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As filed with the Securities and Exchange Commission on May, 5 1999
Registration No.
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<TABLE>
<CAPTION>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8/S-3
REGISTRATION STATEMENT
(Including Registration of Shares for Resale by Means of a Form S-3 Prospectus)
Under
The Securities Act of 1933
TICKETMASTER ONLINE-CITYSEARCH, INC.
(Exact name of Registrant as specified in its charter)
<S> <C> <C>
Delaware 95-4546874
(State of incorporation) (I.R.S. Employer Identification No.)
790 E. Colorado Boulevard, Suite 200
Pasadena, California 91101
(Address of principal executive offices)
CityAuction, Inc. 1998 Stock Plan
Restricted Stock Purchase Agreements
(Full Title of the Plan)
Charles Conn
Chief Executive Officer
Ticketmaster Online-CitySearch, Inc.
790 E. Colorado Boulevard, Suite 200
Pasadena, California 91101
(626) 405-0050
(Name, address, and telephone number, including area code, of agent for service)
Copy to:
John T. Sheridan, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(415) 493-9300
</TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Maximum Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered(1) Per Share Price Registration Fee
<S> <C> <C> <C> <C>
Class B Common Stock, $0.01 par value 671,929 shares(3) $31.56(2) $ 21,206,079.24 $ 5,895.29
Issued under CityAuction, Inc.
Restricted Stock Purchase Agreements..
- ------------------------------------------------------------------------------------------------------------------------------------
To be issued upon exercise of 6,274 shares(3) $ 0.36(4) $ 2,258.64 $ 0.63
outstanding options under the
CityAuction, Inc. 1998 Stock Plan...
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Total.............................. 678,203 shares $ 21,208,337.88 $ 5,895.92
</TABLE>
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(1) For the sole purpose of calculating the registration fee, the number of
shares to be registered under this Registration Statement has been broken
down into two subtotals.
(2) Computed in accordance with Rule 457(h) under the Securities Act. Such
computation is based on the average of the high and low prices reported on
the Nasdaq National Market on May 3, 1999.
(3) Certain of such shares are subject to vesting.
(4) Computed in accordance with Rule 457(h) under the Securities Act. Such
computation is based on the exercise price of $0.36 per share covering
authorized but unissued shares to be issued upon exercise of outstanding
options under the CityAuction, Inc. 1998 Stock Option Plan.
================================================================================
<PAGE>
PROSPECTUS
May 5, 1999
671,929 Shares
[LOGO]
Class B Common Stock
------------
These shares may be offered and sold from time to time by certain stockholders
of Ticketmaster Online-CitySearch, Inc. identified in this prospectus. See
"Selling Stockholders." The selling stockholders acquired the shares on March
29, 1999 in connection with the acquisition of CityAuction, Inc., by
Ticketmaster Online-CitySearch, Inc. pursuant to an Agreement of Merger and Plan
of Reorganization dated as of January 8, 1999 by and among Ticketmaster Online-
CitySearch, Inc., Nero Acquisition Corporation, CityAuction, Inc., Andrew Rebele
and Monica Lee, as amended (the "Merger Agreement").
The selling stockholders will receive all of the net proceeds from the sale of
the shares. These stockholders will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. Ticketmaster Online-
CitySearch, Inc. will not receive any proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK.
Ticketmaster Online-CitySearch, Inc.'s Class B common stock is quoted on the
Nasdaq National Market under the symbol "TMCS." On May 3, 1999, the last
reported sale of the Class B common stock was $30.56 per share.
--------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES
REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE
SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<PAGE>
--------------
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Ticketmaster Online-CitySearch, Inc........................................... 2
Recent Developments........................................................... 2
Risk Factors.................................................................. 5
Where to Find More Information About Ticketmaster Online-CitySearch, Inc...... 30
Information Incorporated by Reference......................................... 30
Selling Stockholders.......................................................... 31
Plan of Distribution.......................................................... 31
Indemnification of Directors and Officers..................................... 32
</TABLE>
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<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of Ticketmaster Online-CitySearch, Inc. common
stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale of
the shares.
FORWARD LOOKING INFORMATION
This prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934 (the "Exchange Act"). Our actual results
could differ materially from those projected in the forward-looking statements
as a result of the risk factors set forth below. In addition, please review the
sections captioned "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in our annual report on Form 10-K for the fiscal year
ended December 31, 1998, which report is incorporated herein by reference and
such section of any subsequently filed Exchange Act reports. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the shares offered hereby should carefully consider the factors
set forth in this prospectus under "Risk Factors."
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TICKETMASTER ONLINE-CITYSEARCH, INC.
Ticketmaster Online-CitySearch, Inc. ("Ticketmaster Online-CitySearch") is
a leading provider of local city guides, local advertising and live events
ticketing on the Internet. Ticketmaster Online-CitySearch is integrating its
local CitySearch city guides with its Ticketmaster Online live events ticketing
and merchandise distribution capabilities to offer online ticketing,
merchandise, electronic coupons and other transactions to a broader audience of
consumers. The CitySearch city guides provide up-to-date information regarding
arts and entertainment events, community activities, recreation, business,
shopping, professional services and news/sports/weather to consumers in
metropolitan areas. Ticketmaster Online offers consumers up-to-date information
on live entertainment events and a convenient means of purchasing tickets for
live events and related merchandise on the World Wide Web in 43 states and in
Canada and the United Kingdom. Consumers can access the Ticketmaster Online
service at www.ticketmaster.com and from CitySearch owned and operated city
guides at www.citysearch.com through numerous direct links from banners and
event profiles. Ticketmaster Online-CitySearch's principal offices are located
at 790 E. Colorado Boulevard, Suite 200, Pasadena, California, 91101, and the
telephone number at that address is (626) 405-0050.
RECENT DEVELOPMENTS
On February 9, 1999, USA Networks, Inc. ("USAi"), Lycos, Inc.
("Lycos") and Ticketmaster Online-CitySearch announced that they had entered
into definitive agreements (the "Agreements") relating to the combination of
Ticketmaster Online-CitySearch, Lycos and USAi's Home Shopping Network,
Ticketmaster and Internet Shopping Network/First Auction businesses (the
"Contributed Businesses") in a new company to be named USA/Lycos Interactive
Networks, Inc. ("USA/Lycos"). The transactions will be effected by mergers of
Lycos and Ticketmaster Online-CitySearch with subsidiaries of USA/Lycos and the
contribution by USAi to USA/Lycos of the Contributed Businesses, in
exchange for the consideration summarized below (the "Transactions").
Pursuant to the Agreements, upon consummation of the Transactions:
i) each share of Lycos Common Stock will be converted into the right to
receive (a) 1 share of USA/Lycos Common Stock and (b) 0.2963 of a share of
USA/Lycos Series A Convertible Redeemable Preferred Stock (the "Series A
Preferred Stock");
ii) each share of Ticketmaster Online-CitySearch Class B Common Stock (the
publicly traded Ticketmaster Online-CitySearch stock) will be converted
into the right to receive (x) 0.4464 of a share of USA/Lycos Common Stock
and (y) 0.0584 of a share of Series A Preferred Stock;
iii) each share of Ticketmaster Online-CitySearch Class A Common Stock will be
converted into the right to receive 0.4464 of a share of USA/Lycos Class B
Common Stock; and
iv) USAi will receive 88,353,398 shares of USA/Lycos Class B Common
Stock and 1,938,853 shares of Series A Preferred Stock in exchange for the
Contributed Businesses.
Both the USA/Lycos Common Stock and Series A Preferred Stock will be
publicly traded. The USA/Lycos Class B Common Stock will not be publicly traded.
Except as otherwise provided by Delaware law, the USA/Lycos Common Stock will
have one vote per share, and the USA/Lycos Class B Common
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<PAGE>
Stock will have 15 votes per share on all matters submitted to a vote of
USA/Lycos' stockholders, including the election of directors of USA/Lycos.
Upon closing of the Transactions, based on the expected initial ownership
of USA/Lycos on an adjusted fully diluted basis, former Lycos shareholders will
own 30% of the USA/Lycos equity, former Ticketmaster Online-CitySearch
shareholders (other than USAi) will own 8.5% of the USA/Lycos equity and
USAi will own 61.5% of the USA/Lycos equity (including 10.9% relating to
USAi's controlling interest in Ticketmaster Online-CitySearch). Upon the
closing, USAi will beneficially own shares of USA/Lycos stock
representing approximately 96% of the combined voting power of USA/Lycos,
assuming all holders of Ticketmaster Online-CitySearch Class A Common Stock,
other than USAi, convert their shares into shares of Ticketmaster
Online-CitySearch Class B Common Stock prior to the closing.
The terms of the Series A Preferred Stock provide for the issuance in
certain circumstances of additional shares of USA/Lycos Common Stock to the
holders thereof following the 39-month anniversary of the closing of the
transactions. Each share of Series A Preferred Stock will be, following such
anniversary, automatically converted into the right to receive a number of
shares of USA/Lycos Common Stock based on the "Final Market Price" of the
USA/Lycos Common Stock, which is equal to the sum of (i) .5 times the average of
the 90-day, volume-weighted average closing price (the "Market Price") of the
USA/Lycos Common Stock ending on (x) the 90th day following the closing, (y) the
15-month anniversary of the closing and (z) the 27-month anniversary of the
closing, and (ii) .5 times the Market Price for the 90-day period ending on the
39-month anniversary of the closing (the sum of (i) and (ii), the "Final Market
Price"). If the Final Market Price is equal to or greater than $257.88 (which
would imply a market capitalization, based on USA/Lycos's expected initial
capitalization at closing, of $45 billion), each share of Series A Preferred
Stock will be converted into 1 share of USA/Lycos Common Stock, if the Final
Market Price is equal to or less than $143.27 (which would imply a market
capitalization, based on USA/Lycos' expected initial capitalization at closing,
of $25 billion), each Series A Preferred Stock share will be convertible into no
shares of USA/Lycos Common Stock and the shares of Series A preferred stock will
be redeemed by USA/Lycos for $.01 per share. At Final Market Prices between
$143.27 and $257.88, the shares to be issued will vary, on an interpolated
basis. The Series A Preferred Stock will contain customary anti-dilution
adjustments for the Final Market Price and the conversion ratio. The terms of
the Series A Preferred Stock are set forth in Exhibit B to the Agreement and
Plan of Reorganization, which is incorporated by reference in Ticketmaster
Online-CitySearch's Form 10-K for the year ended December 31, 1998, File
No. 000-25041, as filed with the Securities and Exchange Commission (the "SEC")
on March 31, 1999.
The parties have also entered into option agreements, which under certain
circumstances provide USAi and Ticketmaster Online-CitySearch with the
right to acquire, in the aggregate, up to 19.9% of the outstanding Lycos Common
Stock.
The Transactions are subject to Lycos shareholder approval as well as
receipt of required regulatory approvals and other customary conditions.
Upon closing of the Transactions, Barry Diller, Chairman and Chief
Executive Officer of USAi will be Chairman of the Board of USA/Lycos;
Robert J. Davis, the President and Chief Executive Officer of Lycos, will be the
President and Chief Executive Officer of USA/Lycos; and Edward M. Philip, Chief
Operating Officer and Chief Financial Officer of Lycos, will be the Chief
Financial Officer of USA/Lycos. In addition to Mr. Diller, Messrs. Davis and
Philip will be directors of USA/Lycos. Lycos will be entitled to appoint one
additional director to serve for a one-year term, and USAi will appoint
the remaining directors of USA/Lycos.
3
<PAGE>
The agreements summarized above are incorporated by reference in
Ticketmaster Online-CitySearch's Form 10-K for the year ended December 31, 1998,
File No. 000-25041, as filed with the SEC on March 31, 1999, and the foregoing
summary descriptions of the agreements are qualified in their entirety by
reference to such exhibits.
4
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. The risk factors set forth in this Prospectus
reflect those risks known to management as of the date of this Prospectus and
which management believes could be material to our business, operating results
and financial condition. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also impair our business
operations. Such risk factors may change over time and may differ materially
from those set forth in this Prospectus.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline and you may lose
all or part of your investment.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in such forward-looking statement as a result of a variety of factors, including
those set forth in the following risk factors or elsewhere in, or incorporated
by reference into, this Prospectus.
Limited Operating History
CitySearch was incorporated in September 1995 and launched its initial
local city guide service in the Raleigh-Durham-Chapel Hill metropolitan area in
May 1996. Ticketmaster Online commenced online ticket sales in November 1996.
Accordingly, the CitySearch and Ticketmaster Online businesses each have an
extremely limited operating history upon which an evaluation of Ticketmaster
Online-CitySearch and its prospects can be based. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets such as those in which we compete.
These risks include, but are not limited to:
* evolving and unpredictable business models;
* management of growth;
* our ability to anticipate and adapt to developing markets;
* acceptance of our services by Internet users, consumers and business
customers; and
* our ability to establish relationships with additional strategic partners.
To address these risks, we must, among other things, do the following:
5
<PAGE>
* attract and retain an audience of frequent users of our city guide, ticketing
and auction services in our target markets;
* maintain our business customer base;
* attract a significant number of new CitySearch business customers in target
markets;
* expand our sales of tickets and merchandise through Ticketmaster Online;
* respond to competitive developments;
* continue to form and maintain relationships with media partners;
* continue to attract, retain and motivate qualified personnel;
* provide superior customer service; and
* continue to develop and upgrade our technologies and commercialize our
services incorporating these technologies.
There can be no assurance that we will be successful in addressing these
risks, and a failure to do so could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore, we have a limited history as a company with public reporting
obligations, and operating with these obligations will place substantial demands
on management and our operating systems. These increased demands are requiring
further expenditures to hire management personnel and to expand our operating
systems. To the extent these expenditures precede or are not subsequently
followed by increased revenues, our business, financial condition and results of
operations could be materially and adversely affected.
Anticipated Continued Operating Losses
Ticketmaster Online incurred net losses of $615,000 for the year ended
January 31, 1997, generated net income of $2.3 million for the year ended
January 31, 1998 and incurred net losses of $17.2 million for the eleven
months ended December 31, 1998. As a result of the merger of Ticketmaster
Online with a wholly-owned subsidiary of CitySearch in September 1998 (the
"Merger"), we have recorded a significant amount of goodwill which will
adversely affect our earnings and profitability for the foreseeable future. We
recorded an aggregate of $315.9 million of goodwill and other intangibles,
$154.8 million of which related to the transaction in which Ticketmaster
Group, Inc. became a wholly-owned subsidiary of USAi, and is to be amortized
through 2008, and $161.1 million of which related directly to the Merger and
is to be amortized through 2003. In addition, our acquisition of CityAuction,
Inc. resulted in $28.1 million in goodwill which will be amortized through
2004. To the extent the amount of such recorded goodwill is increased or we
have future losses and are unable to demonstrate our ability to recover the
amount of goodwill recorded during these time periods, the period of
amortization could be shortened, which may further increase annual
amortization charges. In this case, our business, financial condition and
results of operations could be materially and adversely affected.
We believe that our future profitability and success will depend in large
part on, among other things:
* our ability to generate sufficient revenues from online ticketing, online
auctions, sales of our Web sites to businesses and from the licensing of our
technology and business systems to partners setting up our services in
partner-led markets;
6
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* the ability of Ticketmaster Corp. to maintain existing relationships and
enter into new relationships with live event venues, sports franchises,
promoters and other clients for which it sells live event tickets;
* the ability of Ticketmaster Corp. to obtain or retain for us the right to
sell live event tickets and related merchandise online;
* our ability to effectively maintain existing relationships with our media
partners;
* our ability to successfully enter into new strategic relationships for
distribution and increased usage of our services; and
* our ability to generate sufficient online traffic and sales volume to achieve
profitability.
Accordingly, we expect to expend significant financial and management
resources on the roll-out of our service in new owned and operated and partner-
led markets, site and content development on our CitySearch.com,
CityAuction.com and Ticketmaster.com sites, integration of the CitySearch,
CityAuction and Ticketmaster Online services, strategic relationships,
technology and operating infrastructure. As a result, we expect to incur
significant additional losses and continued negative cash flow from operations
for the foreseeable future. There can be no assurance that our revenues will
increase or even continue at their current levels or that we will achieve or
maintain profitability or generate cash from operations in future periods. In
view of the rapidly evolving nature of our business, the limited operating
history of CitySearch and Ticketmaster Online and the risks associated with
integrating these businesses, we believe that period-to-period comparisons of
operating results are not meaningful and should not be relied upon as an
indication of future performance.
Dependence on Relationship with Ticketmaster Corp.
In connection with the merger of CitySearch and Ticketmaster Online,
Ticketmaster Online, Ticketmaster Corp. and USAi entered into a license
agreement, which designates, subject to certain limitations, Ticketmaster Online
as Ticketmaster Corp.'s exclusive agent for online live event ticket sales and
as its non-exclusive agent for the online sale of merchandise.
We anticipate that, for the foreseeable future, a majority of our revenues
will be derived from the online sale of tickets by Ticketmaster Online.
Ticketmaster Online currently derives and, for the foreseeable future, will
continue to derive a substantial portion of its revenues from per ticket
convenience charges and per order handling charges paid by consumers in
connection with online purchases of tickets to live events presented or promoted
by clients of Ticketmaster Corp. Ticketmaster Online does not have contractual
relationships with the entities for which it sells tickets as Ticketmaster
Corp.'s agent and it is restricted under the license agreement from having such
relationships, whether with current Ticketmaster Corp. clients or its potential
clients. Accordingly, Ticketmaster Online's future revenues and business success
are dependent on Ticketmaster Corp.'s ability to maintain and renew
relationships with its existing clients and to establish relationships with
additional clients.
For the year ended December 31, 1998, Ticketmaster Corp. processed ticket
sales for over 3,750 clients. Approximately 20% of Ticketmaster Corp.'s client
contracts are subject to renewal each year. Ticketmaster Online is dependent
upon Ticketmaster Corp.'s ability to enter into and maintain client contracts on
terms that are favorable to Ticketmaster Corp. and Ticketmaster Online. There
can be no assurance that Ticketmaster Corp. will be able to enter into or
maintain client contracts on such terms.
All of Ticketmaster Online's ticket sales are processed through
Ticketmaster Corp.'s systems. Under the license agreement, Ticketmaster Corp. is
generally obligated to provide order fulfillment services at least
7
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at the same level as such services were generally provided as of the date of the
license agreement. The license agreement obligates Ticketmaster Corp. to process
a specified number of tickets sold online each year through December 31, 2001.
As a result, Ticketmaster Online's future revenues are dependent upon
Ticketmaster Corp.'s ability to process such online ticket sales in an accurate
and timely manner. While we believe that, due to the perpetual right of
Ticketmaster Online to serve as Ticketmaster Corp.'s exclusive agent for online
live event ticket sales, Ticketmaster Corp. has a substantial interest in its
relationship with Ticketmaster Online, there can be no assurance that
Ticketmaster Corp. will provide fulfillment services to Ticketmaster Online in
excess of the requirements of the Ticketmaster license agreement and, in
particular, after December 31, 2001.
Ticketmaster Online's ability to generate ticket and merchandise sales on
its Web sites is also dependent in part on Ticketmaster Corp.'s ability to
maintain and enhance the Ticketmaster brand name. Any failure on the part of
Ticketmaster Corp. to maintain its existing base of clients, to establish
relationships with new clients upon terms favorable to Ticketmaster Online, to
obtain or retain for Ticketmaster Online the right to sell tickets and
merchandise online for Ticketmaster Corp.'s clients, to process Ticketmaster
Online's online ticket sales in a timely and accurate manner or at levels
necessary to support Ticketmaster Online's business or to maintain and enhance
the Ticketmaster brand name would have a material adverse effect on our
business, financial condition and results of operations.
Control by and Relationship with USA Networks
We are currently a direct, majority-owned subsidiary of Ticketmaster Corp.,
which is an indirect wholly-owned subsidiary of USAi. As of March 31, 1999, USAi
owned approximately 58.7% of the total outstanding Common Stock (on a converted
to Class B Common Stock basis), representing approximately 66.6% of the total
voting power of the Common Stock. As a result of its ownership of Class A Common
Stock, USAi has the ability to control the outcome of any matter submitted for
the vote or consent of our stockholders, except where a separate vote of the
holders of Class B Common Stock is required by Delaware law. Subject to
applicable Delaware law, USAi is generally not restricted with regard to its
ability to control the election of our directors, to cause the amendment of our
Amended and Restated Certificate of Incorporation or generally to exercise a
controlling influence over our business and affairs. This control relationship
may have the effect of delaying or preventing a change in control of our company
and might adversely affect the market price of the Class B Common Stock.
