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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000.
REGISTRATION NO. 333-81761
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2 ON FORM S-3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TICKETMASTER ONLINE-CITYSEARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4546874
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CALIFORNIA 91101
(626) 405-0050
(Address including zip code, telephone number, including area code, of
Registrant's principal executive offices)
CHARLES CONN
CHIEF EXECUTIVE OFFICER
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CALIFORNIA 91101
(626) 405-0050
(Name, address, including zip code, and Telephone number, including area code,
of agent for service) Copies to:
Kenneth M. Doran, Esq. Eric J. Bock, Esq.
Gibson, Dunn & Crutcher LLP Cendant Corporation
333 South Grand Avenue 9 West 57th Street
Los Angeles, California 90071 New York, New York 10019
(213) 229-7000 (212) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. | |
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. | |
__________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. | | _____________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. | |
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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EXPLANATORY NOTE
This Post-Effective Amendment No. 2 on Form S-3 ("Amendment No. 2") is being
made to a Registration Statement (SEC No. 333-81761) (the "Registration
Statement") which was originally filed on Form S-1 with the Securities and
Exchange Commission on June 29, 1999. Post-Effective Amendment No. 1 ("Amendment
No. 1") to the Registration Statement was filed on Form S-1 on September 1,
1999.
As of June 29, 1999 and September 1, 1999, the registrant, Ticketmaster
Online-CitySearch, Inc. ("TMCS"), was not eligible to use Form S-3 because TMCS
had not been subject to the reporting requirements of Section 12 or 15(b) of the
Securities Exchange Act of 1934, as amended, for a period of at least 12
calendar months immediately preceding the filing of the Registration Statement
and Amendment No. 1, respectively.
As of the date of the filing of this Amendment No. 2, TMCS is eligible to use
Form S-3 and has elected to file this Post-Effective Amendment No. 2 on Form
S-3.
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PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MAY 22, 2000
99,714 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
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This prospectus relates to the public offering of 99,714 shares of Class B
Common Stock, par value $.01 per share, of Ticketmaster Online-CitySearch, Inc.
which are held by certain of our current stockholders. This offering will not be
underwritten.
The prices at which these stockholders may sell the shares will be determined by
the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares.
Our Class B Common Stock is listed on the Nasdaq National Market under the
symbol "TMCS." On May 12, 2000, the last reported sale price of our Class B
Common Stock was $19.25 per share.
Investing in the Class B Common Stock involves risks. See "Risk Factors"
beginning on page 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful and complete. Any representation to the contrary is
a criminal offense.
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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 our Class B Common Stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the Class B Common Stock.
In this prospectus, references to "Ticketmaster Online-CitySearch," "we," "us"
and "our" refer to Ticketmaster Online-CitySearch, Inc. and its subsidiaries.
The date of this prospectus is May __, 2000
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<TABLE>
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY...........................................................................1
THE COMPANY..................................................................................1
THE OFFERING.................................................................................4
RISK FACTORS.................................................................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........................................21
USE OF PROCEEDS.............................................................................21
SELLING STOCKHOLDERS........................................................................21
PLAN OF DISTRIBUTION........................................................................22
LEGAL MATTERS...............................................................................23
EXPERTS.....................................................................................23
WHERE YOU CAN FIND MORE INFORMATION.........................................................23
INCORPORATION OF DOCUMENTS BY REFERENCE.....................................................23
</TABLE>
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PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE NOTES TO THE FINANCIAL STATEMENTS AND OTHER INFORMATION
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
THE COMPANY
Ticketmaster Online-CitySearch, Inc. is a leading local portal and
electronic commerce company that provides in-depth local content and services to
help people get things done online. We offer practical tools for living that
make the Internet an important part of people's everyday lives. Our principal
operations are online city guides, online ticketing and online personals. Our
family of Web sites includes citysearch.com, ticketmaster.com, match.com,
museumtix.com, cityauction.com, astroabby.com and livedaily.com, among others.
In September 1998, our company was created by combining CitySearch, Inc. and
Ticketmaster Multimedia Holdings, Inc. (Ticketmaster Online), then a
wholly-owned online subsidiary of Ticketmaster Corporation, to create
Ticketmaster Online-CitySearch, a leading provider of local city guides, local
advertising and live event ticketing on the Internet.
CitySearch was incorporated in September 1995 and launched its first
local city guide in May 1996. Ticketmaster Online was formed in 1993 to
administer the online business of Ticketmaster Corporation and began selling
live event tickets and related merchandise online in November 1996. Subject to
specified limitations, our ticketmaster.com service is the exclusive agent of
Ticketmaster Corporation for the online sale of tickets to live events presented
by Ticketmaster Corporation's clients.
In 1999, we acquired CityAuction, Inc. (cityauction.com), an online
auction company, Match.com, Inc. (match.com) and Web Media Ventures, LLC (d/b/a
One & Only Network), which are both online personals services, and
astroabby.com, an online horoscope service. We are continuing to grow each of
these operations in their own right and we are also integrating their services
with our citysearch.com city guides. In addition, in 1999, we acquired the arts
and entertainment portion of The Microsoft Network (MSN) Sidewalk (sidewalk.com)
city guides, significantly expanding the reach of our citysearch.com city
guides. We have integrated the Sidewalk city guides with the citysearch.com city
guides to create a nationwide network. In January 2000, we acquired 2b
Technology, Inc., a Richmond, Virginia based visitor management software
developer and offline and online ticketing company targeted at venues such as
higher volume museums, cultural institutions and historic sites. We intend to
continue to make strategic acquisitions as appropriate opportunities become
available.
