                   Exhibit C

                             Employment Agreement
<PAGE>

                                   Exhibit D

                         Company Disclosure Memorandum
<PAGE>

                                   Exhibit E

                      Opinion of Counsel for the Company
<PAGE>

                                   Exhibit F

                          Real Property Tax Affidavit
<PAGE>

                                   Exhibit G

          Form of Confidentiality and Invention Assignment Agreement
<PAGE>

                                   Exhibit H

                          Opinion of Counsel for AVT

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