Subject to applicable Delaware law, USAi could elect to sell all or a
substantial portion of its equity interest in us to a third party, which would
represent a controlling or substantial interest in us, without offering to our
other stockholders the opportunity to participate in such a transaction. See
"Recent Developments" for a description of the pending Lycos/USA Networks
transaction. In the event of a sale of USAi's interest to a third party, that
third party may be able to control us in the manner that USAi is able to control
us, including the ability to control the election of
8
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directors. This could adversely affect the market price of the Class B Common
Stock and may adversely affect our business, financial condition and results of
operations.
USAi is currently controlled by Barry Diller, who is also a director of our
company. Mr Diller is the Chairman and Chief Executive Officer of USAi. Under
stockholder and governance agreements with Liberty Media and Universal Studios
(two other significant USAi stockholders), Mr. Diller generally has the right to
control the outcome of any matter requiring the approval of USAi stockholders,
other than with respect to specified fundamental changes relating to USAi or its
subsidiaries. To engage in these fundamental changes, the approval of each of
Mr. Diller, Liberty Media and Universal Studios is generally required. Copies of
the governance and stockholders agreements among USAi, Universal Studios,
Liberty Media and Mr. Diller have been filed with the SEC as Appendices B and C,
respectively, to USAi's Definitive Proxy Statement, dated January 12, 1998 and
are available from the SEC. Mr. Diller does not have an employment agreement
with USAi, although he has been granted options to purchase a substantial
number of shares of USAi common stock. The vesting of the unvested portion of
these options, which should occur in the next two years, is conditioned on Mr.
Diller remaining at USAi. If Mr. Diller no longer serves in his positions at
USAi, generally Universal Studios and Liberty Media will be able to control
USAi. Any change in the governance, management, operations or business of USAi
could have a material adverse effect on our relationship with USAi and
Ticketmaster Corp., and could materially and adversely affect our business,
financial condition and results of operations.
Potential Conflicts of Interest
Conflicts of interest may arise between us, including Ticketmaster Online,
on the one hand, and USAi and its affiliates, including Ticketmaster
Corp., on the other hand, in areas relating to past, ongoing and future
relationships. These relationships include:
* our license agreement;
* corporate opportunities:
* indemnity arrangements;
* tax and intellectual property matters;
* potential acquisitions or financing transactions;
* sales or other dispositions by USAi of shares of the our Class A
Common Stock held by it; and
* the exercise by USAi of its ability to control our management and
affairs.
These conflicts also may include disagreements regarding the our license
agreement, including possible amendments to, or modifications or waivers of
provisions of, the agreement. Due to USAi's ability to control
our board of directors and subject to Delaware law, USAi may be able to
effect these amendments without seeking the approval of any other party. These
amendments, modifications or waivers may adversely affect our business,
financial condition and results of operations. Ownership interests of our
directors or officers in the USAi common stock, or service as both a
director or officer of us and a director, officer or employee of USAi,
could create or appear to
9
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create potential conflicts of interest when directors and officers are faced
with decisions that could have different implications for us and USAi. Eight
of the members of our board of directors are also directors, officers or
employees of USAi.
In addition, USAi is engaged in a diverse range of media and entertainment-
related businesses, including businesses engaged in electronic and online
commerce (including Home Shopping Network and its USA Interactive business), and
these businesses may have interests that conflict or compete in some manner with
our businesses. Subject to applicable Delaware law, USAi is under no obligation,
and has not indicated any intention, to share any future business opportunities
available to it with us except as expressly provided by our license agreement
with Ticketmaster Corp. Our Amended and Restated Certificate of Incorporation
also includes provisions which provide that:
* USAi shall have no duty to refrain from engaging in the same or similar
activities or lines of our business, thereby competing with us;
* USAi, its officers, directors and employees shall not be liable to us or our
stockholders for breach of any fiduciary duty by reason of any activities of
USAi in competition with us; and
* USAi shall have no duty to communicate or offer corporate opportunities to us
and shall not be liable for breach of any fiduciary duty as a stockholder of
us in connection with these opportunities, provided that certain procedures
set forth in the Amended and Restated Certificate of Incorporation are
followed.
There can be no assurance that any conflicts that may arise between us and
USAi, any loss of a corporate opportunity to USAi that might otherwise be
available to us, or any engagement by USAi (subject to the limitations of our
license agreement) in any activity that is similar to our businesses will not
have a material adverse effect on our business, financial condition and results
of operations or our other stockholders.
Possible Future Sales of Common Stock by USAi
Subject to applicable federal securities laws and the restrictions set
forth below, USAi may sell a significant portion of the shares of Class A
Common Stock beneficially owned by it (which at March 31, 1999 represented
approximately 82.1% of the outstanding Common Stock on a converted to Class B
Common Stock basis) or distribute any or all of such shares of Class A Common
Stock to its stockholders. Pursuant to our Amended and Restated Certificate of
Incorporation, each share of Class A Common Stock will be converted
automatically into one share of Class B Common Stock upon any transfer by the
initial registered holder (except in certain cases such as transfers to
affiliates or other holders of Class A Common Stock). Any sales or
distribution by USAi of substantial amounts of Class B Common Stock issuable
upon conversion of the Class A Common Stock held by USAi in the public market
or to its stockholders, or a transfer of beneficial ownership of shares of
Class A Common Stock that does not constitute a transfer pursuant to the
Amended and Restated Certificate of Incorporation, or the perception that
these transfers, sales or distribution could occur, could adversely affect the
prevailing market prices for the Class B Common Stock. USAi is not subject to
any obligation to retain any portion of its controlling interest in us, except
that USAi has agreed not to sell or otherwise dispose of any shares of our
capital stock for a period of 180 days after the date of the Prospectus filed
by us on December 3, 1998 without the prior written consent of NationsBanc
Montgomery Securities LLC, the representative of the underwriters in the
public offering.
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Company Integration Risks
Before the transactions that have combined CitySearch, CityAuction and
Ticketmaster Online, CitySearch and CityAuction operated independently and
Ticketmaster Online operated as a wholly-owned subsidiary of Ticketmaster
Corp. and USAi. Our future success will depend to a significant extent on the
efficient, effective and timely integration of the companies' operations. This
integration includes the combination of different business models, different
technologies and personnel with different expertise and backgrounds and the
development of services in which CitySearch's local content, CityAuction's
auction functionality, and Ticketmaster Online's live event-specific content
and transactional capabilities are integrated with each other. We are also
evaluating our existing technologies and our ability to support the expanded
range of products and services we are expected to offer. We are currently
linking the Ticketmaster Online ticketing service more closely with some of
our CitySearch city guides and promoting CityAuction's services throughout the
city guides. We have not executed this integration in the past, and this
integration could require adaptation of existing technologies or development
of new technologies. There can be no assurance that we will be able to
coordinate either operational or technological integration effectively or
efficiently with each other. Failure to effectively accomplish the integration
of the companies' operations or the loss of any of our key employees could
have a material adverse effect on our business, financial condition and
results of operations.
Dependence on Increased Ticket and Sponsorship Sales
Our future success, and in particular our revenues and operating results,
depends in large part upon our ability to increase the dollar volume of
transactions through Ticketmaster Online, either by generating significantly
higher levels of traffic to our CitySearch and Ticketmaster Online Web sites or
by increasing the percentage of visitors to our online sites who purchase
tickets or merchandise, or through some combination of the two. Our ability to
increase ticket sales depends in part upon Ticketmaster Corp.'s ability to
obtain the rights to sell tickets online for new Ticketmaster Corp. clients. We
must also increase the number of repeat purchasers of tickets and merchandise
through Ticketmaster Online. Under our license agreement with Ticketmaster
Corp., Ticketmaster Corp. is generally obligated to provide order fulfillment
services at least at the same level as such services were generally provided as
of the date of the agreement. The license agreement obligates Ticketmaster Corp.
to process a specified number of tickets sold online each year through 2001.
While we believe that, due to the perpetual right of Ticketmaster Online to
serve as Ticketmaster Corp.'s exclusive agent for online live event ticket
sales, Ticketmaster Corp. has a substantial interest in its relationship with
Ticketmaster Online, there can be no assurance that Ticketmaster Corp. will
provide fulfillment services to Ticketmaster Online in excess of the
requirements of the Ticketmaster license agreement and, in particular, after
December 31, 2001. In addition, in order to generate sufficient revenues from
sponsorship and advertising on the Ticketmaster Online Web sites, we must
deliver a high level of service and compelling content in order to attract users
with demographic characteristics valuable to sponsors and advertisers. There can
be no assurance that we will be able to increase the dollar volume of
transactions booked through our online sites, increase traffic to our online
sites, increase the percentage of visitors who purchase tickets or merchandise,
increase the number of repeat purchasers or increase our sponsorship and
advertising revenues. In addition, there can be no assurance that we will be
able to offer our online ticketing services through our city guides in our
partner-led markets on terms acceptable to us. The failure to do one or more of
the foregoing would likely have a material adverse effect on our business,
financial condition and results of operations
Future Capital Needs; Uncertainty of Additional Financing
Since inception, CitySearch has experienced negative cash flow from
operations and we expect to continue to experience significant negative cash
flow from operations for the foreseeable future. USAi has no obligation
or agreement to provide any future capital or other funding to us. We may be
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required to raise additional funds at some point in the future. If additional
funds are raised through the issuance of equity securities, our stockholders may
experience significant dilution. Furthermore, there can be no assurance that
additional financing will be available when needed or that if available, such
financing will include terms favorable to our stockholders or us. If this
financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our business, financial condition and results
of operations.
Unpredictability of Future Revenues; Fluctuations in Operating Results
As a result of our limited operating history, and the emerging nature of
the markets in which we compete, we are unable to accurately forecast our future
revenues. Our current and future expense levels are based predominantly on our
operating plans and estimates of future revenues and are to a large extent
fixed. For example, the CitySearch business model, particularly in our owned and
operated markets, requires significant staffing to develop content and to create
and maintain relationships with small- and medium-size businesses. We may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues would
likely have an immediate material adverse effect on our business, financial
condition and results of operations. Furthermore, we currently intend to
increase our operating expenses to roll out our CitySearch service in new
markets, to fund increased sales and marketing and customer service operations,
to attempt to further develop our technology infrastructure and to integrate our
local content with the event-specific content and transactional capabilities of
Ticketmaster Online. To the extent these expenses precede or are not
subsequently followed by increased revenues, our operating results will
fluctuate and net anticipated losses in a given quarter may be greater than
expected.
We expect to experience significant fluctuations in our future operating
results due to a variety of factors, many of which are outside of our control.
Factors that may adversely affect our operating results include, but are not
limited to:
* Ticketmaster Corp.'s ability to maintain and increase the number of clients
for which it provides online ticketing services and convenience charges;
* the ability of our partners to meet roll-out schedules for CitySearch city
guide services;
* the timing and amount of license and royalty payments from our partners;
* our ability to increase the volume of online ticket sales through the
Ticketmaster Online Web site;
* our ability to increase the number of users of the CityAuction service and
revenues generated from auctions;
* our ability to retain existing business customers, attract new business
customers at a steady rate and maintain customer satisfaction;
* the timing and volume of new business Web site orders and our capacity to
meet such orders;
* our ability to maintain or increase current rates of sales productivity;
* the announcement or introduction of new or enhanced sites and services by us
or our competitors;
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* the amount of traffic on our online sites;
* the amount of expenditures for online advertising by businesses;
* the level of use of the Web and online services and consumer acceptance of
the Internet for services such as those offered by us;
* our ability to upgrade and develop our systems and attract personnel in a
timely and effective manner;
* the amount and timing of operating costs and capital expenditures relating to
expansion of our business and infrastructure, technical difficulties, system
downtime or Internet brownouts;
* political or economic events affecting the cities in which we operate; and
* general economic conditions.
Unfavorable changes in any of the above factors could adversely affect our
revenues, gross margins and results of operations in future periods. In
addition, Ticketmaster Online derives a majority of its revenues directly or
indirectly from the sale of tickets and related merchandise for live
entertainment, sporting and leisure events and is directly affected by the
popularity, frequency and location of these events. Factors affecting the demand
for and attendance of such events include, without limitation, general economic
conditions, consumer trends and work stoppages. Any occurrence or condition that
results in decreased attendance or demand for such entertainment, sporting and
leisure events would likely have a material adverse effect on our business,
financial condition and results of operations.
As a result of the foregoing, we believe that period-to-period comparisons
of our results of operations should not be relied upon as an indication of
future performance. In addition, the results of any quarterly period are not
indicative of results to be expected for a full fiscal year. The foregoing
factors which are largely unpredictable and may cause significant fluctuations
in operating results may cause our annual or quarterly results of operations to
be below the expectations of public market analysts or investors.
New and Uncertain Markets; Unproven Market Acceptance; Risk of Significant
Business Customer Turnover
The markets for our services have only recently begun to develop, are
rapidly evolving and are characterized by a number of entrants that have
introduced or plan to introduce competing services. As is typical in the case of
new and rapidly evolving industries, demand and market acceptance for recently
introduced services are subject to a high level of uncertainty and risk. It is
therefore difficult to predict the size and future growth rate, if any, of these
markets. There can be no assurance that the markets for our services will
develop or that demand for our services will emerge or become economically
sustainable. The success of the Ticketmaster Online service will depend on the
willingness of consumers to purchase tickets to live events and related
merchandise online and on Ticketmaster Online's ability to significantly
increase online traffic and sales volume. The success of the CityAuction service
will depend, in part, on users' willingness to post and purchase goods or
services online. The success of CitySearch's city guide service will depend on
the willingness of local businesses to pay for custom business Web sites
developed by CitySearch and to retain the service, which in turn may depend on
the popularity of the guides to consumers and on the actual or perceived
revenues attributable to the services. If such businesses are unwilling to pay
for the CitySearch service or retain the service, if the markets for our
services otherwise fail to develop or develop more slowly than anticipated or if
business customer turnover rates are higher than expected by us, our business,
financial condition and results of operations could be materially and adversely
affected. The turnover rate of business customers using CitySearch's service has
been higher than we had anticipated, and there can be no assurance that such
turnover rates would be at levels which would not in the future materially
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and adversely affect our business, financial condition and results of
operations. Specifically, the turnover rate has been higher than expected due to
several factors, including:
* our early belief that our services would be suited to a broader base of
business customers;
* the challenges of proving advertising value to a broad range of small
businesses that may not have significant experience with online services;
* our continuing refinements to our sales, production and customer service
processes to meet the needs of our business customers; and
* our initial underestimation of the need for continuous marketing support of
our business customers.
There can be no assurance that businesses will elect to outsource the
design, development and maintenance of their Web sites to services such as
CitySearch. Businesses may elect to perform such tasks internally, particularly
if third-party providers of such services prove to be unreliable, ineffective or
too expensive or if software companies offer user-friendly and cost-effective
tools for such purpose. In the event that a significant number of businesses
internalize such tasks, such event may have a material adverse effect on our
business, financial condition and results of operations.
Dependence on Continued Growth of Online Commerce
Our future revenues and any future profits are substantially dependent upon
the widespread acceptance and use of the Web and online services as an effective
medium of commerce by consumers. Rapid growth in the use of and interest in the
Web, the Internet and commercial online services is a recent phenomenon, and
there can be no assurance that acceptance and use will continue to develop or
that a sufficiently broad base of consumers will adopt, and continue to use, the
Web and online services as a medium of commerce, particularly for purchasing
tickets to live events and related merchandise. Demand for recently introduced
services and products over the Web and online services is subject to a high
level of uncertainty, and there are relatively few proven services and products.
The development of the Web and online services as a viable commercial
marketplace is subject to a number of factors, including:
* continued growth in the number of Internet users and users of such services;
* concerns about transaction security;
* continued development of the necessary technological infrastructure; and
* the development of complementary services and products.
If the Web and online services do not become a viable commercial
marketplace, our business, financial condition and results of operations would
be materially and adversely affected.
CitySearch's Reliance on Strategic Relationships
An important element of our current business strategy with respect to the
CitySearch service is to enter into agreements with local media companies to
establish and support city guides. We have entered into, and intend to enter
into, agreements with media companies to address opportunities. In these
"partner-led" markets, we develop and design a city guide for local media
companies and license certain intellectual property to such companies in
exchange for certain up-front and continuing license payments and royalty
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payments. These royalty payments are based on the amount of revenues generated
by such companies through the partner-led city guides. We currently anticipate
that royalty payments from such agreements will constitute an increasing portion
of our revenues in future periods. Accordingly, our success will depend in large
part upon the ability of our partners to timely launch city guides in partner-
led markets and the extent to which these partners are able to generate revenue
through their city guides. Under the terms of our agreements with our media
company partners, we have very limited control over the amount of time and
financial resources that a partner devotes to the launch of a city guide or over
the day-to-day operations and management of the city guide, including the
marketing and sale of business Web sites to potential business customers. For
example, one of our partners did not launch our city guide in accordance with
our initial expectations, thereby delaying revenues subject to royalty payments
payable to us. Furthermore, some of our agreements grant exclusivity in certain
territories. There can be no assurance that our partners that are in the process
of developing new city guides or future partners will launch their sites in a
timely manner, or at all, or that if launched, such sites will generate revenues
consistent with our expectations. Furthermore, we are unable to accurately
forecast our revenues to be derived from these agreements with the partners.
Exclusivity provisions in some of our agreements place certain limitations on
our ability to license our intellectual property to other partners. There also
can be no assurance that we will successfully enter into partnerships with media
companies in additional cities with respect to the CitySearch service. In
addition, some of our agreements with our media company partners may be
terminated for failure to meet performance criteria. Any failure by one of our
proposed partner-led city guides to launch in a timely manner or by one of our
existing partner-led city guides to generate sufficient revenues, or a failure
by us to enter into or to renew agreements with media company partners on terms
favorable to us or early termination of certain existing agreements could have a
material adverse effect on our business, financial condition and results of
operations.
We have entered into a license and services agreement with Classified
Ventures, pursuant to which we license elements of our technology and business
systems to Classified Ventures and provide services in automotive and real
estate classified advertising categories. We receive significant revenues from
licensing and service fees under this agreement. Under this agreement, we are
restricted from entering into certain classified advertising markets and from
licensing our technology and business systems to competitors of Classified
Ventures. In addition, this agreement may be terminated effective 2001 by
Classified Ventures and there can be no assurance that it will be renewed on
terms favorable to us. Our failure to meet certain milestones under this
agreement, early termination of this agreement or our inability to compete with
Classified Ventures or to license technology to competitors of Classified
Ventures may have a material adverse effect on our business, financial condition
and results of operations.
In our owned and operated markets, we have entered into co-promotion or
distribution agreements with a number of television, radio, print media and
online companies. Some of these agreements are of a short duration and there can
be no assurance that our co-promotion or distribution partners with respect to
the CitySearch business will not terminate their agreements with us or that we
will secure additional co-promotion or distribution partners in the future which
could have a material adverse effect on our business, financial condition and
results of operations.
Ticketmaster Online's Reliance on Strategic Relationships
Ticketmaster Online's business is to an extent dependent on its and
Ticketmaster Corp.'s relationships with certain strategic partners relating to
the sharing of certain Ticketmaster Online Web site and user links. We expect to
derive significant benefits, including increased revenues and consumer
awareness, from these agreements. The arrangements also include, in certain
cases, non-competition provisions that restrict our ability to engage in similar
activities on our own or with other partners. There can be no assurance that
these relationships will continue, that such strategic relationships will be
successful in
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any respect or that we will be able to find suitable additional or replacement
strategic partners. The failure of these relationships could have a material
adverse effect on our business, financial condition and results of operations.
Dependence on Sales Personnel
We currently derive and, for the foreseeable future, intend to derive a
substantial portion of our revenues from sales of business Web sites to local
businesses in markets in which we own and operate CitySearch city guides. We
depend on our direct sales force to sell business Web sites in these markets.