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Our portfolio of Web sites includes: citysearch.com, ticketmaster.com,
match.com, museumtix.com, cityauction.com, livedaily.com, astroabby.com and
jobs.citysearch.com, which are described in more detail below.
- - CITYSEARCH.COM is a network of local portal city guide sites that offer
primarily original local content for major U.S. and foreign cities as
well as practical transactional tools to get things done online. The
city guides provide up-to-date, locally produced information about a
city's arts and entertainment events, bars and restaurants, recreation,
community activities and businesses (shopping and professional
services), as well as local news, sports and weather updates.
citysearch.com city guides also let people act on what they learn by
supporting online business transactions, including ticketing,
reservations, auctions, matchmaking, merchandise sales and classifieds.
With our recent acquisition of the arts and entertainment portion of the
MSN Sidewalk (sidewalk.com) city guides, citysearch.com now reaches more
than 70 cities worldwide.TICKETMASTER.COM is the leading online
ticketing site and live event portal. Through our exclusive arrangement
with Ticketmaster Corporation, ticketmaster.com provides tickets for
more than 100 professional sports franchises and more than 3,750 leading
arenas, stadiums, performing arts venues and theaters. The site also
offers in-context, entertainment-related merchandise, including CDs,
apparel and memorabilia through STORE.TICKETMASTER.COM.
- - TICKETMASTER.COM is the leading online ticketing site and live event
portal. Through our exclusive arrangement with Ticketmaster Corporation,
ticketmaster.com provides tickets for more than 100 professional sports
franchises and more than 3,750 leading arenas, stadiums, performing arts
venues and theaters. The site also offers in-context,
entertainment-related merchandise, including CDs, apparel and
memorabilia through STORE.TICKETMASTER.COM.
- - MATCH.COM is a leading online matchmaking and dating service which
offers single adults a convenient, fun and private environment for
meeting other singles. In combination with the One & Only Network,
another online personals company we acquired in 1999 and which we are
integrating with match.com (the combined operations to be called
match.com), match.com has more than 4 million user registrations and
approximately 560,000 active users, generating more than 100 million
monthly page views. In addition, as part of our recent transaction with
Microsoft, match.com has become the premier provider of online personals
and matchmaking services on The Microsoft Network (MSN).
- - MUSEUMTIX.COM is 2b Technology's online ticketing site, providing
information and ticketing for cultural institutions and other venues,
including museums, zoos, aquariums and planetariums.
- - CITYAUCTION.COM is a person-to-person online auction service that
provides a local resource for online auctions. In addition to national
and regional auctions, cityauction.com lets users post and search for
items in their own locality, allowing them to trade items that would be
considered too valuable or difficult to transport, such as televisions
or furniture. Cityauction.com is a member of the FairMarket, Inc.
network of auction sites. Buyers and sellers using cityauction.com have
access to all of the auctions listed in the FairMarket network of
auction sites, including listings from users of many of the largest
internet portal Web sites.
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- - LIVEDAILY.COM is our daily online live entertainment news webzine that
offers music fans daily concert and music news, tour announcements,
reviews, interviews and exclusive national ticketing information.
livedaily.com users benefit from direct connections to our ticket
distribution network at ticketmaster.com and local music information via
citysearch.com's growing network of city guides.
- - ASTROABBY.COM is an entertaining and informative horoscope site that
provides free weekly and monthly astrology forecasts, as well as
astrology advice.
- - JOBS.CITYSEARCH.COM is our online source of employment classifieds and
specialists that can be viewed by city to make job searching efficient
and effective.
We have two classes of authorized Common Stock outstanding, Class A
Common Stock and Class B Common Stock. The rights of the holders of Class A
Common Stock and Class B Common Stock are substantially identical, except with
respect to voting, conversion and transfer. Except as otherwise required by
applicable law, each share of Class A Common Stock entitles its holder to 15
votes and each share of Class B Common Stock entitles its holder to one vote on
all matters submitted to a vote or for the consent of stockholders. Except as
otherwise required by applicable law, the Class A Common Stock and the Class B
Common Stock vote together as a single class on all matters submitted to a vote
or for the consent of stockholders. We have also authorized Class C Common Stock
which is nonvoting and of which no shares are issued and outstanding.
We are currently a direct, majority-owned subsidiary of Ticketmaster
Corporation, an Illinois corporation, which is an indirect, wholly-owned
subsidiary of USA Networks, Inc., a Delaware corporation, which is referred to
in this prospectus as USAi. USAi beneficially owns 43,782,544 shares, or
approximately 51.3%, of our total outstanding Common Stock, representing
approximately 82.1% of the total voting power of the outstanding Common Stock.
Our principal executive offices are located at 790 E. Colorado
Boulevard, Suite 200, Pasadena, California 91101, and our telephone number at
that address is (626) 405-0050.
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THE OFFERING
THE FOLLOWING SUMMARIZES THE SELLING STOCKHOLDERS' OFFERING OF OUR CLASS B
COMMON STOCK.
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Class B Common Stock to be offered
by the selling stockholders................................... 99,714 shares
Common Stock to be outstanding after the offering:
CLASS A COMMON STOCK.................................. 49,438,326 shares
CLASS B COMMON STOCK.................................. 36,325,539 shares
Total Common Stock.................................... 85,763,865 shares
Use of Proceeds............................................... We will not receive any
proceeds from the sale of the
shares.
Nasdaq National Market Symbol................................. TMCS
</TABLE>
The information concerning outstanding Common Stock above is as of April
1, 2000. Each share of Class A Common Stock automatically converts into one
share of Class B Common Stock upon transfer to anyone other than another holder
of Class A Common Stock.