The creation of new revenue from CitySearch's city guide service and our roll-
out in additional cities requires the services of a highly trained sales force
working directly for us. Accordingly, a shortage in the number of trained
salespeople could limit our ability to sell business Web sites as we roll out
our service in new cities or to maintain or increase our number of business
customers in cities in which we already operate. We have in the past and expect
in the future to experience a high rate of turnover in our direct sales force.
There can be no assurance that turnover will not increase in the future or have
a material adverse effect on our sales, which could have a material adverse
effect on our business, financial condition and results of operations. In
addition, we currently derive a portion of our Ticketmaster Online revenues from
the sale of banner advertising and sponsorships. A shortage in the number of
trained salespeople could limit our ability to sell additional banner
advertising or sponsorships or renew existing sponsorship or advertising
relationships, which could have a material adverse effect on our business,
financial condition and results of operations.
Dependence on Key Personnel; Need to Hire Additional Qualified Personnel
Our success depends to a significant degree upon the continued
contributions of our executive management team, including Charles Conn, our
Chief Executive Officer. The loss of the services of Mr. Conn or other members
of our management team could have a material adverse effect on our business,
financial condition and results of operations. In addition, Ticketmaster Online
has been managed historically by the management of Ticketmaster Corp. The
success of the Company will depend upon a successful transition of Ticketmaster
Online's management responsibility to our senior management team. Our employees,
including our senior officers, may voluntarily terminate their employment with
us at any time, and competition for qualified employees is intense. Our success
also depends upon our ability to attract and retain additional highly qualified
management, technical and sales and marketing personnel. The process of locating
and hiring such personnel with the combination of skills and attributes required
to carry out our strategy is often lengthy. The loss of the services of key
personnel or the inability to attract additional qualified personnel could have
a material adverse effect on our business, financial condition and results of
operations.
Uncertain Acceptance and Maintenance of CitySearch Brand
We believe that establishing and maintaining the CitySearch brand is
critical to our efforts to attract consumers and business customers to our sites
and that the importance of brand recognition will increase due to the growing
number of Internet sites and relatively low barriers to entry to providing
Internet content. Promotion of the CitySearch brand will depend largely on our
success and our media company partners in providing high quality Internet
content. Under the terms of our agreements with media company partners, we have
very limited control over the content provided on the CitySearch partners'
sites. If consumers and business customers do not perceive the content of our or
our partners' existing sites to be of high quality, we will be unsuccessful in
promoting and maintaining the CitySearch brand. Furthermore, not all of our
partners promote the CitySearch brand on their services with a high level of
prominence. In addition, users accessing partner-led market sites that contain
different interfaces from our owned and operated sites may be confused by the
differences in interface or navigation, and any such confusion may inhibit our
ability to develop our
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brand and network. Other than links to CitySearch's city sites, we have not
entered into a significant distribution relationship with any major online
search or navigation company. In order to attract and retain consumers and
business customers, and to promote the CitySearch brand in response to
competitive pressures, we may find it necessary to increase our budget for
content or otherwise to increase substantially our financial commitment to
creating and maintaining a distinct brand loyalty among consumers and business
customers. If either we or our media company partners are unable to provide high
quality content or otherwise fail to promote and maintain the CitySearch brand
or if we incur excessive expenses in an attempt to improve our CitySearch
content or promote and maintain the CitySearch brand, our business, financial
condition and results of operations could be materially and adversely affected.
Risks Associated with Roll Out of Services
Our future success will depend to a significant extent on our ability, on
our own and with partners, to rapidly roll out the CitySearch local city guide
service in additional cities in the United States and internationally. As of
March 31, 1999, we had launched our local city guide service in 24 metropolitan
areas and intend to expand our service in additional cities in the United States
and internationally. There can be no assurance that we will be able to launch
the CitySearch service in additional markets in a cost-effective or timely
manner or in accordance with our planned schedule, or that any newly launched
service will achieve market acceptance. Any new service that is not favorably
received by local businesses or consumers could damage our reputation or the
CitySearch brand. Launching the CitySearch service or future services offered by
us will also require significant additional expenses and will strain our
management, financial and operational resources. In particular, the launch of
the CitySearch service in additional cities will require us to expand and
upgrade our technology infrastructure and business systems, including our
enterprise management system and our business Web site production system. We are
in the process of launching a new version of the software underlying the
CitySearch service. There can be no assurance that this new version will
function as intended, and any failure of the software could have a material
adverse effect on our business, financial condition and results of operations.
There can be no assurance that the existing technology used with respect to our
Ticketmaster Online services would be able to accommodate increased volumes of
traffic and transactions that may arise in the future. Expansion of our
technology capabilities could result in significant expenses. Moreover, the
strain placed on our resources by simultaneous launches of the CitySearch
service in multiple cities and our efforts to integrate CitySearch's local
content with the event-specific content and transactional capabilities of
Ticketmaster Online may adversely affect the roll-out schedule or quality of the
service in a particular city. Our failure to launch the CitySearch service in
new markets in a timely and cost effective manner in accordance with our planned
schedule or the lack of market acceptance of new services would have a material
adverse effect on our business, financial condition and results of operations.
Risks of Fixed-Price Contracts
The services offered by us to CitySearch business customers typically
consist of the design, implementation, hosting and maintenance of customized Web
sites, for which the customers are billed on a fixed-price basis, consisting of
an up-front fee and monthly fees. Our failure to estimate accurately the
resources and time required for providing such services, to manage client
expectations effectively regarding the scope of services to be delivered for the
estimated fees or to complete the services within budget, on time and to
clients' satisfaction would expose us to risks associated with cost overruns and
customer dissatisfaction, which could have a material adverse effect on our
business, financial condition and results of operations.
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Competition
The markets for local interactive content and services are highly
competitive. Currently, CitySearch's primary competitors include Digital City,
Inc., a company wholly-owned by America Online, Inc. and Tribune Company, and
Microsoft Corporation (Sidewalk). CitySearch also competes against search engine
and other site aggregation companies which primarily serve to aggregate links to
sites providing local content such as Excite, Inc. (City.Net), Lycos, Inc.
(Lycos City Guide) and Yahoo! (Yahoo! Local). In addition, CitySearch competes
against offerings from media companies, including Cox Interactive Media, Inc.,
Knight Ridder, Inc. and Zip2 Corporation, as well as offerings from several
telecommunications and cable companies and Internet service providers that
provide local interactive programming such as SBC Communications, Inc. (At Hand)
and MediaOne Group, Inc. (DiveIn). There are also numerous niche competitors
which focus on a specific category or geography and compete with specific
content offerings provided by us. We may also compete with online services and
other Web site operators, as well as traditional media such as television, radio
and print, for a share of advertisers' total advertising budgets. We face
different competitors in most of our CitySearch markets. For example,
competitors in the San Francisco Bay Area primarily include Microsoft
Corporation (Sidewalk), America Online, Inc. (Digital City) and Yahoo! (SF Bay).
Competitors in Raleigh-Durham-Chapel Hill primarily include the Web site
operated by The Raleigh News & Observer, WRAL-TV, trianglerestaurants.com,
Digital Center (raleighonline.com), Yahoo! Local and Internet Presentations,
Inc. (citydirect.com). Furthermore, additional major media and other companies
with financial and other resources greater than ours may introduce new Internet
products and services addressing these markets in the future. There can be no
assurance that competitors will not develop services that are superior to ours
or that achieve greater market acceptance than our offerings.
The markets for the business of selling live event tickets and related
merchandise is highly competitive and diverse. Ticketmaster Corp.'s and
Ticketmaster Online's competitors include event facilities and promoters that
handle their own ticket sales and distribution through online and other
distribution channels, live event automated ticketing companies with Web sites
which may or may not currently offer online transactional capabilities and
certain Web-based live event ticketing companies which only conduct business
online. Where facilities and promoters decide to utilize the services of a
ticketing company, Ticketmaster Corp. and Ticketmaster Online compete with
international, national and regional ticketing services, including TicketWeb,
Telecharge (Shubert Ticketing Services), NEXT Ticketing, Advantix, ETM
Entertainment Network, Dillard's, Prologue, Capital Tickets and Lasergate
(Lasergate Systems, Inc.). Several of Ticketmaster Corp.'s and Ticketmaster
Online's competitors have operations in multiple locations throughout the United
States and compete with Ticketmaster Corp. and Ticketmaster Online on a national
level, while others compete with Ticketmaster Corp. and Ticketmaster Online
principally in one specific geographic region. Ticketmaster Corp. is a leading
provider of live event automated ticketing services in the United States, with
over 3,750 clients, and has a widely recognized brand name in the live event
ticketing business. We believe that our right to act as Ticketmaster Corp.'s
exclusive agent for online live event ticket sales with the exclusive, worldwide
right to use the Ticketmaster trademark for such online sales will enable it to
compete effectively with other online ticketing services. However, in certain
specific geographic regions, including certain of the local markets in which
CitySearch provides or intends to provide our local city guide service, one or
more of Ticketmaster Corp.'s and Ticketmaster Online's competitors may serve as
the primary ticketing service in the region. We believe that Ticketmaster Online
will experience significant difficulty in establishing a significant online
presence in such regions and, as a result, any local city guide for such a
region may be unable to provide significant ticketing capabilities. In addition,
there can be no assurance that one or more of these regional automated ticketing
companies will not expand into other regions or nationally, which could have a
material adverse effect on our business, financial condition and results of
operations.
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Furthermore, certain of Ticketmaster Online's competitors may have
financial and other resources greater than those of the Company and may
introduce new Internet products and services in these markets in the future.
There can be no assurance that Ticketmaster Online's competitors will not
develop services superior to those of Ticketmaster Online or achieve greater
acceptance than Ticketmaster Online's offerings. In addition, pursuant to our
license agreement with Ticketmaster Online, Ticketmaster Online is restricted
from entering into agreements with facilities, promoters or other ticket sellers
for the online sale of live event tickets. As a result, Ticketmaster Online is
dependent on the ability of Ticketmaster Corp. to acquire and maintain live
event ticketing rights, including online ticketing rights, with facilities and
promoters and to negotiate commercially favorable terms for such rights.
Furthermore, substantially all of the tickets sold through Ticketmaster Online's
Web site are also sold by Ticketmaster Corp. by telephone and through
independent retail outlets. These sales by Ticketmaster Corp. could have a
material adverse effect on Ticketmaster Online's online sales, and as a result,
on our business, financial condition and results of operations.
The online auction market is highly competitive. Currently, eBay.com
dominates the online auction market, both in terms of number of users and value
of goods auctioned. Search engine companies and other site aggregation companies
also offer auction functionality to Web users, and there can be no assurance
that other auction offerings will not attract more users and greater volumes of
goods auctioned than CityAuction.
We believe that the principal competitive factors for all our services
include:
* depth, quality and comprehensiveness of content;
* ease of use;
* distribution;
* search capability; and
* brand recognition.
Many of our competitors have greater financial and marketing resources
than we and may have significant competitive advantages through other lines of
business and existing business relationships. There can be no assurance that we
will be able to successfully compete against our current or future competitors
or that competition will not have a material adverse effect on our business,
financial condition and results of operations. Furthermore, as a strategic
response to changes in the competitive environment, we may make certain pricing,
servicing or marketing decisions or enter into acquisitions or new ventures that
could have a material adverse effect on our business, financial condition and
results of operations.
Risks Associated with Offering New Business and Consumer Services
We expect to introduce new and expanded services in order to generate
additional revenues, attract more businesses and consumers, and respond to
competition. For example, we recently introduced business Web sites containing
new and enhanced functionality for our CitySearch business customers. We also
offer services facilitating the purchase of goods by consumers from CitySearch's
business customers or others. A key element of our strategy is to
technologically enable our city guides so that consumers and our business
customers can buy and sell goods and services online through our city guides. We
have limited experience in building e-commerce functionality with our city
guides. There can be no assurance that we will be able to offer e-commerce or
other new services in a cost-effective or timely manner or that our efforts
would be successful. Furthermore, any new service launched by us that is not
favorably received by consumers could damage our reputation or our brand names.
Expansion of our services in this manner would also require
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significant additional expenses and development and may strain our management,
financial and operational resources. Our inability to generate revenues from
such expanded services sufficient to offset their cost could have a material
adverse effect on our business, financial condition and results of operations.
Management of Potential Growth; Risks Associated with Expansion
Our businesses have grown rapidly in recent periods. The growth of these
businesses and expansion of our consumer bases have placed a significant strain
on management and operations. The growth of our businesses has resulted, and is
expected in the future to result, in the growth in the number of our employees,
in the establishment of offices in disparate regions of the country and in
increased responsibility for both existing and new management personnel. In
addition, this growth has and will put additional pressure on existing
operational, financial and management information systems. Our success will
depend to a significant extent on the ability of our executive officers and
other members of senior management to operate effectively, both independently
and as a group. To manage our growth, we must continue to implement and improve
operational, financial and management information systems and hire and train
additional qualified personnel, including sales and marketing staff. There can
be no assurance that we will be able to manage recent or any future expansions
successfully, and any failure by us to do so could have a material adverse
effect on our business, financial condition and results of operations. There
also can be no assurance that our CitySearch, CityAuction or Ticketmaster Online
services will be able to sustain the rate of expansion that each has experienced
in the past.
Dependence Upon Continued Content Development
Our success depends in part upon our ability to deliver compelling
interactive content on our CitySearch service, such as local events information,
recreation, business, shopping, professional services and news/sports/weather
and online ticketing services in order to attract consumers with demographic
characteristics valuable to CitySearch's business customers, as well as our
ability to develop and integrate compelling content with existing ticketing
capabilities on the Ticketmaster Online Web site. There can be no assurance that
we will be successful in developing new content and services or enhancing
CitySearch's existing local city guide service, the Ticketmaster Online service
or the CityAuction service on a timely basis, or that such content and services
will effectively address consumer requirements and achieve market acceptance. If
we, for technological or other reasons, are unable to develop and enhance
CitySearch's, Ticketmaster Online's and CityAuction's local interactive content
and services in a manner compatible with emerging industry standards and that
allows us to attract, retain and expand a consumer base possessing demographic
characteristics attractive to CitySearch's business customers, Ticketmaster
Online's advertisers and sponsors, and CityAuction's users, our business,
financial condition and results of operations would be materially and adversely
affected.
Dependence on Increased Usage and Stability of the Internet and the Web
The usage of the Web for services such as those offered by us will depend
in significant part on continued rapid growth in the number of households and
commercial, educational and government institutions with access to the Web, in
the level of usage by individuals and in the number and quality of products and
services designed for use on the Web. Because usage of the Web as a source for
information, products and services is a relatively recent phenomenon, it is
difficult to predict whether the number of users drawn to the Web will continue
to increase and whether any significant market for usage of the Web for such
purposes will continue to develop and expand. There can be no assurance that
Internet usage patterns will not decline as the novelty of the medium recedes or
that the quality of products and services offered online will improve
sufficiently to continue to support user interest. Failure of the Web to
stimulate user interest and be accessible to a broad audience at moderate costs
would jeopardize the markets for our services.
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Moreover, issues regarding the stability of the Internet's infrastructure
remain unresolved. The rapid rise in the number of Internet users and increased
transmission of audio, video, graphical and other multimedia content over the
Web has placed increasing strains on the Internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Web and
could reduce the usage of the Web by businesses and individuals. In addition, to
the extent that the Web continues to experience significant growth in the number
of users and level of use without corresponding increases and improvements in
the Internet infrastructure, there can be no assurance that the Internet will be
able to support the demands placed upon it by such continued growth. Any failure
of the Internet to support an increasing number of users due to inadequate
infrastructure or otherwise would seriously limit the development of the Web as
a viable source of local interactive content and services, which could
materially and adversely affect the acceptance of our services, which would, in
turn, materially and adversely affect our business, financial condition and
results of operations.
Risks Associated with International Expansion
A component of our strategy is to continue to expand our services into
international markets. We expect to expend significant financial and management
resources to operate overseas and, with respect to the CitySearch service,
create localized user interfaces through the launch of additional partner-led
markets. We believe Ticketmaster Corp. intends to continue to expand its
operations outside of the United States, which will require additional resources
from Ticketmaster Online to the extent it distributes tickets online in those
markets. If the revenues generated by these international operations are
insufficient to offset the expense of establishing and maintaining such
operations, our business, financial condition and results of operations will be
materially and adversely affected. To date, we have limited experience in
developing localized versions of our CitySearch online sites and marketing and
distributing our products and services internationally. There can be no
assurance that our partners or we will be able to successfully market or sell
our services in these international markets. In addition to the uncertainty as
to our ability to expand our international presence, there are certain risks
inherent in conducting business on an international level, such as:
* unexpected changes in regulatory requirements, tariffs and other trade
barriers;
* difficulties in staffing and managing foreign operations;
* political instability;
* currency rate fluctuations; and
* potentially adverse tax consequences.
There can be no assurance that one or more of the foregoing factors will
not have a material adverse effect on our current and future international
operations and, consequently, on our business, financial condition and results
of operations.
Capacity Constraints and System Disruptions; Reliance on Third-Party Systems
The satisfactory performance, reliability and availability of our city
guides, online ticketing services, auction services and our network
infrastructures are critical to attracting Web users and maintaining
relationships with business customers and consumers. System interruptions that
result in the unavailability of sites or slower response times for consumers
would reduce the number of business Web sites and advertisements purchased and
reduce the attractiveness of our CitySearch local city guides, CityAuction
service, and Ticketmaster Online's online services to business customers and
consumers. Our services have experienced
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system interruptions in the past and believe that such interruptions will
continue to occur from time to time in the future. Additionally, any substantial
increase in traffic on our services will require us to expand and adapt our
network infrastructure. Our inability to add additional software and hardware to
accommodate increased traffic on our services may cause unanticipated system
disruptions and result in slower response times. In addition, we currently
depend on a limited number of suppliers for certain key technologies used to
roll out and manage our services, including Exodus Communications, Inc., which
hosts the CitySearch city guides, and PSINet, which hosts the Ticketmaster
Online service. There can be no assurance that we will be able to expand our
network infrastructure on a timely basis to meet increased demand or that key
technology suppliers will continue to provide us with products and services that
meet our requirements. Any increase in system interruptions or slower response
times resulting from the foregoing factors could have a material adverse effect
on our business, financial condition and results of operations.
Our operations are vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure and other events beyond our control.
Substantially all of our server equipment is currently located in California in
areas that are susceptible to earthquakes. Our business interruption insurance
may not be sufficient to compensate us for losses that may occur and would not
compensate us for the loss of consumer goodwill due to disruption of service,
and any losses or damages incurred by us could have a material adverse effect on
our business, financial condition and results of operations.
In addition, our Ticketmaster Online operations are substantially dependent
upon services and infrastructure provided by Ticketmaster Corp. that enable
Ticketmaster Online to access information on ticket and merchandise inventory,
events and consumers maintained by Ticketmaster Corp. In addition, Ticketmaster
Corp. has agreed to provide all order processing, payment processing and
fulfillment services for tickets to live events and merchandise ordered through
Ticketmaster Online pursuant to the terms and subject to the limitations of our
license agreement. Any discontinuation or disruption of these services by
Ticketmaster Corp. would be disruptive to the Ticketmaster Online business and
would likely have a material adverse effect on our business, financial condition
and results of operations.
We use a custom-developed system for our Ticketmaster Online ticketing
operations and certain aspects of transaction processing. Ticketmaster Online
has experienced temporary system interruptions, which may continue to occur in
the future from time to time. Any substantial increase in the volume of traffic
on our online sites or the number of tickets purchased by consumers may require
us to expand and upgrade further Ticketmaster Online technology, transaction-
processing systems and network infrastructure. The Ticketmaster Online service
has experienced, and we expect to continue to experience, temporary capacity
constraints due to sharply increased traffic for certain events, which may cause
unanticipated system disruptions, slower response times and degradation in
levels of service. In addition, to the extent we experience delays in processing
ticketing confirmations and reporting accurate financial information, our
operations would be adversely affected. There can be no assurance that
Ticketmaster Online's transaction-processing systems and network infrastructure
will be able to accommodate such increases in traffic in the future, or that we
will, in general, be able to accurately project the rate or timing of such
increases or upgrade our systems and infrastructure to accommodate future
traffic levels on our online sites. In addition, there can be no assurance that
Ticketmaster Online will be able to effectively upgrade and expand its
transaction-processing systems in a timely manner or to successfully integrate
any newly developed or purchased components of its existing systems. Any
inability to do so could have a material adverse effect on our business,
financial condition and results of operations.