Unless otherwise stated, all information contained in this prospectus
excludes:
(1) 1,589,956 shares of Class A Common Stock issuable upon the
exercise of options outstanding at April 1, 2000 at a weighted
average price of $5.05 per share under our 1996 Stock Plan;
(2) 3,860,185 shares of Class B Common Stock issuable upon the
exercise of options outstanding at April 1, 2000 at a weighted
average price of $27.62 per share under our 1998 Stock Plan;
(3) 3,704,959 shares of Class B Common Stock issuable upon the
exercise of options outstanding at April 1, 2000 at a weighted
average price of $36.18 per share under our 1999 Stock Plan; and
(4) an aggregate of 3,295,041 shares of Class B Common Stock
available for future grant or issuance as of February 1, 2000
under our 1998 Stock Plan, our 1999 Stock Plan and our 1998
Employee Stock Purchase Plan.
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RISK FACTORS
An investment in our Class B Common Stock offering is very risky. You
should carefully consider the following risk factors in addition to the
remainder of this prospectus before purchasing the Class B Common Stock. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Many factors, including those described below, may cause actual
results to differ materially from anticipated results.
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE CANNOT ASSURE YOU
THAT WE WILL ACHIEVE OR MAINTAIN PROFITABILITY.
We incurred net losses of $17.2 million and $121.4 million for the
eleven months ended December 31, 1998 and the year ended December 31, 1999,
respectively. We expect to expend significant financial and management resources
on the roll-out of our service in new citysearch.com owned and operated and
partner-led markets, site and content development on our citysearch.com,
cityauction.com, match.com and ticketmaster.com sites, integration of the
citysearch.com, cityauction.com, match.com, One & Only Network and
ticketmaster.com 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.
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;
- the ability of Ticketmaster Corporation 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 Corporation 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;
- our ability to provide superior customer service;
- our ability to continue to develop and upgrade our technologies
and commercialize our services incorporating these technologies;
and
- and our ability to generate sufficient online traffic and sales
volume to achieve profitability.
As a result of the merger of Ticketmaster Online and CitySearch in
September 1998, we recorded a significant amount of goodwill which will
adversely affect our earnings and profitability for the foreseeable future. We
recorded an aggregate of $315.0 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 $160.2 million of which related directly to the merger of Ticketmaster
Online and CitySearch and is to be amortized through 2003. In addition, our
acquisitions of cityauction.com, match.com and One & Only resulted in an
aggregate of $107.1 million in goodwill which will be amortized through 2004.
Our acquisition of 2b Technology, Inc. is expected to result in goodwill in an
amount approximating the purchase price
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that will be amortized through 2005. To the extent the amount of 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. In addition,
our acquisition of the Sidewalk assets resulted in $333.5 million of amortizable
allocated value to the assets, which will be amortized over five years.
Furthermore, we completed our initial public offering in December 1998
and have a limited history as a company with public reporting obligations. We
are hiring additional management personnel and are expanding our operating
systems to address these reporting obligations. To the extent these expenditures
precede and are not subsequently followed by increased revenues, our business,
financial condition and results of operations could be materially and adversely
affected.
OUR ONLINE TICKETING SERVICE IS DEPENDENT UPON OUR RELATIONSHIP WITH
TICKETMASTER CORPORATION.
In connection with the merger of CitySearch and Ticketmaster Online,
Ticketmaster Online, Ticketmaster Corporation and USAi entered into a license
agreement which designates, subject to certain limitations, Ticketmaster Online
(ticketmaster.com) as Ticketmaster Corporation's exclusive agent for online live
event ticket sales and as its non-exclusive agent for the online sale of
merchandise.
For the foreseeable future, we anticipate that a substantial portion of
our revenues will be derived from the online sale of tickets. We also expect
that we will continue to derive a substantial portion of our 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 Corporation. We do not have contractual relationships
with the entities for which our ticketmaster.com service sells tickets as
Ticketmaster Corporation's agent and we are restricted under the license
agreement from having such relationships, whether with current Ticketmaster
Corporation clients or its potential clients. Accordingly, our future revenues
and business success are dependent on Ticketmaster Corporation's ability to
maintain and renew relationships with its existing clients and to establish
relationships with additional clients.
For the year ended December 31, 1999, Ticketmaster Corporation processed
ticket sales for over 3,750 clients. Approximately 20% of Ticketmaster
Corporation's client contracts are subject to renewal each year. We are
dependent upon Ticketmaster Corporation's ability to enter into and maintain
client contracts on terms that are favorable to Ticketmaster Corporation and our
ticketmaster.com service. There can be no assurance that Ticketmaster
Corporation will be able to enter into or maintain client contracts on such
terms.
All of our online ticket sales are processed through Ticketmaster
Corporation's systems. Under the license agreement, Ticketmaster Corporation 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 license
agreement. The license agreement obligates Ticketmaster Corporation to process a
specified number of tickets sold online each year through December 31, 2001. As
a result, our future online ticketing revenues are dependent upon Ticketmaster
Corporation's ability to process online ticket sales in an accurate and timely
manner. While we believe that, due to our perpetual right to serve as
Ticketmaster Corporation's exclusive agent for online live event ticket sales,
Ticketmaster Corporation has a substantial interest in its relationship with us,
there can be no assurance that Ticketmaster Corporation will provide fulfillment
services to us in excess of the requirements of the license agreement and, in
particular, after December 31, 2001.
Our ability to generate ticket and merchandise sales on our
ticketmaster.com Web site is also dependent in part on Ticketmaster
Corporation's ability to maintain and enhance the Ticketmaster brand name. Any
failure on the part of Ticketmaster Corporation to maintain its existing base of
clients, to establish relationships with new
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clients upon terms favorable to our ticketmaster.com service, to obtain or
retain for us the right to sell tickets and merchandise online for Ticketmaster
Corporation's clients, to process our online ticket sales in a timely and
accurate manner or at levels necessary to support our 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.
WE ARE CONTROLLED BY USAi.
We are currently a direct, majority-owned subsidiary of Ticketmaster
Corporation, which is an indirect wholly-owned subsidiary of USAi. As of April
1, 2000, USAi owned approximately 51.3% of our total outstanding Common Stock,
representing approximately 82.1% of the total voting power of our total
outstanding Common Stock. As a result of its ownership of Class A Common Stock,
USAi generally 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. 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 directors.
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 Corporation and
Universal Studios, Inc., 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 Securities and Exchange Commission 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 Corporation, and
could materially and adversely affect our business, financial condition and
results of operations.
CONFLICTS OF INTEREST MAY ARISE BETWEEN TICKETMASTER ONLINE-CITYSEARCH AND USAi.
Conflicts of interest may arise between us, including our
ticketmaster.com service, on the one hand, and USAi and its affiliates,
including Ticketmaster Corporation, on the other hand, in areas relating to
past, ongoing and future relationships and other matters. These also include:
- corporate opportunities;
- indemnity arrangements;
- tax and intellectual property matters;
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- potential acquisitions or financing transactions;
- sales or other dispositions by USAi of shares of 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 our license
agreement with Ticketmaster Corporation, including possible amendments to, 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
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 create potential conflicts of
interest when directors and officers are faced with decisions that could have
different implications for us and USAi. Several 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. These businesses may have interests that conflict or compete in some
manner with our business. 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 Corporation. 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 the relevant procedures set forth
in our 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 in any activity that is similar to
our business will not have a material adverse effect on our business, financial
condition and results of operations or our other stockholders.
USAi MAY SELL A SIGNIFICANT PORTION OF OUR COMMON STOCK THAT IT OWNS WHICH COULD
ADVERSELY EFFECT THE PRICE OF OUR STOCK.
Subject to applicable federal securities laws, USAi may sell a
significant portion of the shares of Class A Common Stock beneficially owned by
it or distribute any or all of its shares of Class A Common Stock to its
stockholders. At April 1, 2000, USAi's holdings represented approximately 51.3%
of the outstanding Common Stock, representing approximately 82.1% of the voting
power of our total outstanding Common Stock. Pursuant to our Amended and
Restated Certificate of Incorporation, each share of Class A Common Stock will
generally be converted automatically into one share of Class B Common Stock upon
any transfer by the initial registered holder. Any sales or distributions by
USAi of substantial amounts of Common Stock in the public market or to its
stockholders, or the perception that these sales or distributions could occur,
could adversely affect the prevailing
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market prices for our Class B Common Stock. USAi is not subject to any
obligation to retain any portion of its controlling interest in us. We have not
granted to USAi any registration rights with respect to the shares of our Common
Stock owned by it.
WE MAY HAVE FUTURE CAPITAL NEEDS AND MAY NOT BE ABLE TO OBTAIN ADDITIONAL
FINANCING ON ACCEPTABLE TERMS.
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 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.
OUR TURNOVER RATE OF BUSINESS CUSTOMERS FOR THE CITYSEARCH.COM SERVICE IS HIGHER
THAN WE INITIALLY HAD ANTICIPATED AND, IF IT DOES NOT IMPROVE, OUR
CITYSEARCH.COM SERVICE WILL SUFFER.
The turnover rate of business customers using our citysearch.com service
has been higher than we had anticipated, and we cannot provide assurance that
turnover rates will decrease and will not in the future materially and adversely
affect our business, financial condition and results of operations.
Specifically, the turnover rate has been higher than we 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.
We cannot provide assurance that businesses will elect to outsource the
design, development and maintenance of their Web sites to services such as
citysearch.com. Businesses may elect to perform such tasks internally,
particularly if third-party providers of such services prove to be unreliable,
ineffective, 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 tasks, our business, financial condition and results of
operations could be materially and adversely affected.
OUR TICKETMASTER.COM SERVICE ALSO RELIES ON STRATEGIC RELATIONSHIPS.
Our ticketmaster.com service is to an extent dependent on its and
Ticketmaster Corporation's relationships with certain strategic partners
relating to the sharing of certain ticketmaster.com Web site and user links. We
hope to derive significant benefits, including increased revenues and consumer
awareness, from these relationships. 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 the relationships will be successful in
any respect or that we will be able to find suitable additional or replacement
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strategic partners. The failure of these relationships could have a material
adverse effect on our business, financial condition and results of operations.
A SHORTAGE OF TRAINED SALES PERSONNEL WOULD LIMIT OUR ABILITY TO SELL OUR
SERVICES.
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.com city guides. We
depend on our direct sales force to sell business Web sites in these markets.
The creation of new revenue from citysearch.com'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.com
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.
WE DEPEND ON KEY PERSONNEL AND 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, John Pleasants, our President, and Dan Marriott, our
Executive Vice President, Corporate Strategy and Development. The loss of the
services of Messrs. Conn, Pleasants, Marriott or other members of our management
team could have a material adverse effect on our business, financial condition
and results of operations. In addition, the ticketmaster.com service has been
managed historically by the management of Ticketmaster Corporation. Our success
will depend upon a successful completion of the transition of the
ticketmaster.com 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.
WE MUST MAINTAIN AND PROMOTE OUR BRANDS TO BE SUCCESSFUL.