Online Commerce and Database Security Risks
A fundamental requirement for online commerce and communications is the
secure transmission of confidential information over public networks. We rely on
encryption and authentication technology licensed
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from third parties to provide the security and authentication necessary to
effect secure transmission of confidential information, such as consumers credit
card numbers. In addition, we maintain an extensive confidential database of
consumer profiles and transaction information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography,
or other events or developments will not result in a compromise or breach of the
methods used by us to protect consumer transaction and personal data contained
in our database. If any such compromise of our security were to occur, it could
have a material adverse effect on our reputation and on our business, operating
results and financial condition. A party who is able to circumvent our security
measures could misappropriate proprietary information or cause interruptions in
our operations. We may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of transactions conducted on
the Internet and commercial online services and the privacy of users may also
inhibit the growth of the Web and online services as a means of conducting
commercial transactions. To the extent that our activities or those of third-
party contractors involve the storage and transmission of proprietary
information, such as credit card numbers or other personal information, security
breaches could expose us to a risk of loss or litigation and possible liability.
In addition, we may suffer losses as a result of orders placed with fraudulent
credit card data, even though the consumer's payment for such orders has been
authorized by the associated financial institution. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions where,
as is the case with the transactions processed by us, no cardholder signature is
obtained. There can be no assurance that we will not suffer significant losses
as a result of fraudulent use of credit card data in the future, which could
have a material adverse effect on our business, financial condition and results
of operations.
Rapid Technological Change
The Internet and the online commerce industry are characterized by the
following:
* rapid technological change;
* changes in user and customer requirements and preferences;
* frequent new product and service introductions embodying new technologies;
and
* the emergence of new industry standards and practices that could render our
existing online sites and proprietary technology and systems obsolete.
The emerging nature of these products and services and their rapid
evolution will require that we continually improve the performance, features and
reliability of our online services, particularly in response to competitive
offerings. Our success will depend, in part, upon:
* on our ability to enhance our existing services;
* to develop new services and technology that address the increasingly
sophisticated and varied needs of our prospective customers; and
* to respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of online sites and other proprietary technology entails
significant technical and business risks and requires substantial expenditures
and lead time. There can be no assurance that we will successfully use new
technologies effectively or adapt our online sites, proprietary technology and
transaction-processing systems to customer requirements or emerging industry
standards. If we are unable,
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for technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing market conditions or customer requirements, our business,
operating results and financial condition could be materially adversely
affected.
Year 2000
The widespread use of computer programs that rely on two-digit dates to
perform computation and decision-making functions may cause computer systems,
including systems and software used by us and our Web services, to malfunction
prior to or in the Year 2000 and lead to significant business delays and
disruptions in our business and operations in the United States and
internationally. We have developed a plan to minimize the impact of this Year
2000 problem. Pursuant to the plan, we have established a Year 2000 Committee
consisting of senior managers from relevant functional areas. The Year 2000
Committee has reviewed all areas of our business and operations that may be
affected and has assigned responsibility for each area to individuals
knowledgeable about their respective areas. The Year 2000 Committee has made
these individuals responsible for the initial assessment of risk and initial
estimate of hardware cost, software cost and time required to achieve
compliance. We concluded our initial assessment in the fourth quarter of 1998
and are commencing implementation of remediation necessary to achieve
compliance. Remediation has continued in 1999. We estimate that the dollar cost
of Year 2000 compliance is approximately $200,000. However, we have not yet
completed our comprehensive assessment of remediation costs and actual costs
could materially differ.
Several systems provided by third parties are required for the operation of
our services, any of which may contain software code that is not Year 2000
compliant. These systems include:
* server software used to operate our network servers;
* software controlling routers;
* switches and other components of our data network;
* disk management software used to control our data disk arrays;
* firewall, security, monitoring and back-up software used by us; and
* desktop PC applications software.
In most cases, we employ widely available software applications and other
products from leading third party vendors, and expect that such vendors will
provide any required upgrades or modifications in a timely fashion. However, any
failure of third party suppliers to provide Year 2000 compliant versions of the
products used by us could result in a temporary disruption of our services or
otherwise disrupt our operations. In addition, our partners may operate their
city guide sites in proximity to other applications that may not be Year 2000
compliant. While we intend to assign an individual to coordinate each partner's
compliance efforts to ensure uninterrupted operations, we have limited ability
to influence decisions by our partners. Non-compliant systems that adjoin
partners' city guide applications could result in interruption or disruption of
our city guide service, which in turn could reduce royalties or other amounts
due to us. There can no assurance that we, our third party suppliers or our
partners will be Year 2000 compliant at the end of the millennium. Failure to
achieve compliance could result in complete failure or inaccessibility of our or
our partners' services, and could adversely affect our business, financial
condition and results of operations.
Year 2000 compliance problems could also undermine the general
infrastructure necessary to support our operations. For instance, we depend on
third party Internet service providers for connectivity to the
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Internet. Any interruption of service from our Internet service providers could
result in a temporary interruption of our services. Moreover, the effects of
Year 2000 compliance deficiencies on the integrity and stability of the Internet
are difficult to predict. A significant disruption in the ability of businesses
and consumers to reliably access the Internet or portions of it would have an
adverse effect on demand for our services and adversely impact our business,
financial condition and results of operations.
Liability for Online Content
We may face potential liability for defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that appear on the CitySearch, CityAuction or
Ticketmaster Online sites or on sites operated by our partners. These claims
have been brought, and sometimes successfully pressed, against online services.
Although we intend to maintain our general liability insurance at current
levels, our insurance may not cover claims of these types or may not be adequate
to indemnify us for any liability that may be imposed. Any imposition of
liability, particularly liability that is not covered by insurance or is in
excess of insurance coverage, could have a material adverse effect on our
reputation and our business, financial conditions and results of operations.
Uncertain Protection of Intellectual Property; Risks of Third-Party Licenses
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets, proprietary software and similar intellectual property as critical to
our success, and rely on trademark and copyright law, trade secret protection
and confidentiality and/or license agreements with employees, customers,
partners and others to protect our proprietary rights. We do not hold any
patents. We pursue the registration of certain of our key trademarks and service
marks in the United States and internationally. Effective trademark, service
mark, copyright and trade secret protection may not be available or sought by us
in every country in which our products and services are made available online.
We have licensed in the past, and expect to license in the future, certain
proprietary rights, such as trademarks or copyrighted material, to third
parties. In addition, we have licensed in the past, and expect that we may
license in the future, certain content, including trademarks and copyrighted
material, from third parties. While we attempt to ensure that the quality of our
brands is maintained by such licensees, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of our proprietary rights or reputation, which could have a material adverse
effect on our business, financial condition and results of operations. There can
be no assurance that the steps taken by us to protect our proprietary rights
will be adequate or that third parties will not infringe or misappropriate our
copyrights, trademarks, trade dress and similar proprietary rights. In addition,
there can be no assurance that other parties will not assert infringement
claims, including patent infringement claims, against us. We license the
trademark "CitySearch" from a third party, and there can be no assurance that we
will be able to continue to license the trademark on terms acceptable to us. We
license the trademark "Ticketmaster" and related trademarks from Ticketmaster
Corp. pursuant to our license agreement with Ticketmaster Corp. We may be
subject to legal proceedings and claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by us and our
licensees. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources which could result in a
material adverse effect on our business, financial condition and results of
operations. We are dependent upon Ticketmaster Corp. to maintain and assert its
rights to the trademarks and defend infringement claims, if any.
Risks Associated with Regulatory Matters
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We are subject to regulations applicable to businesses generally and laws
or regulations directly applicable to access to online commerce. Although there
are currently few laws and regulations directly applicable to the Internet and
commercial online services, it is possible that a number of laws and regulations
may be adopted with respect to the Internet or commercial online services
covering issues such as user privacy, pricing, content, taxation, copyrights,
distribution, antitrust and characteristics and quality of products and
services. Furthermore, the growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws that may
impose additional burdens on those companies conducting business online. The
adoption of any additional laws or regulations may decrease the growth of the
Internet or commercial online services, which could, in turn, decrease the
demand for our products and services and increase our cost of doing business, or
otherwise have a material adverse effect on our business, financial condition
and results of operations. Moreover, the applicability to the Internet and
commercial online services of existing laws in various jurisdictions governing
issues such as property ownership, sales and other taxes, libel and personal
privacy is uncertain and may take years to resolve. For example, tax authorities
in a number of states are currently reviewing the appropriate tax treatment of
companies engaged in online commerce, and new state tax regulations may subject
us to additional state sales and income taxes. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and commercial online services could have a
material adverse effect on our business, financial condition and results of
operations.
Ticketmaster Online is regulated by certain state and local regulations,
including, but not limited to, a law in Georgia that establishes maximum
convenience charges on tickets for certain sporting events. Other legislation
that could affect the way Ticketmaster Online does business, including bills
that would regulate the amount of convenience charges and handling charges, are
introduced from time to time in federal, state and local legislative bodies. We
are unable to predict whether any such bills will be adopted and, if so, whether
such legislation would have a material effect on our business, financial
condition and results of operations.
Potential Governmental Investigations and Litigations
From time to time, federal, state and local authorities have conducted
investigations or inquiries with respect to Ticketmaster Corp.'s compliance with
antitrust, unfair business practice and other laws. The most recent federal
investigation was commenced in 1994 by the Antitrust Division of the Department
of Justice and was concluded in 1995 with no enforcement action being taken
against Ticketmaster Corp. In addition, we are a party to various legal
proceedings involving commercial disputes and intellectual property issues
arising in the ordinary course of business. While the outcomes of these
proceedings are uncertain, we do not currently expect that they will have a
material adverse effect on our business, financial condition or results of
operations.
USAi is a defendant (along with several of USAi's directors) in lawsuits
brought in connection with the Lycos/USAi transaction. See "Recent
Developments." Seven of the lawsuits are brought on behalf of our shareholders
and allege that the non-USAi shareholders of our company will receive
consideration in the Transactions that is "grossly inadequate" and unfair and
that defendants, including USAi, breached alleged fiduciary duties to our
shareholders in negotiating and approving the Transactions. These complaints
seek an injunction against completion of the Transactions, rescission in the
event it is completed, and damages in an unspecified amount. The remaining six
lawsuits are brought on behalf of shareholders of Lycos, alleging that USAi
aided and abetted alleged breaches of fiduciary duty by Lycos' directors, in
that the consideration Lycos shareholders will receive in the Transactions is
alleged to be grossly inadequate and unfair. These complaints seek an injunction
against completion of the Transactions, rescission in the event it is completed,
and damages in an unspecified
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amount. All these actions are pending in the Court of Chancery of the State of
Delaware. The time for defendants to answer has not yet elapsed, and discovery
has not yet been scheduled. USAi believes that the allegations against USAi and
its directors do not have merit.
During 1994, Ticketmaster Corp. was named as a defendant in 16 federal
class action lawsuits filed in United States District Courts purportedly on
behalf of consumers who were alleged to have purchased tickets to various events
through Ticketmaster Corp. These lawsuits alleged that Ticketmaster Corp.'s
activities violated antitrust laws. On December 7, 1994, the Judicial Panel on
Multidistrict Litigation transferred all of the lawsuits to the United States
District Court for the Eastern District of Missouri for coordinated and
consolidated pretrial proceedings. After an amended and consolidated complaint
was filed by the plaintiffs, Ticketmaster Corp. filed a motion to dismiss and,
on May 31, 1996, the District Court granted that motion ruling that the
plaintiffs had failed to state a claim upon which relief could be granted. On
April 10, 1998, the United States Court of Appeals for the Eighth Circuit issued
an opinion affirming the district court's ruling that the plaintiffs lack
standing to pursue their claims for damages under the antitrust laws and held
that the plaintiffs' status as indirect purchasers of Ticketmaster Corp.'s
services did not bar them from seeking equitable relief against Ticketmaster
Corp. Discovery on the plaintiffs' remanded claim for equitable relief is
ongoing in the District Court and a trial date of July 17, 2000 has been set. On
July 9, 1998, the plaintiffs filed a petition for writ of certiorari to the
United States Supreme Court seeking review of the decision dismissing their
damage claims. Plaintiff's petition for writ of certiorari in the United States
Supreme Court was denied on January 19, 1999.
Ticketmaster Corp. has stated that the Court's affirmance of the decision
prohibiting plaintiffs from obtaining monetary damages against Ticketmaster
Corp. eliminates the substantial portion of plaintiffs' claims. With respect to
injunctive relief, the Antitrust Division of the United States Department of
Justice had previously investigated Ticketmaster Corp. for in excess of 15
months and closed its investigation with no suggestion of any form of injunctive
relief or modification of the manner in which Ticketmaster Corp. does business.
In March 1995, MovieFone, Inc. ("MovieFone") and The Teleticketing Company,
L.P. filed a complaint against Ticketmaster Corp. in the United States District
Court for the Southern District of New York. Plaintiffs allege that they are in
the business of providing movie information and teleticketing services, and that
they are parties to a contract with Pacer Cats Corporation, a wholly owned
subsidiary of Wembley plc ("Pacer Cats"), to provide teleticketing services to
movie theaters. Plaintiffs also allege that, together with Pacer Cats, they had
planned to begin selling tickets to live entertainment events, and that
Ticketmaster Corp., by its conduct, frustrated and prevented plaintiffs' ability
to do so. Plaintiffs further allege that Ticketmaster Corp. has interfered with
and caused Pacer Cats to breach its contract with plaintiffs. The complaint
asserts that Ticketmaster Corp.'s actions violate Section 7 of the Clayton Act
and Sections 1 and 2 of the Sherman Act, and that Ticketmaster Corp. tortiously
interfered with contractual and prospective business relationships and seeks
monetary and injunctive relief based on such allegations. Ticketmaster Corp.
filed a motion to dismiss. The court heard oral argument on September 26, 1995.
In March 1997, prior to the rendering of any decision by the Court on
Ticketmaster Corp.'s motion to dismiss, Ticketmaster Corp. received an amended
complaint in which the plaintiffs assert essentially the same claims as in the
prior complaint but have added a RICO claim and tort claims. Ticketmaster Corp.
filed a motion to dismiss the amended complaint in April 1997, which is still
pending. Some of the claims in this litigation are similar to claims that were
the subject of an arbitration award in which MovieFone was a claimant and Pacer
Cats a respondent. Among other things, the award included damages from Pacer
Cats to MovieFone of approximately $22.75 million before interest and an
injunction against some entities, which may include affiliates of Ticketmaster
Corp., restricting or prohibiting their activity with respect to aspects of the
movie teleticketing business for a specified period of time. Neither USAi,
Ticketmaster Corp., nor any entity owned or controlled by Ticketmaster Corp.,
were parties to the arbitration. In May 1998, MovieFone filed a petition
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in New York state court to hold an entity affiliated with Ticketmaster Corp. in
contempt of the injunction provision of the arbitration award on the grounds
that such entity is a successor or assignee of, or otherwise acted in concert
with, Pacer Cats. In November 1998, the court ruled that the Ticketmaster Corp.
affiliate is bound by the arbitrators' findings that it is the successor to
Pacer Cats and, as such, liable for breaches committed by Pacer Cats and subject
to the terms of the arbitration award's injunction. The court further found that
the Ticketmaster Corp. affiliate had violated the injunction and awarded
MovieFone approximately $1.38 million for losses it incurred as a result of such
violations. The Ticketmaster Corp. affiliate has filed a notice of appeal of the
court's decision, including to seek reversal of the ruling regarding successor
liability.
There can be no assurance that we, Ticketmaster Online or Ticketmaster
Corp. or our affiliates will not become the subject of future governmental
investigations or inquiries or be named as a defendant in claims alleging
violations of federal or state antitrust laws or any other laws. Any adverse
outcome in such litigation, investigation or proceeding against us, Ticketmaster
Online or Ticketmaster Corp. or our affiliates could limit or prevent
Ticketmaster Online from engaging in its online ticketing business or subject us
to potential damage assessments, all of which could have a material adverse
effect on our business, financial condition or results of operations. Regardless
of its merit, source or outcome, any such litigation, investigation or
proceeding would at a minimum be costly and could divert the efforts of our
management and other personnel from productive tasks, which could have a
material adverse effect on our business, financial condition or results of
operations.
Risks Associated with Potential Acquisitions
As part of our business strategy, we may make acquisitions of, or
significant investments in, complementary companies, products or technologies.
Any such future acquisitions would be accompanied by the risks commonly
encountered in acquisitions of companies. These risks include, among other
things:
* the difficulty of assimilating the operations and personnel of the acquired
companies;
* the potential disruption of our ongoing business;
* the diversion of resources from our existing businesses, sites and
technologies;
* the inability of management to maximize our financial and strategic position
through the successful incorporation of the acquired technology into our
products and services;
* additional expense associated with amortization of acquired intangible
assets;
* the maintenance of uniform standards, controls, procedures and policies; and
* the impairment of relationships with employees and customers as a result of
any integration of new management personnel.
There can be no assurance that we would be successful in overcoming these
risks or any other problems encountered with such acquisitions, and our
inability to overcome such risks could have a material adverse effect on our
business, financial condition and results of operations.
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Risks Associated with Domain Names
We currently hold and license various Web domain names relating to our
brand, including the "citysearch.com", "cityauction.com" and "ticketmaster.com"
domain names. The acquisition and maintenance of domain names generally is
regulated by governmental agencies and their designees. For example, in the
United States, the National Science Foundation has appointed Network Solutions,
Inc. as the exclusive registrar for the ".com," ".net" and ".org" generic top-
level domains. The regulation of domain names in the United States and in
foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, there can be no
assurance that we will be able to acquire or maintain relevant domain names in
all countries in which it conducts business. Furthermore, the relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. We, therefore, may be unable to prevent
third parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights. Any
such inability could have a material adverse effect on our business, financial
condition and results of operations.
Anti-takeover Effect Of Certain Charter Provisions
Certain provisions of our Restated Certificate of Incorporation and the
Restated Bylaws and Delaware General Corporation Law Section 203 may render more
difficult, or have the effect of discouraging, unsolicited takeover bids from
third parties or the removal of incumbent management of the Company. These
provisions include the right of the holders of the Class A Common Stock to 15
votes per share, versus one vote per share for the holders of Class B Common
Stock and provide that the stockholders may not call special meetings. In
addition, our Restated Certificate of Incorporation authorizes the Board of
Directors to issue, without stockholder approval, 2,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"), with voting, conversion and
other rights and preferences that could adversely affect the voting power or
other rights of the holders of our Common Stock. Although we have no current
plans to issue any shares of Preferred Stock, the issuance of Preferred Stock or
rights to purchase Preferred Stock could render more difficult, or have the
effect of discouraging, unsolicited takeover bids from third parties or the
removal of incumbent management, or otherwise adversely affect the market price
for the Class B Common Stock. Although such provisions do not have a substantial
practical significance to investors while USAi, through its ownership of Class A
Common Stock, is in a position to effectively control all matters affecting us,
such provisions could have the effect of depriving stockholders of an
opportunity to sell their shares at a premium over prevailing market prices
should USAi no longer be in such control.
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WHERE TO FIND MORE INFORMATION ABOUT TICKETMASTER ONLINE-CITYSEARCH
We file special reports and other information with the SEC. You may read
and copy any document we file at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the Public Reference Room. Our SEC filings are also
available to the public from the SEC's Web site at http://www.sec.gov.
This Prospectus contains information concerning Ticketmaster Online-
CitySearch and the sale of its Class B Common Stock by the Selling Stockholders,
but does not contain all the information set forth in the Registration Statement
on Form S-8/S-3 (the "Registration Statement") which Ticketmaster Online-
CitySearch has filed with the SEC under the Securities Act of 1933, as amended
(the "Securities Act"). Statements made in this Prospectus as to the contents of
any referenced contract, agreement or other document are not necessarily
complete, and such statement shall be deemed qualified in its entirety by
reference thereto. The Registration Statement, including various exhibits, may
be obtained upon payment of the fee prescribed by the SEC, or may be examined
without charge at the SEC's office in Washington, D.C.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents that we have previously filed with the SEC or
documents that we will file with the SEC in the future. The information
incorporated by reference is considered to be part of this Prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below, and
any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, until the selling stockholders sell all the shares. This
Prospectus is part of a Registration Statement we filed with the SEC. The
documents we incorporate by reference are:
(1) Ticketmaster Online-CitySearch's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998;
(2) Ticketmaster Online-CitySearch's Current Report on Form 8-K dated April 29,
1999 for the acquisition of CityAuction, Inc.; and
(3) The description of the Ticketmaster Online-CitySearch's Common Stock
contained in our Registration Statement on Form S-1, No. 333-64855, filed
on December 2, 1998.