We believe that maintaining and promoting the citysearch.com brand and,
to a lesser extent, the cityauction.com and match.com brands, are critical to
our efforts to attract consumers and business customers to our sites. We also
believe 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 our brands will depend largely on our
success, and, to a lesser extent, the success of 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.com 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 may be unsuccessful in
promoting and
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maintaining the citysearch.com brand. Furthermore, not all of our partners
promote the citysearch.com 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 this confusion may inhibit our
ability to develop our brand and network.
In order to attract and retain consumers and business customers, and to
promote our brands in response to competitive pressures, we have found it
necessary to increase our budget for content and 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
our brands or if we incur excessive expenses in an attempt to improve our
content or promote and maintain our brands, our business, financial condition
and results of operations could be materially and adversely affected.
OUR FIXED PRICE CONTRACTS EXPOSE US TO COST OVERRUNS AND OTHER RISKS.
The services we offer to citysearch.com 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.
THE MARKETS IN WHICH WE SELL OUR SERVICES ARE INTENSELY COMPETITIVE AND OUR
BUSINESS WOULD BE ADVERSELY AFFECTED IF WE FAIL TO GROW OUR MARKET SHARE OR
OTHERWISE FAIL TO SUCCESSFULLY COMPETE IN THESE MARKETS.
The markets for local interactive content and services, the selling of
live event tickets and related merchandise and our other services are highly
competitive and diverse. citysearch.com's primary competitors include Digital
City, Inc., a company wholly owned by America Online, Inc., Tribune Company, Cox
Interactive, Knight Ridder's Real Cities and InfoSpace. citysearch.com also
competes with numerous search engines and other site aggregation companies,
media, telecommunications and cable companies, Internet service providers and
niche competitors which focus on a specific category or geography and compete
with specific content offerings provided by us. Furthermore, additional major
media and other companies with financial and other resources greater than ours
may introduce new Internet products addressing the local interactive content and
service market in the future.
Ticketmaster Corporation's and ticketmaster.com's online services
compete with 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 conduct business online, including Tickets.com and
Ticketweb.com. In certain specific geographic regions, including certain of the
local markets in which citysearch.com provides or intends to provide our local
city guide service, one or more of Ticketmaster Corporation's and our
ticketmaster.com service's competitors may serve as the primary ticketing
service in the region. We believe that our ticketmaster.com service 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.
Furthermore, substantially all of the tickets sold through our ticketmaster.com
Web site are also sold by Ticketmaster Corporation by telephone and through
independent retail outlets. These sales by Ticketmaster Corporation could have a
material adverse effect on our online sales, and as a result, on our business,
financial condition and results of operations.
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The online dating services market is very competitive. match.com's and
One & Only Network's primary competitors include FriendFinder, Inc. and
Matchmaker.com, Inc., both of whom charge subscribers fees for use of their
services. In addition, match.com and One & Only Network face significant
competition from online dating services which are free to subscribers and which
are offered by most major portal sites, including Yahoo! Inc., Excite Inc. and
America Online, Inc., among others.
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.
WE NEED TO SUCCESSFULLY INTRODUCE NEW SERVICES TO GROW OUR BUSINESS.
We expect to continue to introduce new and expanded services in order to
generate additional revenues, attract more businesses and consumers, and respond
to competition. We also offer services facilitating the purchase of goods by
consumers from citysearch.com'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
significant additional expenses and development and may strain our management,
financial and operational resources. If we do not generate revenues from
expanded services sufficient to offset their costs, our business would suffer.
WE HAVE RECENTLY EXPERIENCED AND ARE CURRENTLY EXPERIENCING RAPID GROWTH AND OUR
INABILITY TO MANAGE THIS GROWTH COULD HARM OUR BUSINESS.
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 our 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
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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.com, cityauction.com,
match.com (including the One & Only Network) or ticketmaster.com services will
be able to sustain the rate of expansion that each has experienced in the past.
OUR SERVICES ARE SUBSTANTIALLY DEPENDENT ON OUR ABILITY TO CONTINUE TO DEVELOP
COMPELLING CONTENT.
Our success depends in part, upon our ability to deliver compelling
interactive content on our citysearch.com service, such as local events
information, recreation, business, shopping, professional services and
news/sports/weather and online ticketing services. We need to develop this
content in order to attract consumers with demographic characteristics valuable
to citysearch.com's business customers. Our success also depends on our ability
to develop and integrate compelling content with existing ticketing capabilities
on our ticketmaster.com Web site.
There can be no assurance that we will be successful in developing new
content and services or enhancing citysearch.com's existing local city guide
service, or the ticketmaster.com, cityauction.com, match.com or One & Only
Network services 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 our 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.com's business
customers, ticketmaster.com's advertisers and sponsors, and cityauction.com's,
match.com's and One & Only Network's users, our business, financial condition
and results of operations would be materially and adversely affected.
OUR PLANS TO EXPAND INTERNATIONALLY WILL REQUIRE US TO DEVELOP LOCALIZED
VERSIONS OF OUR SITES AND ADDRESS OTHER RISKS OF OPERATING INTERNATIONALLY.
A key 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.com
service, create localized user interfaces through the launch of additional
partner-led markets. We believe Ticketmaster Corporation intends to continue to
expand its operations outside of the United States, which will require
additional resources from our ticketmaster.com service 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. 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.
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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.
OUR BUSINESS RELIES ON THE PERFORMANCE OF OUR SYSTEMS AND THE PERFORMANCE AND
AVAILABILITY OF THIRD PARTY SYSTEMS.
The satisfactory performance, reliability and availability of our city
guides, online ticketing services, auction services, Internet personals 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.com
local city guides, cityauction.com, match.com and One & Only Network services,
and ticketmaster.com's online services to business customers and consumers. Our
services have experienced system interruptions in the past and we believe that
such interruptions will continue to occur from time to time in the future.