We also incorporate by reference all documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment which indicates that all
securities registered have been sold or which deregisters all securities then
remaining unsold.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement or this Prospectus to the extent that
a statement contained herein, in a Prospectus Supplement or in any other
document subsequently filed with the Commission which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of the Registration Statement or this
Prospectus.
30
<PAGE>
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Ticketmaster Online-CitySearch, Inc.,
790 E. Colorado Boulevard, Suite 200, Pasadena, California 91101; the telephone
number is (626) 405-0050.
SELLING STOCKHOLDERS
None of the Selling Stockholders is an executive officer or director of
Ticketmaster Online-CitySearch, except that Andrew Rebele became an Executive
Vice President of Ticketmaster Online-CitySearch in connection with our
acquisition of CityAuction, Inc. pursuant to the Merger Agreement (the
"CityAuction Merger"). None of the Selling Stockholders beneficially owns,
individually or in the aggregate, more than 1% of the outstanding Class B Common
Stock of Ticketmaster Online-CitySearch prior to this offering, except as set
forth below. All of the shares of Class B Common Stock held by the Selling
Stockholders are being registered hereunder and were issued upon exercise of
rights granted under restricted stock purchase agreements with CityAuction, Inc.
for CityAuction Common Stock, which were subsequently converted into
Ticketmaster Online-CitySearch Class B Common Stock pursuant to the
CityAuction Merger. Ten percent of the shares held by the selling stockholders
are held in escrow pursuant to the Merger Agreement.
<TABLE>
<CAPTION>
Name Number of Shares
Being Offered
<S> <C>
Andrew Rebele....................... 589,619
Monica Lee.......................... 65,512
Stephen Walther..................... 16,798
TOTAL............................... 671,929
</TABLE>
As of March 31, 1999, Mr. Rebele beneficially owned 6.5% of the Class B
Common Stock of the Company. Beneficial ownership calculations are determined
in accordance with the Rules of the SEC and are based on 9,238,109 shares
outstanding as of March 31, 1999 as adjusted to reflect the issuance of
approximately 800,000 shares of Class B Common Stock in connection with the
CityAuction Merger; in computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Class B Common
Stock that were exercisable or that will become exercisable within 60 days of
March 31, 1999 are deemed outstanding for such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
PLAN OF DISTRIBUTION
Ticketmaster Online-CitySearch has been advised by the Selling Stockholders
that they intend to sell all or a portion of the shares offered hereby from time
to time in the Nasdaq National Market and that sales will be made at prices
prevailing in the Nasdaq National Market at the times of such sales. As used
herein, "Selling Stockholders" includes donees and pledgees selling shares
received from a Selling Stockholder after the date of this Prospectus. The
Selling Stockholders may also make private sales directly or through a broker or
brokers, who may act as agent or as principal. Further, the Selling Stockholders
may choose to dispose of the shares offered hereby by gift to a third party or
as a donation to a charitable or other non-profit entity. In connection with any
sales, the Selling Stockholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Stockholders and, if such broker acts as agent for
the purchaser of such shares, from such purchaser.
31
<PAGE>
Usual and customary brokerage fees will be paid by the Selling Stockholders.
Broker-dealers may agree with the Selling Stockholders to sell a specified
number of shares at a stipulated price per share, and, to the extent such a
broker-dealer is unable to do so acting as agent for the Selling Stockholders,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the Selling Stockholders. Broker-dealers who acquire
shares as principal may thereafter resell such shares from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
Ticketmaster Online-CitySearch has advised the Selling Stockholders that
Regulation M promulgated under the Exchange Act may apply to sales in the market
and has informed them of the possible need for delivery of copies of this
Prospectus. The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such broker-
dealers, and, if any such broker-dealers purchase shares as principal, any
profits received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Upon Ticketmaster Online-CitySearch's being notified by the Selling
Stockholders that any material arrangement has been entered into with a broker-
dealer for the sale of shares through a cross or block trade, a supplemental
prospectus will be filed under Rule 424(c) under the Securities Act, setting
forth the name of the participating broker-dealer(s), the number of shares
involved, the price at which such shares were sold by the Selling Stockholders,
the commissions paid or discounts or concessions allowed by the Selling
Stockholders to such broker-dealer(s), and where applicable, that such broker-
dealer(s) did not conduct any investigation to verify the information set out in
this Prospectus.
Any securities covered by this Prospectus which qualify for sale pursuant
to Rules 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. In general, under Rule 144 as currently in effect,
a person (or persons whose shares are aggregated), including any person who may
be deemed to be an "affiliate" of Ticketmaster Online-CitySearch, is entitled to
sell within any three month period "restricted shares" beneficially owned by him
or her in an amount that does not exceed the greater of (i) 1% of the then
outstanding shares of Class B Common Stock or (ii) the average weekly trading
volume in shares of Class B Common Stock during the four calendar weeks
preceding such sale, provided that at least one year has elapsed since such
shares were acquired from Ticketmaster Online-CitySearch or an affiliate of
Ticketmaster Online-CitySearch. Sales are also subject to certain requirements
as to the manner of sale, notice and availability of current public information
regarding Ticketmaster Online-CitySearch. However, a person who has not been an
"affiliate" of Ticketmaster Online-CitySearch at any time within three months
prior to the sale is entitled to sell his or her shares without regard to the
volume limitations or other requirements of Rule 144, provided that at least one
year has elapsed since such shares were acquired from Ticketmaster Online-
CitySearch or an affiliate of Ticketmaster Online-CitySearch.
There can be no assurance that the Selling Stockholders will sell any or
all of the shares of Common Stock offered hereunder.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
32
<PAGE>
Ticketmaster Online-CitySearch's Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware Law.
Insofar as indemnification by Ticketmaster Online-CitySearch for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of Ticketmaster Online-CitySearch pursuant to
the provisions referenced in Prospectus or otherwise, Ticketmaster Online-
CitySearch has been advised that in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Ticketmaster Online-CitySearch of
expenses incurred or paid by a director, officer, or controlling person of
Ticketmaster Online-CitySearch in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, Ticketmaster Online-
CitySearch will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
33
<PAGE>
TICKETMASTER ONLINE-CITYSEARCH, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference in this Registration Statement
the following documents and information heretofore filed with the SEC:
(1) Ticketmaster Online-CitySearch's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998;
(2) Ticketmaster Online-CitySearch's Current Report on Form 8-K dated
April 29, 1999 for the acquisition of CityAuction, Inc.; and
(3) The description of the Ticketmaster Online-CitySearch's Common Stock
contained in the Company's Registration Statement on Form S-1, No.
333-64855, filed on December 2, 1998.
All documents subsequently filed by Ticketmaster Online-CitySearch pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities registered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Ticketmaster Online-CitySearch's Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware Law.
Ticketmaster Online-CitySearch's Bylaws provides for the indemnification of
officers, directors and third parties to the fullest extent permissible under
Delaware Law, which provisions are deemed to be a contract between Ticketmaster
Online-CitySearch and each director and officer who serves in such capacity
while such bylaw is in effect.
II-1
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The issuance of the shares being offered by the Form S-3 resale prospectus
were deemed to be exempt from registration under the Securities Act in reliance
on Section 4(2) of the Securities Act or Regulation D promulgated thereunder, or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under such Rule 701. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationship with Ticketmaster Online-CitySearch, to information about
Ticketmaster Online-CitySearch.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Description
Number
<C> <S>
5.1 Opinion of counsel as to legality of securities being registered.
10.1 CityAuction, Inc. 1998 Stock Plan, including form of Stock Option Agreement.
10.2 Restricted Stock Purchase Agreement by and between CityAuction, Inc. and Monica Lee, as
amended.
10.3 Restricted Stock Purchase Agreement by and between CityAuction and Andrew Rebele, as
amended.
10.4 Restricted Stock Purchase Agreement by and between CityAuction and Stephen Walther, as
amended.
23.1 Consent of counsel (contained in Exhibit 5.1).
23.2 Independent Auditors' Consent.
24.1 Power of Attorney (see page II-4).
</TABLE>
ITEM 9. UNDERTAKINGS.
A. Ticketmaster Online-CitySearch hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
B. Ticketmaster Online-CitySearch hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
Ticketmaster Online-CitySearch's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
Ticketmaster Online-CitySearch pursuant to law, Ticketmaster Online-
CitySearch's Certificate of Incorporation or Bylaws, Ticketmaster Online-
CitySearch has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Ticketmaster Online-CitySearch of expenses incurred or paid by a director,
officer or controlling person of Ticketmaster Online-CitySearch in a
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereunder, Ticketmaster Online-CitySearch will, unless in
the opinion of its counsel the matter has already been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8/S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pasadena, State of California, on this 5th day of
May, 1999.
TICKETMASTER ONLINE-CITYSEARCH, INC.
By: /s/ Charles Conn
Charles Conn
Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes an appoints Charles Conn, Douglas McPherson and Bradley
Ramberg, jointly and severally, his attorney-in-fact, each with the power of
substitution for him or her in any and all capacities, to sign any amendments to
this Registration Statement on Form S-8/S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Report has
been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- ------------------------------------- ---------------------
<S> <C> <C>
/s/ Charles Conn Chief Executive Officer (Principal May 5, 1999
- --------------------------------------- Executive Officer) and Director
Charles Conn
/s/ Bradley Ramberg Chief Financial Officer and May 5, 1999
- --------------------------------------- Vice President, Finance and
Bradley Ramberg Administration and Secretary
(Principal Financial and Accounting
Officer)
/s/ Barry Baker Director May 5, 1999
- ---------------------------------------
Barry Baker
/s/ Terry Barnes Director May 5, 1999
- ---------------------------------------
Terry Barnes
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Alan Citron Director May 5, 1999
- ---------------------------------------
Alan Citron
/s/ Eugene L. Cobuzzi Director May 5, 1999
- ---------------------------------------
Eugene L. Cobuzzi
/s/ Stuart W. Depina Director May 5, 1999
- ---------------------------------------
Stuart W. Depina
/s/ Barry Diller Director May 5, 1999
- ---------------------------------------
Barry Diller
/s/ Joseph Gleberman Director May 5, 1999
- ---------------------------------------
Joseph Gleberman
/s/ William Gross Director May 5, 1999
- ---------------------------------------
William Gross
/s/ Victor A. Kaufman Director May 5, 1999
- ---------------------------------------
Victor A. Kaufman
/s/ Robert Kavner Director May 5, 1999
- ---------------------------------------
Robert Kavner
/s/ William D. Savoy Director May 5, 1999
- ---------------------------------------
William D. Savoy
/s/ Allan Spoon Director May 5, 1999
- ---------------------------------------
Allan Spoon
/s/ Thomas Unterman Director May 5, 1999
- ---------------------------------------
Thomas Unterman
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
Number
<C> <S>
5.1 Opinion of counsel as to legality of securities being registered.
10.1 CityAuction, Inc. 1998 Stock Plan, including form of Stock Option
Agreement.
10.2 Restricted Stock Purchase Agreement by and between CityAuction, Inc. and
Monica Lee, as amended.
10.3 Restricted Stock Purchase Agreement by and between CityAuction and Andrew
Rebele, as amended.
10.4 Restricted Stock Purchase Agreement by and between CityAuction and Stephen
Walther, as amended.
23.1 Consent of counsel (contained in Exhibit 5.1).
23.2 Independent Auditors' Consent.
24.1 Power of Attorney (see page II-4).
</TABLE>
<PAGE>
EXHIBIT 5.1
May 5, 1999
Ticketmaster Online-CitySearch, Inc.
790 E. Colorado Boulevard, Suite 200
Pasadena, CA 91101
RE: REGISTRATION STATEMENT ON FORM S-8/S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8/S-3 to be filed
by you with the Securities and Exchange Commission on May 5, 1999 (as such
may thereafter be amended or supplemented, the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
of 678,203 shares of your Class B Common Stock, $0.01 par value (the "Shares"),
of which 671,929 have been issued under certain CityAuction, Inc. Restricted
Stock Purchase Agreements, and 6,274 are reserved for issuance pursuant to
options granted under the CityAuction, Inc. 1998 Stock Plan. As your legal
counsel, we have examined the proceedings taken, and are familiar with the
proceedings proposed to be taken, by you in connection with the sale and
issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, the Shares, when issued and sold in the manner described in the
Registration Statement and in accordance with the resolutions adopted by the
Board of Directors of Ticketmaster Online-CitySearch, Inc., will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI Professional
Corporation
<PAGE>
EXHIBIT 10.1
CITYAUCTION, INC.
1998 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
--------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights may also be granted under the
Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Committee appointed by the Board of Directors in
accordance with paragraph (a) of Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means CityAuction, Inc., a California corporation.
(h) "CONSULTANT" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render advisory or consulting
services and is compensated for such services, and any director of the Company
whether compensated for such services or not; provided that if and in the event
the Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave, military leave or any other leave of absence
approved by the Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or
<PAGE>
(ii) in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or its successor.
(j) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported, as quoted on such
system or exchange for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(o) "OPTION" means a stock option granted pursuant to the Plan.
(p) "OPTIONED STOCK" means the Common Stock subject to an Option.
(q) "OPTIONEE" means an Employee or Consultant who receives an Option.
(r) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(s) "PLAN" means this 1998 Stock Plan, as amended from time to time.
(t) "PURCHASER" means an Employee or Consultant who exercises a Stock
Purchase Right.
<PAGE>
(u) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.
(v) "STOCK PURCHASE RIGHT" means the right to purchase Restricted Stock
granted pursuant to Section 11 of the Plan.
(w) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the
-------------------------
Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 300,000 Shares of Common Stock. The shares may be authorized,
but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Administration. The Plan shall be administered by the Board or by a
--------------
Committee designated by the Board to administer the Plan. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all in accordance with the legal requirements relating to
the administration of incentive stock option plans, if any, of California
corporate and securities laws and of the Code (the "Applicable Laws").
(b) Powers of the Administrator. Subject to the provisions of the Plan and
---------------------------
in the case of a Committee, the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2 of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
<PAGE>
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited to
the share price and any restriction or limitation, based in each case on such
factors as the Administrator shall determine, in its sole discretion);
(vii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(viii) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(ix) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; and
(x) to make any other such determinations with respect to awards under
the Plan as it shall deem appropriate, including (without limitation)
determinations with respect to vesting, exercisability and price adjustments.
(c) Effect of Committee's Decision. All decisions, determinations and
------------------------------
interpretations of the Administrator shall be final and binding on all Optionees
and Purchasers and any other holders of any Options or Rights.
5. Eligibility for Options.
-----------------------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
<PAGE>
(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur of
------------
its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
--------------
Option Agreement; provided, however, that in the case of any Stock Option, the
term shall be no more than ten (10) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement. However, in the case of
an Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
such Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be
no less than 85% of the Fair Market Value per Share on the date of grant.
<PAGE>
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (iv) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (v) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (vi) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the Shares not more than twelve months after the date of delivery of the
subscription agreement, (vii) any combination of the foregoing methods of
payment, (viii) or such other consideration and method of payment for the
issuance of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
(i) An Option may not be exercised for a fraction of a Share. An
Option shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and the Administrator has determines that
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
(b) Termination of Employment. In the event of termination of an
-------------------------
Optionee's consulting relationship or Continuous Status as an Employee with the
<PAGE>
Company (as the case may be), such Optionee may, but within no less than thirty
(30) days after the date of such termination (or such other longer period as is
set out by the Administrator in the Option Agreement, but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate. Notwithstanding anything to the
contrary contained herein, in the event that the Optionee's employment has
terminated for cause (as determined by the Administrator in accordance with the
policies of the Company), the Option shall terminate immediately on the date of
termination of employment.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
----------------------
above, in the event of termination of an Optionee's Consulting relationship or
Continuous Status as an Employee as a result of his disability (as determined by
the Administrator in accordance with the policies of the Company), Optionee may,
but within no less than six (6) months from the date of such termination (or
such other longer period as is set out by the Administrator in the Option
Agreement, but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
10. Non-Transferability of Options. An Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase Restricted Stock. Stock Purchase Rights may be
-----------------------------------
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer, which shall in no event exceed one-
hundred twenty (120) days from the date of grant of the Stock Purchase Right.
For these purposes, the-price to be paid shall be no less than 85% of fair
market value on
<PAGE>
the date of grant of the Stock Purchase Right or, in the case of a greater than
10% shareholder, no less than 100% of the fair market value on the date of
grant. The offer shall be accepted by execution of a Restricted Stock agreement
in the form determined by the Administrator. Shares purchased pursuant to the
grant of a Stock Purchase Right shall be referred to herein as "Restricted
Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise, the
-----------------
Restricted Stock agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the Purchaser's
employment with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock agreement
shall be the original price paid by the Purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option with respect to the Restricted Stock shall lapse at such rate as the
Committee may determine, but in no event as to less than 20% of the total shares
granted annually.
(c) Other Provisions. The Restricted Stock agreement shall contain such
----------------
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion. In addition, the
provisions of Restricted Stock agreements need not be the same with respect to
each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
-----------------------
the Purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
<PAGE>
(b) Corporate Transactions. In the event of the proposed dissolution or
----------------------
liquidation of the Company, or of a merger in which the successor corporation
does not agree to assume the Option or Stock Purchase Right or substitute an
equivalent Option or Stock Purchase Right, the Board shall notify Optionees and
Purchasers at least fifteen (15) days prior to such proposed action and, in its
discretion, permit Optionees to exercise their Options to the extent already
vested or make a determination to accelerate vesting of any outstanding Options
or Stock Purchase Right. To the extent it has not been previously exercised, the
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
13. Time of Granting Options. The date of grant of an Option shall, for all
------------------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee or
Purchaser under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Applicable Laws,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of the Plan shall not affect Options and Stock Purchase Rights already granted
and such Options and Stock Purchase Rights shall remain in full force and effect
as if this Plan had not been amended or terminated, unless mutually agreed
otherwise between the Optionee or Purchaser and the Board, which agreement must
be in writing and signed by the Optionee or Purchaser and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
----------------------------------
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan, will at
---------------------
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel
<PAGE>
to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by written
----------
agreements in such form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to approval
--------------------
by the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each Optionee,
------------------------
during the period for which such Optionee has one or more Options outstanding,
annual financial statements of the Company. The Company shall not be required to
provide such information if the issuance of Options under the Plan is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information.
<PAGE>
CITYAUCTION, INC.
1998 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name]
[Address]
You have been granted an option, consisting of the Stock Option Agreement
attached hereto as Exhibit A and this Notice of Stock Option Grant (together,
the "Option") to purchase Common Stock of CityAuction, Inc., (the "Company") as
follows:
Date of Grant _______________________________________
Vesting Date _______________________________________
Option Price Per Share $
---------------------------------------
Total Number of Shares Granted _______________________________________
Total Price of Shares Granted $
---------------------------------------
Type of Option __ Incentive Stock Option
__ Nonqualified Stock Option
Term/Expiration Date 10 years/ _________________
Exercise Schedule:
-----------------
This Option may be exercised, in whole or in part, in accordance with the
Vesting Schedule set out below.
Vesting Schedule
----------------
Date of Vesting Number of Shares
--------------- ----------------
First Annual Anniversary
of Vesting Date(_______) 25%(_________)
Thereafter, monthly on the _____ day of each month, 1/48 (_____) of
the total number of Shares until fully vested. In the event of
fractional Shares, the monthly number of Shares shall be adjusted
accordingly to the nearest whole Share.
<PAGE>
Termination Period:
------------------
Option may be exercised for thirty (30) days after termination of
----------------
employment or consulting relationship except as set out in Sections 7 and 8 of
the Stock Option Agreement (but in no event later than the Expiration Date).
Form of Exercise:
-----------------
Exercise of this Option shall be with cash or check, on a form of Exercise
Notice provided by the Company.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THIS OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1998 STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain information
related to it and represents that he or she is familiar with the terms and
provisions of the Plan and this Option. Optionee accepts this Option subject to
all such terms and provisions. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1998 STOCK PLAN and the Stock Option Agreement, all
of which are attached and made a part of this document.
OPTIONEE: CITYAUCTION, INC.
a California corporation
_____________________________ By _____________________________
Signature
_____________________________ Title __________________________
Print Name
I am unmarried ___.
Spousal consent attached____.
I am married and have previously filed a spousal consent with the Company._____
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option, the undersigned hereby agrees to be irrevocably
bound by the terms and conditions of the Plan and this Option and further agrees
that any community property interest shall be similarly bound. The undersigned
hereby appoints the undersigned's spouse as attorney-in-fact for the undersigned
with respect to any amendment or exercise of rights under the Plan or this
Option.
_____________________________
Spouse of Optionee
<PAGE>
CITYAUCTION, INC.
1998 STOCK PLAN
EXHIBIT A TO NOTICE OF GRANT
TERMS OF STOCK OPTION AGREEMENT
-------------------------------
1. Grant of Option. CityAuction, Inc., a California corporation (the
---------------
"COMPANY"), hereby grants to the Optionee (the "OPTIONEE") named in the Notice
of Grant, an option (the "OPTION") to purchase a number of Shares, as set forth
in the Notice of Grant, at the exercise price per share set forth in the Notice
of Grant (the "EXERCISE PRICE"), subject to the terms, conditions and
definitions of the 1998 Stock Plan (the "PLAN") adopted by the Company, which is
incorporated herein by reference. In the event of a conflict between the terms
and conditions of the Plan and the terms and conditions of this Option
Agreement, the terms and conditions of the Option Agreement shall prevail.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form provided by the Company (the "EXERCISE NOTICE"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "EXERCISED SHARES"), and
such other representations and agreements as to the holder's investment intent
with respect to the Exercised Shares as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and, if required by the Company, by the Optionee's spouse, and shall be
delivered in person or by certified mail to the Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price. No Shares shall be issued pursuant to the
exercise of this Option unless such issuance and exercise complies with all
relevant provisions of law and the requirements of any stock exchange upon which
the Shares are then listed. Assuming such compliance, for income tax purposes
the Exercised Shares shall be considered transferred to the Optionee on the date
the Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
<PAGE>
(a) cash; or
(b) check; or
(c) such other consideration as is indicated on the Notice of Grant.
4. Optionee's Representations. In the event the Shares purchasable pursuant
--------------------------
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company an Investment Representation Statement in
the form attached as EXHIBIT A to the Exercise Notice.
5. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
---------------------------
consulting relationship or Continuous Status as an Employee, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"TERMINATION DATE"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate. In the
event that the Optionee is terminated for cause, the Option shall expire on the
Termination Date.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
----------------------
above, in the event of termination of Optionee's Continuous Status as an
Employee as a result of disability (as determined by the Board in accordance
with the policies of the Company), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below),
exercise the Option to the extent otherwise so entitled at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option may
-----------------
be exercised at any time within twelve (12) months following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in any
-----------------------------
manner otherwise than by will or by the laws of descent or distribution and may
be
<PAGE>
exercised during the lifetime of Optionee only by him. The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set out
--------------
in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option. The limitations set out in Section 7
of the Plan regarding Option terms and Options granted to more than ten percent
(10%) shareholders shall apply to this Option.
11. Tax Consequences. Some of the federal and California tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonqualified Stock Option ("NSO"). If this Option does not qualify
---------------------------------
as an ISO, the Optionee may incur regular federal income tax and California
income tax liability upon exercise. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the fair market value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If the Optionee is an employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as an ISO,
------------------------------
the Optionee will have no regular federal income tax or California income tax
liability upon its exercise, although the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one year, any
---
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year after
---
exercise AND two years after the grant date, any gain realized on disposition of
the Shares will be treated as long-term capital gain for federal income tax
purposes. If the Optionee disposes of ISO Shares within one year after exercise
or two years after the grant date, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the LESSER OF (A) the difference between the FAIR
MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and the aggregate
Exercise Price, or (B) the difference between the SALE PRICE of such Shares and
the aggregate Exercise Price.
<PAGE>
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
-------------------------------------------------
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) the date two years after the grant date, or (ii) the
date one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
<PAGE>
EXHIBIT 10.2
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS AGREEMENT is made as of the ____ day of September 1998, by and
between CityAuction, Inc., a California corporation (the "Company"), and Monica
Lee (the "Purchaser").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions
--------------------------
of this Agreement, the Company hereby agrees to sell to Purchaser and Purchaser
agrees to purchase from the Company at the Closing an aggregate of 234,000
shares of the Company's Common Stock (the "Stock") at a price of $.001 per
share, for an aggregate purchase price of $234.
2. Closing. The purchase and sale of the Stock shall occur at a
-------
Closing to be held on the date hereof (the "Closing Date"). The Closing will
take place at the principal office of the Company or at such other place as
shall be designated by the Company. At the Closing, the Company will issue the
Stock registered in the name of Purchaser.
3. Purchase Option.
---------------
3.1 Grant of Purchase Option. Beginning on the Closing Date, the
------------------------
Stock shall be subject to the right and option of the Company to repurchase the
Stock (the "Purchase Option") as set forth in this Section 3. In the event
Purchaser's employment or consulting relationship with the Company (including a
parent or subsidiary of the Company) shall cease for any reason, or no reason,
with or without cause, including death, disability or involuntary termination
("Termination"), the Company shall have the right, as provided in Section 3.2
hereof, to purchase from Purchaser or its personal representative, as the case
may be, at the purchase price of $.01 per share (the "Option Price"), all of the
Stock that has not been released from the Purchase Option in accordance with the
following schedule:
(i) 1/4 (25%) of the shares of the Stock (58,500 shares) shall be
released from the Purchase Option on January 1, 1999;
(ii) On the first day of each month commencing with February 1,
1999, an additional one forty-eighth (1/48th) of the shares of Stock (4,875
shares) will be released from the Purchase Option.
-1-
<PAGE>
3.2 Exercise of Purchase Option. Within ninety (90) days following
---------------------------
Termination, the Company shall notify Purchaser by written notice delivered or
mailed as provided in Section 9.3 as to whether it wishes to purchase the Stock
pursuant to exercise of the Purchase Option. If the Company (or its assignees)
elects to purchase the Stock hereunder, it shall specify a date (which shall not
be later than thirty (30) days from the date of the above described notice) and
a place for the closing of the transaction. At such closing, the Company (or its
assignees) shall tender payment for the Stock and the certificates representing
the Stock so purchased shall be cancelled. Purchaser hereby authorizes and
directs the Secretary or Transfer Agent of the Company to transfer the Stock as
to which the Purchase Option has been exercised from Purchaser to the Company
(or its assignees). The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
Purchaser to the Company, or by check, or both.
3.3 No Limit on Rights. Nothing in this Agreement shall affect in any
------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause, subject to Section 3.4 below.
3.4 Escrow of Stock. Purchaser agrees at the Closing hereunder, to
---------------
deliver to and deposit with the Escrow Agent named in the Escrow Agreement of
even date and delivered herewith, the certificate or certificates evidencing the
Stock and the duly executed Assignments. Such documents are to be held by the
Escrow Agent until delivered pursuant to the terms of such Escrow Agreement.
Shares of the Stock which are subject to the Purchase Option shall not be
transferable by the Purchaser.
4. Restriction on Transfer; Rights of First Refusal.
------------------------------------------------
4.1 Rights of First Refusal. Before any shares of Stock registered in
-----------------------
the name of Purchaser may be sold or transferred (including transfer by
operation of law other than as excepted pursuant to Section 4.2 hereof),
Purchaser must first obtain the written consent of the Company. If such written
consent is not given, then the Company or, if the Company desires, the other
shareholders of the Company, shall have a right of first refusal to purchase
such shares for the same price and on the same terms and conditions offered to
such prospective purchaser, in accordance with the procedures set forth below
(the "Rights of First Refusal").
If the proposed price per share is to be other than in cash, then an
equivalent cash value shall be determined in good faith by the Board of
Directors of the Company. If a transfer other than a voluntary sale is proposed
to be made, then the
-2-
<PAGE>
price per share for purposes of the Rights of First Refusal shall be determined
by the mutual agreement of Purchaser and the Company or, if no agreement can be
reached, the price shall be the fair market value of such shares, as determined
in good faith by the Company's Board of Directors.
Prior to any sale or transfer of any shares of the Stock, Purchaser,
or the legal representative of Purchaser, shall promptly deliver to the
Secretary of the Company a written notice of the price and other terms and
conditions of the offer by the prospective purchaser, the identity of the
prospective purchaser, and, in the case of a sale, Purchaser's bona fide
intention to sell or dispose of such shares together with a copy of a written
agreement between Purchaser and the prospective purchaser conditioned only upon
the satisfaction of the procedures set forth in these Rights of First Refusal.
If the Company does not give its written consent to such transfer, then the
Company (or its assignees) shall, for thirty (30) days after such notice from
Purchaser, have the right under this Section 4 to purchase some or all such
shares, as set forth herein. After the expiration of the Rights of First
Refusal, or upon the written consent of the Company to the proposed transfer,
Purchaser may sell or transfer the shares specified in the notice to the
Company, on the terms and conditions specified in such notice; provided,
however, that the sale must be consummated within three (3) months after the
date of the notice and that all shares sold or transferred shall remain subject
to the provisions and restrictions of this Agreement and shall carry a legend to
that effect.
If the Rights of First Refusal under this Section 4 are not exercised
but Purchaser fails to consummate such sale on the same terms and conditions as
set forth in the notice to the Company within three (3) months after the date of
the notice, then such Rights of First Refusal shall be reinstated.
4.2 Termination; Exceptions. The provisions of this Section 4 shall
-----------------------
terminate on the closing date of an underwritten public offering of Common Stock
of the Company. The provisions of Section 4.1 shall not apply to a transfer of
any shares of Stock by Purchaser to the assignees or successors of Purchaser;
provided, in each such case a transferee shall receive and hold such shares
subject to the provisions and restrictions on transfer of this Agreement and
there shall be no further transfer of such shares except in accordance herewith.
4.3 Effect of Transfers Not in Compliance. The Company shall not be
-------------------------------------
required to transfer on its books any shares of Stock of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or the Security Agreement, or to treat as owner of such shares,
or to accord the right to vote as such owner or to pay dividends to, any
transferee to whom such shares shall have been so transferred.
-3-
<PAGE>
5. Stock Splits, etc. If, from time to time during the term of the
-----------------
Purchase Option or Rights of First Refusal as provided in Sections 3 and 4
hereof, there is any stock dividend, stock split or other change in the
character or amount of any of the outstanding securities of the Company or if
there is any consolidation, merger or sale of all, or substantially all, of the
assets of the Company, then in such event any and all new, substituted or
additional securities to which Purchaser is entitled by reason of its ownership
of Stock shall be immediately subject to the Purchase Option and Rights of First
Refusal and be included in the term "Stock" for all purposes of this Agreement
with the same force and effect as the shares of Stock presently subject to this
Agreement.
6. Legends. All certificates representing any shares of Stock of the
-------
Company subject to the provisions of this Agreement shall have endorsed thereon
substantially the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND
RIGHTS OF REPURCHASE AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required under applicable state securities laws.
7. Investment Intent; Covenant. In purchasing the Stock, Purchaser
---------------------------
represents to the Company as follows:
(a) Purchaser has had an opportunity to discuss the business
prospects and business plan of the Company with the officers and directors of
the Company. Purchaser has a preexisting personal or business relationship with
the Company or one of its officers, directors or controlling persons and/or by
reason of its business or financial experience it has the capacity to protect
its own interests in connection with the transactions contemplated by this
Agreement. Purchaser further acknowledges that the Stock is highly speculative
and involves a high degree of risk,
-4-
<PAGE>
and represents and warrants that it is able, without impairing its financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss of its investment therein.
(b) Purchaser is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of said Stock or with
any present intention of distributing or selling said Stock and it does not
presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause it to sell said Stock. Purchaser
understands that the Stock has not been registered under the Securities Act of
1933, as amended, (the "Act") and may not be sold or otherwise disposed of
except pursuant to an effective Registration Statement filed under the Act or
pursuant to an exemption from the registration requirements of such Act.
Purchaser acknowledges that the Company is under no obligation to register the
Stock under the Act on its behalf. Purchaser represents and warrants that it
understands that the Stock constitutes restricted securities within the meaning
of Rule 144 promulgated under the Act; that the exemption from registration
under Rule 144 will not be available in any event for at least one year from the
date of purchase and payment for the Stock, and even then will not be available
unless the terms and conditions of Rule 144 are complied with and will be
subject to the limitations on amount set forth therein.
(c) Without limiting the representations and warranties set forth
above, Purchaser agrees it will not make any transfer of all or any part of the
Stock unless (i) there is a Registration Statement under the Act in effect with
respect to such transfer and such transfer is made in accordance therewith, or
(ii) Purchaser has furnished the Company an opinion of counsel satisfactory to
the Company and its counsel to the effect that such transfer will not require
registration under the Act. Purchaser agrees that, prior to the closing of the
Company's initial public offering registered under the Act, it will not transfer
any of such securities in a public offering without the Company's prior consent,
even if it is otherwise permitted to transfer them pursuant to Rule 144(k) under
the Act.
8. Lock-up Agreement. In the event the Company sells any of its
-----------------
securities in an underwritten initial public offering pursuant to a registration
filed pursuant to the Act, Purchaser agrees (but only if each officer and
director of the Company also agrees), upon request from the Company or the
managing underwriter of such initial or other public offering, not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of, any of the Stock, without the prior written consent of the Company
or such underwriter, as the case may be, for such period of time (not to exceed
one hundred eighty (180) days) from the effective date of such registration as
the Company or the underwriter may specify. Purchaser further agrees that the
Company may place stop-transfer notations with the transfer agent of the Stock
to enforce this provision.
-5-
<PAGE>
9. Miscellaneous.
-------------
9.1 Further Assurances. The parties agree to execute such further
------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
9.2 Entire Agreement. This Agreement, including any exhibits, is the
----------------
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior oral and written understandings of the parties.
9.3 Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to Purchaser at its address shown on
the Company's employment records and to the Company at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten (10) days' advance written notice to the other
party hereto.
9.4 Assignment of Rights; Binding Upon Successors. The Company may
---------------------------------------------
assign its rights and delegate its duties under Section 3 and/or 4 hereof. This
Agreement shall inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser, its heirs, executors, administrators, successors and
assigns.
9.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California as applied to contracts
between California residents to be wholly performed within the State of
California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
Monica Lee
By: /s/ Monica Lee
-----------------------------
Title: Director, Business Development
_______________________________
Address:
-7-
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED, I, _________________________, hereby sell, assign
and transfer unto, _________________________ (__________) shares of the Common
Stock of CITY AUCTION, INC. standing in my name on the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint _________________________ to transfer said stock on the
books of the within-named corporation with full power of substitution in the
premises.
Dated: _______________________
Signature:
By: /s/ Monica Lee
---------------------------------
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Restricted Stock Purchase Agreement between the above assignor
and CITYAUCTION, INC. dated September ____, 1998.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
- -----------
<PAGE>
ESCROW AGREEMENT
----------------
September ____, 1998
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Dear Sir or Madam:
As Escrow Agent for both CITY AUCTION, INC., a California corporation
("Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement"), dated of even date herewith, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Purchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (i) to date the stock assignments
necessary for the transfer in question, (ii) to fill in the number of shares
being transferred, and (iii) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (by check or by cancellation
of any debt owed by Purchaser to the Company) for the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as its attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities
negotiable and to complete any transaction herein contemplated, including but
not limited to the filing with the Department of Corporations of the State of
California of an Application for Consent to Transfer Securities Subject to
Legend or Escrow Condition Pursuant to Section 25151 of the California Corporate
-9-
<PAGE>
Securities Law of 1968, if required. Subject to the provisions of this paragraph
3, Purchaser shall exercise all rights and privileges of a stockholder of the
Company while the stock is held by you.
4. Upon written request of Purchaser after each successive one-year
period from the date of the Agreement, unless the Purchase Option has been
exercised, you will deliver to Purchaser a certificate or certificates
representing so many shares of stock as are not then subject to the Purchase
Option. Ninety days after cessation of Purchaser's service to the Company, you
will deliver to Purchaser a certificate or certificates representing the
aggregate number of shares sold and issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the Purchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
-10-
<PAGE>
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
11. Your responsibilities and rights as Escrow Agent hereunder shall pass
to any successor of the Company.
12. If you reasonably require other or further instruments in connection
with this Escrow Agreement or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized to retain in your possession without
liability to anyone all or any part of said securities until such disputes shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction, but
you shall be under no duty whatsoever to institute or defend any such
proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to Purchaser at its address shown on the Company's
employment records and to you and the Company at the address of its principal
corporate offices (attention Secretary and attention: President, respectively)
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties hereto.
15. By signing this Escrow Agreement, you become a party hereto only for
the purpose of said Escrow Agreement; you do not become a party to the
Agreement.
-11-
<PAGE>
16. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
COMPANY
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
By: /s/ Monica Lee
-----------------------------------
Name: Monica Lee
ESCROW AGENT
GENERAL COUNSEL ASSOCIATES LLP
By: /s/ John B. Montgomery
Title: Partner
-12-
<PAGE>
ELECTION UNDER SECTION 83(b) OF
-------------------------------
THE INTERNAL REVENUE CODE OF 1986
---------------------------------
The undersigned Taxpayer hereby elects, pursuant to the provisions of
the federal income tax law noted above, to include in gross income for the
Taxpayer's current taxable year, as compensation for services, the excess, if
any, of the fair market value of the property described below at the time of
transfer over the amount paid for such property.
1. Taxpayer's Name: Monica Lee
----------
Taxpayer's Address: ____________________________________________________
____________________________________________________
____________________________________________________
Federal Tax I.D.#: _____________________________________________________
2. The property with respect to which the election is made is described as
follows: 234,000 shares of Common Stock of CITY AUCTION, INC., California
-------
corporation (the "Company"), which is Taxpayer's employer or the
corporation for whom the Taxpayer has performed services.
3. The date on which the shares were transferred was September ____, 1998, and
this election is made for calendar year 1998.
4. The shares are subject to the following restrictions:
The Company may repurchase all or a portion of the shares at the
Taxpayer's original purchase price under certain conditions at the
time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $.001 per
share at the time of transfer.
6. The amount paid for such shares was $.001 per share.
7. The Taxpayer has submitted a copy of this statement to the Company as the
Taxpayer's employer or the corporation for whom the Taxpayer has performed
services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: September ____, 1998
TAXPAYER:
By:
_____________________________________
Name: Monica Lee
<PAGE>
Amendment No. 1 to Restricted Stock Purchase Agreement
This Amendment No. 1 to Restricted Stock Purchase Agreement dated
September ____, 1998 by and between CityAuction, Inc., a California corporation
(the "Company"), and Monica Lee (the "Purchaser") (the "Agreement") is made as
of March 29, 1999.
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Amendment to Section 3. Section 3 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"3. Purchase Option.
---------------
3.1 Grant of Purchase Option. Beginning on the Closing Date, the
------------------------
Stock shall be subject to the right and option of the Company or any affiliate
(as the term "affiliate" is defined in Rule 501 of Regulation D of the
Securities Act of 1933, as amended) to repurchase the Stock (the "Purchase
Option") as set forth in this Section 3. In the event Purchaser's employment or
consulting relationship with the Company (including a parent or subsidiary of
the Company) shall cease for any reason, or no reason, with or without cause,
including death, disability or involuntary termination ("Termination"), the
Company shall have the right, as provided in Section 3.2 hereof, to purchase
from Purchaser or its personal representative, as the case may be, at the
purchase price of $.001 per share (the "Option Price"), all of the Stock that
has not been released from the Purchase Option in accordance with the following
schedule:
(i) 1/4 (25%) of the shares of the Stock (58,500 shares) shall be
released from the Purchase Option on January 1, 1999;
(ii) On the first day of each month commencing with February 1,
1999, an additional one forty-eighth (1/48th) of the shares of Stock (4,875
shares) will be released from the Purchase Option.