Any substantial increase in traffic on our services will also 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, our ticketmaster.com operations are substantially dependent
upon services and infrastructure provided by Ticketmaster Corporation that
enable ticketmaster.com to access information on ticket and merchandise
inventory, events and consumers maintained by Ticketmaster Corporation. In
addition, Ticketmaster Corporation has agreed to provide all order processing,
payment processing and fulfillment services for tickets to live events and
merchandise ordered through ticketmaster.com pursuant to the terms and subject
to the limitations of our license agreement. Any discontinuation or disruption
of these services by Ticketmaster Corporation would be disruptive to the
ticketmaster.com 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.com ticketing
operations and certain aspects of transaction processing. ticketmaster.com 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 will require us
to continue to expand and upgrade further ticketmaster.com technology,
transaction-processing systems and network infrastructure.
The ticketmaster.com 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 our ticketmaster.com service'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 we will be able to
effectively upgrade and expand our ticketmaster.com 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.
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SECURITY BREACHES OF OUR NETWORK SYSTEMS WOULD SIGNIFICANTLY ADVERSELY AFFECT
OUR BUSINESS.
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 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 security breaches or to alleviate problems caused by 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.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL
CHANGES THAT CHARACTERIZE THE INTERNET AND THE ONLINE COMMERCE INDUSTRY.
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 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.
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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, 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.
INFORMATION DISPLAYED ON OR ACCESSED FROM OUR WEB SITES MAY SUBJECT US TO
LIABILITY.
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.com, cityauction.com,
match.com, One & Only Network, ticketmaster.com or museumtix.com 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.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY CHALLENGES OR IF WE ARE SUBJECT
TO LITIGATION.
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 Corporation pursuant to our license agreement with Ticketmaster
Corporation. 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
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operations. We are dependent upon Ticketmaster Corporation to maintain and
assert its rights to the trademarks and defend infringement claims, if any.
IF WE FAIL TO COMPLY WITH THE LAWS AND REGULATIONS THAT GOVERN OUR SERVICES, OUR
BUSINESS COULD BE ADVERSELY AFFECTED.
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.
As of April 21, 2000, we are subject to the Children's Online Privacy
Protection Act of 1998 ("COPPA"). Pursuant to COPPA, a Web site operator must
provide notice on its Web sites of the information it collects from children
under the age of 13, how it uses that information and to whom it discloses that
information. With certain exceptions, the operator must obtain verifiable
parental consent for any collection, use or disclosure of personal information
submitted online by children under the age of 13. We believe we are currently
in, and intend to continue to remain in, compliance with COPPA. However, in the
event we are found to have violated COPPA, we could be subject to penalties of
up to $10,000 per violation.
Our ticketmaster.com service 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 our ticketmaster.com service does
business, including bills that would regulate
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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.
WE MAY BE SUBJECT TO GOVERNMENTAL INVESTIGATIONS AND LITIGATIONS.
From time to time, federal, state and local authorities have conducted
investigations or inquiries with respect to Ticketmaster Corporation's
compliance with antitrust, unfair business practice and other laws. In 1994, the
Antitrust Division of the Department of Justice commenced an investigation,
which was concluded in 1995 with no enforcement action being taken against
Ticketmaster Corporation. Ticketmaster believes it has not taken any action
which is improper. 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.
During 1994, Ticketmaster Corporation 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 Corporation. These lawsuits alleged that
Ticketmaster Corporation'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 Corporation
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
Corporation's services did not bar them from seeking equitable relief against
Ticketmaster Corporation. 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. The action is
still pending.
Ticketmaster Corporation has stated that the Court's affirmance of the
decision prohibiting plaintiffs from obtaining monetary damages against
Ticketmaster Corporation 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
Corporation 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 Corporation does business.
In March 1995, MovieFone, Inc. and The Teleticketing Company, L.P. filed
a complaint against Ticketmaster Corporation 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, 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 Corporation,
by its conduct, frustrated and prevented plaintiffs' ability to do so.
Plaintiffs further allege that Ticketmaster Corporation has interfered with and
caused Pacer Cats to breach its contract with plaintiffs. The complaint asserts
that Ticketmaster Corporation's actions violate Section 7 of the Clayton Act and
Sections 1 and 2 of the Sherman Act, and that Ticketmaster Corporation
tortiously interfered with contractual and prospective business relationships
and seeks monetary and injunctive relief based on such allegations. Ticketmaster
Corporation 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 Corporation's motion to dismiss, Ticketmaster Corporation
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
18
<PAGE>
claims. Ticketmaster Corporation filed a motion to dismiss the amended complaint
in April 1997, which is 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 Corporation, restricting or prohibiting their
activity with respect to aspects of the movie teleticketing business for a
specified period of time. Neither USAi, Ticketmaster Corporation, nor any entity
owned or controlled by Ticketmaster Corporation, were parties to the
arbitration. In May 1998, MovieFone filed a petition in New York state court to
hold an entity affiliated with Ticketmaster Corporation 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 Corporation 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 Corporation affiliate had violated the injunction and awarded
MovieFone approximately $1.38 million for losses it incurred as a result of such
violations. The Ticketmaster Corporation affiliate filed a notice of appeal of
the court's decision, including to seek reversal of the ruling regarding
successor liability and violations of the injunction. The appeal was denied by
order entered January 11, 2000. Further, on December 21, 1999, the court
extended the injunction for six months.