Notwithstanding the foregoing, in the event of an Acquisition Event (as defined
below), 1/8 th of the shares of the Stock (29,250 shares) shall be released from
the Purchase Option, along with any additional compensation or acceleration
granted to other Company
<PAGE>
stockholders and optionholders in their capacity as such as a result of the
Acquisition Event. For purposes of this Section 3.1, an Acquisition Event shall
mean the sale of all or substantially all of the assets of the Company (or any
successor), a merger or consolidation of the Company (or any successor) with or
into any other corporation or corporations, or the merger of any other
corporation or corporations into the Company (or any successor), or any other
corporate reorganization, in which sale of assets, consolidation, reorganization
or merger the stockholders of the Company (or any successor) receive
distributions in cash or securities of another corporation or corporations as a
result of such sale of assets, consolidation, reorganization or merger, unless
the shareholders of the Company (or any successor) hold as a result of their
stock holdings in the Company (or any successor) more than fifty percent (50%)
of the voting equity securities of the successor or surviving corporation
immediately following such merger, sale of assets, reorganization or
consolidation. Neither the transaction contemplated by that Agreement and Plan
of Reorganization dated January 8, 1999, by and among purchaser, the Company,
Ticketmaster Online - CitySearch, Inc., Nero Acquisition Corporation and Andrew
Rebele (the "Merger") nor the transaction contemplated by that agreement dated
February 9, 1999 by and among USA Networks, Inc., Lycos, Inc. and Ticketmaster
Online - City Search, Inc. relating to the combination of Ticketmaster Online -
CitySearch, Inc.Company, Lycos and certain businesses of USAI shall be an
Acquisition Event; provided, however, that notwithstanding the foregoing, upon
the effective time of the Merger, 50% of the shares of Stock shall be released
from the Purchase Option and the remaining 50% of the shares of Stock shall be
released from the Purchase Option at the rate of one twenty-fourth (1/24th) of
the shares of Stock (4,875) on each monthly anniversary of February 15, 1999
subject to her continuing her employment or consulting relationship with the
Company as set forth above."
2. Amendment to Section 4. Section 4 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"4. [This Section is intentionally left blank.]"
3. Amendment to Section 8. Section 8 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"1 Lock-up Agreement. In the event Ticketmaster Online - CitySearch,
-----------------
Inc. sells any of its securities in an underwritten public offering pursuant to
a registration filed pursuant to the Act, Purchaser agrees (but only if each
executive officer and director of Ticketmaster Online -- CitySearch, Inc. also
agrees), upon request from Ticketmaster Online -- CitySearch, Inc. or the
managing underwriter of such public offering, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of, any of
the Stock, without the prior written consent of Ticketmaster Online --
CitySearch, Inc. or such underwriter, as the case may be, for such period of
time (not to exceed one hundred eighty (180) days) from the effective date of
such registration as Ticketmaster Online -- CitySearch, Inc. or the underwriter
may specify. Purchaser further agrees that Ticketmaster Online -- CitySearch,
Inc. may place stop-transfer notations with the transfer agent of the Stock to
enforce this provision."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 to the Agreement as of the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
-----------------------------------
Title: President
--------------------------------
PURCHASER
Monica Lee
By: /s/ Monica Lee
Title: Director, Business Development
<PAGE>
EXHIBIT 10.3
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS AGREEMENT is made as of the ____ day of September 1998, by and
between CityAuction, Inc., a California corporation (the "Company"), and Andrew
Rebele (the "Purchaser").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions
--------------------------
of this Agreement, the Company hereby agrees to sell to Purchaser and Purchaser
agrees to purchase from the Company at the Closing an aggregate of 2,106,000
shares of the Company's Common Stock (the "Stock") at a price of $.001 per
share, for an aggregate purchase price of $2,106.
2. Closing. The purchase and sale of the Stock shall occur at a
-------
Closing to be held on the date hereof (the "Closing Date"). The Closing will
take place at the principal office of the Company or at such other place as
shall be designated by the Company. At the Closing, the Company will issue the
Stock registered in the name of Purchaser.
3. Purchase Option.
---------------
3.1 Grant of Purchase Option. Beginning on the Closing Date, the
------------------------
Stock shall be subject to the right and option of the Company to repurchase the
Stock (the "Purchase Option") as set forth in this Section 3. In the event
Purchaser's employment or consulting relationship with the Company (including a
parent or subsidiary of the Company) shall cease for any reason, or no reason,
with or without cause, including death, disability or involuntary termination
("Termination"), the Company shall have the right, as provided in Section 3.2
hereof, to purchase from Purchaser or its personal representative, as the case
may be, at the purchase price of $.01 per share (the "Option Price"), all of the
Stock that has not been released from the Purchase Option in accordance with the
following schedule:
(i) On the date of this Agreement, 745,975 shares will be released
from the Purchase Option.
(ii) On the first day of each month commencing with October 1, 1998,
an additional one forty-eighth (1/48th) of the shares of Stock (43,875)
will be released from the Purchase Option.
-1-
<PAGE>
Notwithstanding the foregoing, in the event of a Change in Control of
the Company, the lesser of (i) 25% of the shares of Stock or (ii) all remaining
shares of Stock will be released from the Purchase Option. For the purposes of
this Section 3.1 "Change in Control" means the occurrence of any of the
-----------------
following events:
(A) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended), excluding
existing beneficial owners as of the date of this Agreement, is or becomes
the "beneficial owner" (as defined in Section 13d-3 of said Act), directly
or indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company's then outstanding voting
securities;
(B) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the total voting power
represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets;
(C) Any other provision of this subsection notwithstanding, the
term Change in Control shall not include either of the following events
undertaken at the election of the Company:
(i) Any transaction, the sole purpose of which is to change the
state of the Company's incorporation; or
(ii) A transaction, the result of which is to sell all or
substantially all of the assets of the Company to another corporation
(the "surviving corporation") provided that the surviving corporation
is owned directly or indirectly by the shareholders of the company
immediately following such transaction in substantially the same
proportions as their ownership of the Company's common stock
immediately preceding such transaction.
-2-
<PAGE>
3.2 Exercise of Purchase Option. Within ninety (90) days following
---------------------------
Termination, the Company shall notify Purchaser by written notice delivered or
mailed as provided in Section 9.3 as to whether it wishes to purchase the Stock
pursuant to exercise of the Purchase Option. If the Company (or its assignees)
elects to purchase the Stock hereunder, it shall specify a date (which shall not
be later than thirty (30) days from the date of the above described notice) and
a place for the closing of the transaction. At such closing, the Company (or its
assignees) shall tender payment for the Stock and the certificates representing
the Stock so purchased shall be cancelled. Purchaser hereby authorizes and
directs the Secretary or Transfer Agent of the Company to transfer the Stock as
to which the Purchase Option has been exercised from Purchaser to the Company
(or its assignees). The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
Purchaser to the Company, or by check, or both.
3.3 No Limit on Rights. Nothing in this Agreement shall affect in any
------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause, subject to Section 3.4 below.
3.4 Escrow of Stock. Purchaser agrees at the Closing hereunder, to
---------------
deliver to and deposit with the Escrow Agent named in the Escrow Agreement of
even date and delivered herewith, the certificate or certificates evidencing the
Stock and the duly executed Assignments. Such documents are to be held by the
Escrow Agent until delivered pursuant to the terms of such Escrow Agreement.
Shares of the Stock which are subject to the Purchase Option shall not be
transferable by the Purchaser.
4. Restriction on Transfer; Rights of First Refusal.
------------------------------------------------
4.1 Rights of First Refusal. Before any shares of Stock registered in
-----------------------
the name of Purchaser may be sold or transferred (including transfer by
operation of law other than as excepted pursuant to Section 4.2 hereof),
Purchaser must first obtain the written consent of the Company. If such written
consent is not given, then the Company or, if the Company desires, the other
shareholders of the Company, shall have a right of first refusal to purchase
such shares for the same price and on the same terms and conditions offered to
such prospective purchaser, in accordance with the procedures set forth below
(the "Rights of First Refusal").
If the proposed price per share is to be other than in cash, then an
equivalent cash value shall be determined in good faith by the Board of
Directors of the Company. If a transfer other than a voluntary sale is proposed
to be made, then the price per share for purposes of the Rights of First Refusal
shall be determined by the mutual agreement of Purchaser and the Company or, if
no agreement can be reached,
-3-
<PAGE>
the price shall be the fair market value of such shares, as determined in good
faith by the Company's Board of Directors.
Prior to any sale or transfer of any shares of the Stock, Purchaser,
or the legal representative of Purchaser, shall promptly deliver to the
Secretary of the Company a written notice of the price and other terms and
conditions of the offer by the prospective purchaser, the identity of the
prospective purchaser, and, in the case of a sale, Purchaser's bona fide
intention to sell or dispose of such shares together with a copy of a written
agreement between Purchaser and the prospective purchaser conditioned only upon
the satisfaction of the procedures set forth in these Rights of First Refusal.
If the Company does not give its written consent to such transfer, then the
Company (or its assignees) shall, for thirty (30) days after such notice from
Purchaser, have the right under this Section 4 to purchase some or all such
shares, as set forth herein. After the expiration of the Rights of First
Refusal, or upon the written consent of the Company to the proposed transfer,
Purchaser may sell or transfer the shares specified in the notice to the
Company, on the terms and conditions specified in such notice; provided,
however, that the sale must be consummated within three (3) months after the
date of the notice and that all shares sold or transferred shall remain subject
to the provisions and restrictions of this Agreement and shall carry a legend to
that effect.
If the Rights of First Refusal under this Section 4 are not exercised
but Purchaser fails to consummate such sale on the same terms and conditions as
set forth in the notice to the Company within three (3) months after the date of
the notice, then such Rights of First Refusal shall be reinstated.
4.2 Termination; Exceptions. The provisions of this Section 4 shall
-----------------------
terminate on the closing date of an underwritten public offering of Common Stock
of the Company. The provisions of Section 4.1 shall not apply to a transfer of
any shares of Stock by Purchaser to the assignees or successors of Purchaser;
provided, in each such case a transferee shall receive and hold such shares
subject to the provisions and restrictions on transfer of this Agreement and
there shall be no further transfer of such shares except in accordance herewith.
4.3 Effect of Transfers Not in Compliance. The Company shall not be
-------------------------------------
required to transfer on its books any shares of Stock of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or the Security Agreement, or to treat as owner of such shares,
or to accord the right to vote as such owner or to pay dividends to, any
transferee to whom such shares shall have been so transferred.
5. Stock Splits, etc. If, from time to time during the term of the
-----------------
Purchase Option or Rights of First Refusal as provided in Sections 3 and 4
hereof,
-4-
<PAGE>
there is any stock dividend, stock split or other change in the character or
amount of any of the outstanding securities of the Company or if there is any
consolidation, merger or sale of all, or substantially all, of the assets of the
Company, then in such event any and all new, substituted or additional
securities to which Purchaser is entitled by reason of its ownership of Stock
shall be immediately subject to the Purchase Option and Rights of First Refusal
and be included in the term "Stock" for all purposes of this Agreement with the
same force and effect as the shares of Stock presently subject to this
Agreement.
6. Legends. All certificates representing any shares of Stock of the
-------
Company subject to the provisions of this Agreement shall have endorsed thereon
substantially the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND
RIGHTS OF REPURCHASE AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required under applicable state securities laws.
7. Investment Intent; Covenant. In purchasing the Stock, Purchaser
---------------------------
represents to the Company as follows:
(a) Purchaser has had an opportunity to discuss the business prospects
and business plan of the Company with the officers and directors of the Company.
Purchaser has a preexisting personal or business relationship with the Company
or one of its officers, directors or controlling persons and/or by reason of its
business or financial experience it has the capacity to protect its own
interests in connection with the transactions contemplated by this Agreement.
Purchaser further acknowledges that the Stock is highly speculative and involves
a high degree of risk, and represents and warrants that it is able, without
impairing its financial condition, to
-5-
<PAGE>
hold the Stock for an indefinite period of time and suffer a complete loss of
its investment therein.
(b) Purchaser is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of said Stock or with
any present intention of distributing or selling said Stock and it does not
presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause it to sell said Stock. Purchaser
understands that the Stock has not been registered under the Securities Act of
1933, as amended, (the "Act") and may not be sold or otherwise disposed of
except pursuant to an effective Registration Statement filed under the Act or
pursuant to an exemption from the registration requirements of such Act.
Purchaser acknowledges that the Company is under no obligation to register the
Stock under the Act on its behalf. Purchaser represents and warrants that it
understands that the Stock constitutes restricted securities within the meaning
of Rule 144 promulgated under the Act; that the exemption from registration
under Rule 144 will not be available in any event for at least one year from the
date of purchase and payment for the Stock, and even then will not be available
unless the terms and conditions of Rule 144 are complied with and will be
subject to the limitations on amount set forth therein.
(c) Without limiting the representations and warranties set forth
above, Purchaser agrees it will not make any transfer of all or any part of the
Stock unless (i) there is a Registration Statement under the Act in effect with
respect to such transfer and such transfer is made in accordance therewith, or
(ii) Purchaser has furnished the Company an opinion of counsel satisfactory to
the Company and its counsel to the effect that such transfer will not require
registration under the Act. Purchaser agrees that, prior to the closing of the
Company's initial public offering registered under the Act, it will not transfer
any of such securities in a public offering without the Company's prior consent,
even if it is otherwise permitted to transfer them pursuant to Rule 144(k) under
the Act.
8. Lock-up Agreement. In the event the Company sells any of its
-----------------
securities in an underwritten initial public offering pursuant to a registration
filed pursuant to the Act, Purchaser agrees (but only if each officer and
director of the Company also agrees), upon request from the Company or the
managing underwriter of such initial or other public offering, not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of, any of the Stock, without the prior written consent of the Company
or such underwriter, as the case may be, for such period of time (not to exceed
one hundred eighty (180) days) from the effective date of such registration as
the Company or the underwriter may specify. Purchaser further agrees that the
Company may place stop-transfer notations with the transfer agent of the Stock
to enforce this provision.
9. Miscellaneous.
-------------
-6-
<PAGE>
9.1 Further Assurances. The parties agree to execute such further
------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
9.2 Entire Agreement. This Agreement, including any exhibits, is the
----------------
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior oral and written understandings of the parties.
9.3 Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to Purchaser at its address shown on
the Company's employment records and to the Company at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten (10) days' advance written notice to the other
party hereto.
9.4 Assignment of Rights: Binding Upon Successors. The Company may
---------------------------------------------
assign its rights and delegate its duties under Sections 3 and/or 4 hereof. This
Agreement shall inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser, its heirs, executors, administrators, successors and
assigns.
9.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California as applied to contracts
between California residents to be wholly performed within the State of
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
-7-
<PAGE>
Andrew Rebele
By: /s/ Andrew Rebele
Title: individually
Address:
-8-
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED, I, _______________________________, hereby sell,
assign and transfer unto, _____________________________________ (_____________)
shares of the Common Stock of CITY AUCTION, INC. standing in my name on the
books of said corporation represented by Certificate No.__________ herewith and
do hereby irrevocably constitute and appoint __________________________________
to transfer said stock on the books of the within-named corporation with full
power of substitution in the premises.
Dated: ____________________
Signature:
By: /s/ Andrew Rebele
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Restricted Stock Purchase Agreement between the above assignor
and CITYAUCTION, INC. dated September _____, 1998.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
- -----------
<PAGE>
ESCROW AGREEMENT
- ----------------
September ____, 1998
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Dear Sir or Madam:
As Escrow Agent for both CITY AUCTION, INC., a California corporation
("Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement"), dated of even date herewith, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Purchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (i) to date the stock assignments
necessary for the transfer in question, (ii) to fill in the number of shares
being transferred, and (iii) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (by check or by cancellation
of any debt owed by Purchaser to the Company) for the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as its attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities
negotiable and to complete any transaction herein contemplated, including but
not limited to the filing with the Department of Corporations of the State of
California of an Application for Consent to Transfer Securities Subject to
Legend or Escrow Condition Pursuant to Section 25151 of the California Corporate
-10-
<PAGE>
Securities Law of 1968, if required. Subject to the provisions of this paragraph
3, Purchaser shall exercise all rights and privileges of a stockholder of the
Company while the stock is held by you.
4. Upon written request of Purchaser after each successive one-year
period from the date of the Agreement, unless the Purchase Option has been
exercised, you will deliver to Purchaser a certificate or certificates
representing so many shares of stock as are not then subject to the Purchase
Option. Ninety days after cessation of Purchaser's service to the Company, you
will deliver to Purchaser a certificate or certificates representing the
aggregate number of shares sold and issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the Purchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
-11-
<PAGE>
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
11. Your responsibilities and rights as Escrow Agent hereunder shall pass
to any successor of the Company.
12. If you reasonably require other or further instruments in connection
with this Escrow Agreement or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized to retain in your possession without
liability to anyone all or any part of said securities until such disputes shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction, but
you shall be under no duty whatsoever to institute or defend any such
proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to Purchaser at its address shown on the Company's
employment records and to you and the Company at the address of its principal
corporate offices (attention Secretary and attention: President, respectively)
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties hereto.
15. By signing this Escrow Agreement, you become a party hereto only for
the purpose of said Escrow Agreement; you do not become a party to the
Agreement.
-12-
<PAGE>
16. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
COMPANY
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
By: /s/ Andrew Rebele
Name: Andrew Rebele
ESCROW AGENT
GENERAL COUNSEL ASSOCIATES LLP
By: /s/ John B. Montgomery
Title: Partner
-13-
<PAGE>
ELECTION UNDER SECTION 83(b) OF
-------------------------------
THE INTERNAL REVENUE CODE OF 1986
---------------------------------
The undersigned Taxpayer hereby elects, pursuant to the provisions of the
federal income tax law noted above, to include in gross income for the
Taxpayer's current taxable year, as compensation for services, the excess, if
any, of the fair market value of the property described below at the time of
transfer over the amount paid for such property.
1. Taxpayer's Name: Andrew Rebele
-------------
Taxpayer's Address: 18 Orben Pl San Francisco CA 94115
_________________________________________
_________________________________________
_________________________________________
Federal Tax I.D.#: ###-##-####
__________________________________________
2. The property with respect to which the election is made is described as
follows: 1,360,025 shares of Common Stock of CITY AUCTION, INC., California
---------
corporation (the "Company"), which is Taxpayer's employer or the
corporation for whom the Taxpayer has performed services.
3. The date on which the shares were transferred was September ____, 1998, and
this election is made for calendar year 1998.
4. The shares are subject to the following restrictions:
The Company may repurchase all or a portion of the shares at the
Taxpayer's original purchase price under certain conditions at the
time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $.001 per
share at the time of transfer.
6. The amount paid for such shares was $.001 per share.
7. The Taxpayer has submitted a copy of this statement to the Company as the
Taxpayer's employer or the corporation for whom the Taxpayer has performed
services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: September ____, 1998
TAXPAYER:
By: /s/ Andrew Rebele
Name: Andrew Rebele
<PAGE>
AMENDMENT NO. 1 TO RESTRICTED STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Restricted Stock Purchase Agreement dated September
_____, 1998 by and between CityAuction, Inc., a California corporation (the
"Company"), and Andrew Rebele (the "Purchaser") (the "Agreement") is made as of
March 29, 1999.
--
In consideration of the mutual covenants and representations herein set
forth, the Company and Purchaser agree as follows:
1. Amendment to Section 3. Section 3 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"3. Purchase Option.
---------------
3.1 Grant of Purchase Option. Beginning on the Closing Date, the Stock
------------------------
shall be subject to the right and option of the Company or any affiliate (as the
term "affiliate" is defined in Rule 501 of Regulation D of the Securities Act of
1933, as amended) to repurchase the Stock (the "Purchase Option") as set forth
in this Section 3. In the event Purchaser's employment or consulting
relationship with the Company (including a parent or subsidiary of the Company)
shall cease for any reason, or no reason, with or without cause, including
death, disability or involuntary termination ("Termination"), the Company shall
have the right, as provided in Section 3.2 hereof, to purchase from Purchaser or
its personal representative, as the case may be, at the purchase price of $.001
per share (the "Option Price"), all of the Stock that has not been released from
the Purchase Option in accordance with the following schedule:
(i) On the date of this Agreement, 745,975 shares will be released
from the Purchase Option.