On July 22, 1999, a class action entitled ANTHONY MARTIN V. TICKETMASTER
LLC; TICKETMASTER CORPORATION; TICKETMASTER GROUP, INC.; TIME CONSUMER SERVICE,
INC. AND JOHN DOES 1-10 was filed in the United States District Court for the
Northern District of Illinois. The plaintiff alleges that Ticketmaster
Corporation engages in unlawful business practices in connection with offering
"Entertainment Weekly" magazine to consumers. The complaint, which alleges that
Ticketmaster's policies violate 39 U.S.C. 3009 (mailing of unordered
merchandise) and Section 2 of the Illinois Consumer Fraud and Deceptive Business
Practices Act, seeks restitution, damages, punitive damages and attorney's fees.
The defendants filed an answer on September 16, 1999. Ticketmaster Corporation
believes that these allegations have no merit.
On or about December 17, 1999, a purported class action lawsuit entitled
ADRIANA GARZA, ET AL. V. SOUTHWEST TICKETING, INC., D/B/A TICKETRON,
TICKETMASTER AND RAINBOW TICKETMASTER, TICKETMASTER TEXAS MANAGEMENT,
TICKETMASTER LLC, TICKETMASTER GROUP, INC., TICKETMASTER ONLINE-CITYSEARCH, INC.
AND THE MAY DEPARTMENT STORES COMPANY, Case No. C-5714-99-B, was filed in state
court in the District Court of Hidalgo County, Texas, 93rd Judicial District.
The lawsuit challenges the cash discounts offered by Ticketmaster Corporation's
outlets in Texas, and alleges that Defendants impose a surcharge on credit card
users. On January 14, 2000, Defendants removed the case to a federal court, and
filed an Answer on January 24, 2000 denying the allegations. Plaintiff filed a
motion to remand to state court, to which Defendants filed a response on
February 18, 2000. On March 8, 2000, the federal court granted the Plaintiff's
motion to remand the case to state court. Plaintiff filed a motion for partial
summary judgment on March 24, 2000 and, on May 1, 2000, Defendants filed a
cross-motion for summary judgment. Ticketmaster Online-City Search, Inc.
contends in the cross-motion for summary judgment that, in addition to the fact
that the cash discounts offered at outlets are legal, it has no liability
because it was not involved in the sale of tickets to the Plaintiff and,
further, that it does not sell any tickets for which cash discounts are
available. There is no hearing date yet for the motions for summary judgment. On
April 3, 2000, Plaintiff amended her petition. The amended petition includes
allegations by Plaintiff of her desire to represent a class of plaintiffs from
the State of Texas, Oklahoma, Kansas, New York, Florida, Connecticut, Maine,
Massachusetts and Colorado. In addition, Plaintiff also stated her desire for
the proposed class to include not only credit card purchasers of tickets at
outlets but also credit card purchasers of tickets over the telephone and the
Internet. Plaintiff filed her Motion for Class Certification on April 11, 2000.
Hearing is not yet scheduled on this motion. Ticketmaster Online-City Search,
Inc. intends to vigorously defend this action. On May 1, 2000, Ticketmaster
Online-CitySearch filed a summary judgment motion in which Ticketmaster
Online-CitySearch argued, among other things, that it should be dismissed
from the lawsuit because Ticketmaster Online-CitySearch only sells tickets by
credit card and has no relationship with the plaintiffs or Ticketmaster
Corporation's outlets in Texas.
There can be no assurance that we or Ticketmaster Corporation 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 or Ticketmaster Corporation or our
affiliates could limit or prevent ticketmaster.com 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
19
<PAGE>
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.
ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.
As part of our business strategy, we intend to make acquisitions of or
significant investments in, complementary companies, products or technologies.
For example, we recently completed our acquisitions of cityauction.com,
match.com, One & Only Network, the Sidewalk assets and 2b Technology. In
addition, we made investments in foodline.com, an online restaurant reservation
company, FairMarket, Inc., an online auction company, and ActiveUSA.com, an
online participatory sports reservation and registration company. These
acquisitions and investments and any future acquisitions and investments are and
will 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. Our
inability to overcome such risks could dilute our stockholder value and
materially adversely affect our operating results.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE DO NOT MAINTAIN THE VALUE OF OUR
DOMAIN NAMES.
We currently hold and license various Web domain names relating to our
brand, including the "citysearch.com", "cityauction.com", "match.com",
"ticketmaster.com", "sidewalk.com" and "museumtix.com" domain names. The
acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees. 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 we conduct 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.
20
<PAGE>
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT MAY AFFECT THE PRICE OF OUR
STOCK.
Our Restated Certificate of Incorporation and the Restated Bylaws and
Delaware General Corporation Law Section 203 contains provisions that may render
more difficult, or have the effect of discouraging, unsolicited takeover bids
from third parties or the removal of our incumbent management. 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, 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.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "intend," "potential," or "continue" or the negative of such terms
or other comparable terminology. These statements are only predictions. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including the risks outlined under "Risk Factors" and elsewhere in this
prospectus.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
our Class B Common Stock by the selling stockholders pursuant to this
prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the selling
stockholders as of April 1, 2000:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF SHARES SHARES BENEFICIALLY
SELLING STOCKHOLDER OFFERING OFFERED OWNED AFTER OFFERING
- --------------------------- ----------------------- -------------------- -----------------------
<S> <C> <C> <C>
Cendant Corporation 87,500 87,500 -
- --------------------------- ----------------------- -------------------- -----------------------
Charter Ventures III LLC 11,100 11,100 -
- --------------------------- ----------------------- -------------------- -----------------------
Jere E. Goyan 213 213 -
- --------------------------- ----------------------- -------------------- -----------------------
Donald C. Harrison 213 213 -
- ------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
- --------------------------- ----------------------- -------------------- -----------------------
<S> <C> <C> <C>
Fred M. Schwarzer 213 213 -
- --------------------------- ----------------------- -------------------- -----------------------
GCA Investments '98 300 300 -
- --------------------------- ----------------------- -------------------- -----------------------
John Montgomery 175 175 -
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents shares of Class B Common Stock owned by Cendant
Intermediate Holdings, Inc., a wholly owned subsidiary of
Cendant Corporation.