(ii) On the first day of each month commencing with October 1, 1998,
an additional one forty-eighth (1/48th) of the shares of Stock (43,875)
will be released from the Purchase Option.
Notwithstanding the foregoing, in the event of an Acquisition Event (as defined
below), 1/8th of the shares of the Stock (263,250 shares) shall be released
from the Purchase Option, along with any additional compensation or acceleration
granted to other Company stockholders and optionholders in their capacity as
such as a result of the Acquisition Event. For purposes of this Section 3.1, an
Acquisition Event shall mean the sale of all or substantially all of the
<PAGE>
assets of the Company (or any successor), a merger or consolidation of the
Company (or any successor) with or into any other corporation or corporations,
or the merger of any other corporation or corporations into the Company (or any
successor), or any other corporate reorganization, in which sale of assets,
consolidation, reorganization or merger the stockholders of the Company (or any
successor) receive distributions in cash or securities of another corporation or
corporations as a result of such sale of assets, consolidation, reorganization
or merger, unless the shareholders of the Company (or any successor) hold as a
result of their stock holdings in the Company (or any successor) more than fifty
percent (50%) of the voting equity securities of the successor or surviving
corporation immediately following such merger, sale of assets, reorganization or
consolidation. Neither the transaction contemplated by that Agreement and Plan
of Reorganization dated January 8, 1999, by and among Purchaser, the Company,
Ticketmaster Online - CitySearch, Inc., Nero Acquisition Corporation and Monica
Lee (the "Merger") nor the transaction contemplated by that agreement dated
February 9, 1999 by and among USA Networks, Inc., Lycos, Inc. and Ticketmaster
Online - City Search, Inc. relating to the combination of Ticketmaster Online -
CitySearch, Inc. Company, Lycos and certain businesses of USAI shall be an
Acquisition Event; provided, however, that notwithstanding the foregoing, upon
the effective time of the Merger, 50% of the shares of Stock shall be released
from the Purchase Option and the remaining 50% of the shares of Stock shall be
released from the Purchase Option at the rate of one twenty-fourth (1/24th) of
the shares of Stock (43,875) on each monthly anniversary of February 15, 1999
subject to his continuing his employment or consulting relationship with the
Company as set forth above."
2. Amendment to Section 4. Section 4 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"4. [This Section is intentionally left blank.]"
3. Amendment to Section 8. Section 8 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"1. Lock-up Agreement. In the event Ticketmaster Online - CitySearch, Inc.
-----------------
sells any of its securities in an underwritten public offering pursuant to a
registration filed pursuant to the Act, Purchaser agrees (but only if each
executive officer and director of Ticketmaster Online - CitySearch, Inc. also
agrees), upon request from Ticketmaster Online - CitySearch, Inc. or the
managing underwriter of such public offering, not to sell, make any short sale
of, loan, grant any option for the purchase of, or otherwise dispose of, any of
the Stock, without the prior written consent of Ticketmaster Online -
CitySearch, Inc. or such underwriter, as the case may be, for such period of
time (not to exceed one hundred eighty (180) days) from the effective date of
such registration as Ticketmaster Online - CitySearch, Inc. or the underwriter
may specify. Purchaser further agrees that Ticketmaster Online - CitySearch,
Inc. may place stop-transfer notations with the transfer agent of the Stock to
enforce this provision."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
to the Agreement as of the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
Andrew Rebele
By: /s/ Andrew Rebele
<PAGE>
EXHIBIT 10.4
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
THIS AGREEMENT is made as of the ____ day of September 1998, by and
between CityAuction, Inc., a California corporation (the "Company"), and Stephen
Walther (the "Purchaser").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. Purchase and Sale of Stock. Subject to the terms and conditions
--------------------------
of this Agreement, the Company hereby agrees to sell to Purchaser and Purchaser
agrees to purchase from the Company at the Closing an aggregate of 60,000 shares
of the Company's Common Stock (the "Stock") at a price of $.001 per share, for
an aggregate purchase price of $60.
2. Closing. The purchase and sale of the Stock shall occur at a
-------
Closing to be held on the date hereof (the "Closing Date"). The Closing will
take place at the principal office of the Company or at such other place as
shall be designated by the Company. At the Closing, the Company will issue the
Stock registered in the name of Purchaser.
3. Purchase Option.
---------------
3.1 Grant of Purchase Option. Beginning on the Closing Date, the
------------------------
Stock shall be subject to the right and option of the Company to repurchase the
Stock (the "Purchase Option") as set forth in this Section 3. In the event
Purchaser's employment or consulting relationship with the Company (including a
parent or subsidiary of the Company) shall cease for any reason, or no reason,
with or without cause, including death, disability or involuntary termination
("Termination"), the Company shall have the right, as provided in Section 3.2
hereof, to purchase from Purchaser or its personal representative, as the case
may be, at the purchase price of $.01 per share (the "Option Price"), all of the
Stock that has not been released from the Purchase Option in accordance with the
following schedule:
(i) 1/4 (25%) of the shares of the Stock (15,000 shares) shall be
released from the Purchase Option on April 1, 1999;
(ii) On the first day of each month commencing with May 1, 1999, an
additional one forty-eighth (1/48th) of the shares of Stock (1,250 shares)
will be released from the Purchase Option.
-1-
<PAGE>
3.2 Exercise of Purchase Option. Within ninety (90) days following
---------------------------
Termination, the Company shall notify Purchaser by written notice delivered or
mailed as provided in Section 9.3 as to whether it wishes to purchase the Stock
pursuant to exercise of the Purchase Option. If the Company (or its assignees)
elects to purchase the Stock hereunder, it shall specify a date (which shall not
be later than thirty (30) days from the date of the above described notice) and
a place for the closing of the transaction. At such closing, the Company (or its
assignees) shall tender payment for the Stock and the certificates representing
the Stock so purchased shall be cancelled. Purchaser hereby authorizes and
directs the Secretary or Transfer Agent of the Company to transfer the Stock as
to which the Purchase Option has been exercised from Purchaser to the Company
(or its assignees). The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
Purchaser to the Company, or by check, or both.
3.3 No Limit on Rights. Nothing in this Agreement shall affect in any
------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause, subject to Section 3.4 below.
3.4 Escrow of Stock. Purchaser agrees at the Closing hereunder, to
---------------
deliver to and deposit with the Escrow Agent named in the Escrow Agreement of
even date and delivered herewith, the certificate or certificates evidencing the
Stock and the duly executed Assignments. Such documents are to be held by the
Escrow Agent until delivered pursuant to the terms of such Escrow Agreement.
Shares of the Stock which are subject to the Purchase Option shall not be
transferable by the Purchaser.
4. Restriction on Transfer; Rights of First Refusal.
------------------------------------------------
4.1 Rights of First Refusal. Before any shares of Stock registered in
-----------------------
the name of Purchaser may be sold or transferred (including transfer by
operation of law other than as excepted pursuant to Section 4.2 hereof),
Purchaser must first obtain the written consent of the Company. If such written
consent is not given, then the Company or, if the Company desires, the other
shareholders of the Company, shall have a right of first refusal to purchase
such shares for the same price and on the same terms and conditions offered to
such prospective purchaser, in accordance with the procedures set forth below
(the "Rights of First Refusal").
If the proposed price per share is to be other than in cash, then an
equivalent cash value shall be determined in good faith by the Board of
Directors of the Company. If a transfer other than a voluntary sale is proposed
to be made, then the
<PAGE>
price per share for purposes of the Rights of First Refusal shall be determined
by the mutual agreement of Purchaser and the Company or, if no agreement can be
reached, the price shall be the fair market value of such shares, as determined
in good faith by the Company's Board of Directors.
Prior to any sale or transfer of any shares of the Stock, Purchaser,
or the legal representative of Purchaser, shall promptly deliver to the
Secretary of the Company a written notice of the price and other terms and
conditions of the offer by the prospective purchaser, the identity of the
prospective purchaser, and, in the case of a sale, Purchaser's bona fide
intention to sell or dispose of such shares together with a copy of a written
agreement between Purchaser and the prospective purchaser conditioned only upon
the satisfaction of the procedures set forth in these Rights of First Refusal.
If the Company does not give its written consent to such transfer, then the
Company (or its assignees) shall, for thirty (30) days after such notice from
Purchaser, have the right under this Section 4 to purchase some or all such
shares, as set forth herein. After the expiration of the Rights of First
Refusal, or upon the written consent of the Company to the proposed transfer,
Purchaser may sell or transfer the shares specified in the notice to the
Company, on the terms and conditions specified in such notice; provided,
however, that the sale must be consummated within three (3) months after the
date of the notice and that all shares sold or transferred shall remain subject
to the provisions and restrictions of this Agreement and shall carry a legend to
that effect.
If the Rights of First Refusal under this Section 4 are not exercised
but Purchaser fails to consummate such sale on the same terms and conditions as
set forth in the notice to the Company within three (3) months after the date of
the notice, then such Rights of First Refusal shall be reinstated.
4.2 Termination; Exceptions. The provisions of this Section 4 shall
-----------------------
terminate on the closing date of an underwritten public offering of Common Stock
of the Company. The provisions of Section 4.1 shall not apply to a transfer of
any shares of Stock by Purchaser to the assignees or successors of Purchaser;
provided, in each such case a transferee shall receive and hold such shares
subject to the provisions and restrictions on transfer of this Agreement and
there shall be no further transfer of such shares except in accordance herewith.
4.3 Effect of Transfers Not in Compliance. The Company shall not be
-------------------------------------
required to transfer on its books any shares of Stock of the Company which shall
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or the Security Agreement, or to treat as owner of such shares,
or to accord the right to vote as such owner or to pay dividends to, any
transferee to whom such shares shall have been so transferred.
-3-
<PAGE>
5. Stock Splits, etc. If, from time to time during the term of the
-----------------
Purchase Option or Rights of First Refusal as provided in Sections 3 and 4
hereof, there is any stock dividend, stock split or other change in the
character or amount of any of the outstanding securities of the Company or if
there is any consolidation, merger or sale of all, or substantially all, of the
assets of the Company, then in such event any and all new, substituted or
additional securities to which Purchaser is entitled by reason of its ownership
of Stock shall be immediately subject to the Purchase Option and Rights of First
Refusal and be included in the term "Stock" for all purposes of this Agreement
with the same force and effect as the shares of Stock presently subject to this
Agreement.
6. Legends. All certificates representing any shares of Stock of the
-------
Company subject to the provisions of this Agreement shall have endorsed thereon
substantially the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND
RIGHTS OF REPURCHASE AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required under applicable state securities laws.
7. Investment Intent; Covenant. In purchasing the Stock, Purchaser
---------------------------
represents to the Company as follows:
(a) Purchaser has had an opportunity to discuss the business prospects
and business plan of the Company with the officers and directors of the Company.
Purchaser has a preexisting personal or business relationship with the Company
or one of its officers, directors or controlling persons and/or by reason of its
business or financial experience it has the capacity to protect its own
interests in connection with the transactions contemplated by this Agreement.
Purchaser further acknowledges that the Stock is highly speculative and involves
a high degree of risk,
-4-
<PAGE>
and represents and warrants that it is able, without impairing its financial
condition, to hold the Stock for an indefinite period of time and suffer a
complete loss of its investment therein.
(b) Purchaser is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of said Stock or with
any present intention of distributing or selling said Stock and it does not
presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause it to sell said Stock. Purchaser
understands that the Stock has not been registered under the Securities Act of
1933, as amended, (the "Act") and may not be sold or otherwise disposed of
except pursuant to an effective Registration Statement filed under the Act or
pursuant to an exemption from the registration requirements of such Act.
Purchaser acknowledges that the Company is under no obligation to register the
Stock under the Act on its behalf. Purchaser represents and warrants that it
understands that the Stock constitutes restricted securities within the meaning
of Rule 144 promulgated under the Act; that the exemption from registration
under Rule 144 will not be available in any event for at least one year from the
date of purchase and payment for the Stock, and even then will not be available
unless the terms and conditions of Rule 144 are complied with and will be
subject to the limitations on amount set forth therein.
(c) Without limiting the representations and warranties set forth
above, Purchaser agrees it will not make any transfer of all or any part of the
Stock unless (i) there is a Registration Statement under the Act in effect with
respect to such transfer and such transfer is made in accordance therewith, or
(ii) Purchaser has furnished the Company an opinion of counsel satisfactory to
the Company and its counsel to the effect that such transfer will not require
registration under the Act. Purchaser agrees that, prior to the closing of the
Company's initial public offering registered under the Act, it will not transfer
any of such securities in a public offering without the Company's prior consent,
even if it is otherwise permitted to transfer them pursuant to Rule 144(k) under
the Act.
8. Lock-up Agreement. In the event the Company sells any of its
-----------------
securities in an underwritten initial public offering pursuant to a registration
filed pursuant to the Act, Purchaser agrees (but only if each officer and
director of the Company also agrees), upon request from the Company or the
managing underwriter of such initial or other public offering, not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of, any of the Stock, without the prior written consent of the Company
or such underwriter, as the case may be, for such period of time (not to exceed
one hundred eighty (180) days) from the effective date of such registration as
the Company or the underwriter may specify. Purchaser further agrees that the
Company may place stop-transfer notations with the transfer agent of the Stock
to enforce this provision.
-5-
<PAGE>
9. Miscellaneous.
-------------
9.1 Further Assurances. The parties agree to execute such further
------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
9.2 Entire Agreement. This Agreement, including any exhibits, is the
----------------
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior oral and written understandings of the parties.
9.3 Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to Purchaser at its address shown on
the Company's employment records and to the Company at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten (10) days' advance written notice to the other
party hereto.
9.4 Assignment of Rights; Binding Upon Successors. The Company may
---------------------------------------------
assign its rights and delegate its duties under Sections 3 and/or 4 hereof. This
Agreement shall inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser, its heirs, executors, administrators, successors and
assigns.
9.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California as applied to contracts
between California residents to be wholly performed within the State of
California.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
Title: President
PURCHASER
Stephen Walther
By: /s/ Stephen Walther
---------------------------------
Title:______________________________
Address:
-7-
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED, I, ____________________________________, hereby
sell, assign and transfer unto, _________________________________ (__________)
shares of the Common Stock of CITY AUCTION, INC. standing in my name on the
books of said corporation represented by Certificate No. ______ herewith and do
hereby irrevocably constitute and appoint ______________________________ to
transfer said stock on the books of the within-named corporation with full power
of substitution in the premises.
Dated: ____________________
Signature:
By: /s/ Stephen Walther
--------------------------------
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Restricted Stock Purchase Agreement between the above assignor
and CITYAUCTION, INC. dated September ____, 1998.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
- -----------
<PAGE>
ESCROW AGREEMENT
----------------
September ____, 1998
General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Dear Sir or Madam:
As Escrow Agent for both CITY AUCTION, INC., a California corporation
("Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement"), dated of even date herewith, in accordance with the
following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Purchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (i) to date the stock assignments
necessary for the transfer in question, (ii) to fill in the number of shares
being transferred, and (iii) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (by check or by cancellation
of any debt owed by Purchaser to the Company) for the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as its attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities
negotiable and to complete any transaction herein contemplated, including but
not limited to the filing with the Department of Corporations of the State of
California of an Application for Consent to Transfer Securities Subject to
Legend or Escrow Condition Pursuant to Section 25151 of the California Corporate
-9-
<PAGE>
Securities Law of 1968, if required. Subject to the provisions of this paragraph
3, Purchaser shall exercise all rights and privileges of a stockholder of the
Company while the stock is held by you.
4. Upon written request of Purchaser after each successive one-year
period from the date of the Agreement, unless the Purchase Option has been
exercised, you will deliver to Purchaser a certificate or certificates
representing so many shares of stock as are not then subject to the Purchase
Option. Ninety days after cessation of Purchaser's service to the Company, you
will deliver to Purchaser a certificate or certificates representing the
aggregate number of shares sold and issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the Purchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
-10-
<PAGE>
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
11. Your responsibilities and rights as Escrow Agent hereunder shall pass
to any successor of the Company.
12. If you reasonably require other or further instruments in connection
with this Escrow Agreement or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized to retain in your possession without
liability to anyone all or any part of said securities until such disputes shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction, but
you shall be under no duty whatsoever to institute or defend any such
proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to Purchaser at its address shown on the Company's
employment records and to you and the Company at the address of its principal
corporate offices (attention Secretary and attention: President, respectively)
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties hereto.
15. By signing this Escrow Agreement, you become a party hereto only for
the purpose of said Escrow Agreement; you do not become a party to the
Agreement.
-11-
<PAGE>
16. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
COMPANY
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
-----------------------------
Title: President
PURCHASER
By: /s/ Stephen Walther
-----------------------------
Name: Stephen Walther
ESCROW AGENT
GENERAL COUNSEL ASSOCIATES LLP
By: /s/ John Montgomery
-----------------------------
Title: Partner
-12-
<PAGE>
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986
-----------------------------------------------------------------
The undersigned Taxpayer hereby elects, pursuant to the provisions of the
federal income tax law noted above, to include in gross income for the
Taxpayer's current taxable year, as compensation for services, the excess, if
any, of the fair market value of the property described below at the time of
transfer over the amount paid for such property.
1. Taxpayer's Name: Stephen Walther
---------------
Taxpayer's Address:______________________________________________________
____________________________________________________________
____________________________________________________________
Federal Tax I.D.#: _______________________________________________________
2. The property with respect to which the election is made is described as
follows: 60,000 shares of Common Stock of CITY AUCTION, INC., California
------
corporation (the "Company"), which is Taxpayer's employer or the
corporation for whom the Taxpayer has performed services.
3. The date on which the shares were transferred was September ____, 1998, and
this election is made for calendar year 1998.
4. The shares are subject to the following restrictions:
The Company may repurchase all or a portion of the shares at the
Taxpayer's original purchase price under certain conditions at the
time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $.001 per
share at the time of transfer.
6. The amount paid for such shares was $.001 per share.
7. The Taxpayer has submitted a copy of this statement to the Company as the
Taxpayer's employer or the corporation for whom the Taxpayer has performed
services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: September ____, 1998
TAXPAYER:
By:____________________________________
Name: Stephen Walther
<PAGE>
Amendment No. 1 to Restricted Stock Purchase Agreement
This Amendment No. 1 to Restricted Stock Purchase Agreement dated September
___, 1998 by and between CityAuction, Inc., a California corporation (the
"Company"), and Stephen Walther (the "Purchaser") (the "Agreement") is made as
of March 29, 1999.
In consideration of the mutual covenants and representations herein set
forth, the Company and Purchaser agree as follows:
2. Amendment to Section 4. Section 4 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"4. [This Section is intentionally left blank.]"
3. Amendment to Section 8. Section 8 of the Agreement is amended and
----------------------
restated in its entirety to read as follows:
"1. Lock-up Agreement. In the event Ticketmaster Online - CitySearch, Inc.
-----------------
sells any of its securities in an underwritten public offering pursuant to a
registration filed pursuant to the Act, Purchaser agrees (but only if each
officer and director of Ticketmaster Online -- CitySearch, Inc. also agrees),
upon request from Ticketmaster Online -- CitySearch, Inc. or the managing
underwriter of such public offering, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of, any of the Stock,
without the prior written consent of Ticketmaster Online -- CitySearch, Inc. or
such underwriter, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the first date any of the Common Stock sold in
Ticketmaster Online-CitySearch's initial public offering was released by the
Ticketmaster Online-CitySearch for sale to the public. Purchaser further agrees
that Ticketmaster Online -- CitySearch, Inc. may place stop-transfer notations
with the transfer agent of the Stock to enforce this provision."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
to the Agreement as of the day and year first above written.
CITY AUCTION, INC.
a California corporation
By: /s/ Andrew Rebele
---------------------------
Title: President
-----------------------
PURCHASER
Stephen Walther
By: /s/ Stephen Walther
Title: CTO
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8/S-3 dated May 5, 1999) and related Prospectus of Ticketmaster Online-
CitySearch, Inc. for the registration of 678,203 shares of its common stock of
our report dated January 29, 1999, with respect to the consolidated financial
statements and schedule of Ticketmaster Online-CitySearch, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Los Angeles, California
May 3, 1999