PLAN OF DISTRIBUTION
In March 1999, we issued 12,214 shares of the shares of Class B
Common Stock offered hereby to certain of the selling stockholders in
connection with our acquisition of cityauction.com. In June 1999, we issued
87,500 of the shares of Class B Common Stock offered by this prospectus to
one of the selling stockholders in connection with our acquisition of
match.com Pursuant to these sales, we agreed to register the shares under the
Securities Act of 1933 for resale to the public. Under the registration
rights agreements between us and the selling stockholders, we must use
reasonable commercial efforts to keep this registration statement, or a
replacement, continuously effective under the Securities Act until the
earlier of (1) such time as the selling stockholders have sold all shares
offered by this prospectus, or a replacement prospectus, (2) the date on
which the shares, in the opinion of counsel to the selling stockholders, may
be immediately sold without restriction, including without limitation as to
volume, without registration under the Securities Act and (3) 360 days
following the date of effectiveness of the registration statement.
The sale of all or a portion of the shares of Class B Common Stock
offered hereby by the selling stockholders may be effected from time to time at
prevailing market prices at the time of such sales, at prices related to such
prevailing prices, at fixed prices that may be changed or at negotiated prices.
The selling stockholders may effect such transactions by selling directly to
purchasers in negotiated transactions, to dealers acting as principals or
through one or more brokers, or any combination of these methods of sale. In
addition, shares may be transferred in connection with the settlement of call
options, short sales, through the issuance of exchangeable or convertible
securities or similar transactions that may be effected by the selling
stockholders. Dealers or brokers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or
purchasers of shares for whom they may act as agent (which compensation may be
in excess of customary commissions). The selling stockholders and any brokers or
dealers that participate in the distribution may under certain circumstances be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by such brokers or dealers and any profits realized on the
resale of shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act. We and the selling stockholders may agree
to indemnify such brokers or dealers against certain liabilities, including
liabilities under the Securities Act.
To the extent required under the Securities Act or the rules of the
Securities and Exchange Commission, a supplemental prospectus will be filed,
disclosing (1) the name of any such brokers or dealers, (2) the number of shares
involved, (3) the price at which such shares are to be sold, (4) the commissions
paid or discounts or concessions allowed to such brokers or dealers, where
applicable, (5) that such brokers or dealers did not conduct any investigation
to verify the information set out in this prospectus, as supplemented, and (6)
other facts material to the transaction.
There is no assurance that the selling stockholders will sell any or all
of the shares of Class B Common Stock offered hereby.
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<PAGE>
We have agreed to pay the expenses incurred in connection with the
registration of the shares of Class B Common Stock offered hereby. The selling
stockholders will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of such shares.
LEGAL MATTERS
The validity of our Class B Common Stock to be offered in this
prospectus will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los
Angeles, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this Prospectus and elsewhere in the Registration Statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may inspect
and copy these reports, proxy statements and other information at the public
reference facilities of the SEC at:
- Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
- 7 World Trade Center, Suite 1300, New York, New York 10048; and
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661.
You may also obtain copies of these materials from the public reference section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. You should call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC also maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding companies and other persons that file electronically with the SEC. The
SEC's Internet web site address is http:\\www.sec.gov. You may inspect reports
and other information that we file at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
We have filed a registration statement and related exhibits with the SEC
under the Securities Act. The registration statement, which includes this
prospectus, contains additional information about our company and the shares to
be sold by the selling stockholder. You may inspect the registration statement
and exhibits without charge at the office of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and you may obtain copies from the SEC at prescribed
rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and the information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the following documents that we have filed with the SEC:
- Annual Report on Form 10-K for the year ended December 31, 1999;
23
<PAGE>
- Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
- Current Report on Form 8-K filed January 28, 2000;
- Current Report on Form 8-K filed April 20, 2000;
- Definitive Proxy Statement filed April 20, 2000; and
- The description of our Class B Common Stock contained in our
Registration Statement on Form 8-A (File No. 000-25041) filed on
November 6, 1998, pursuant to Section 12(g) of the Exchange Act,
including any amendment or report filed for the purpose of
updating such description.
We are also incorporating by reference additional documents that we may
file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act between the date of the prospectus and the termination of the offering of
the shares offered hereby. You may request a copy of these filings at no cost,
by writing or telephoning us at the following address and phone number:
Ticketmaster Online-CitySearch, Inc.
Attn: Chief Financial Officer
790 E. Colorado Boulevard, Suite 200
Pasadena, California 91101
Telephone: (626) 405-0050
24
<PAGE>
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information.
99,714 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
----------------
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We will pay all expenses incident to the offering and sale to the public
of the shares being registered including any commissions and discounts of
underwriters, dealers or agents and any transfer taxes. Such expenses are set
forth in the following table except commissions, discounts and transfer taxes.
All of the amounts shown are estimates, except for the SEC registration fee:
<TABLE>
<CAPTION>
AMOUNT
ITEM TO BE PAID
- ---------------------------------------------------------------------------------- -----------
<S> <C>
SEC Registration fee..................................................... $12,980
Printing fees and expenses............................................... 50,000
Accounting fees and expenses............................................. 50,000
Legal fees and expenses.................................................. 150,000
Blue Sky fees and expenses............................................... 5,000
Transfer agent and registrar fees........................................ 1,000
Miscellaneous............................................................ 6,020
-----------
Total....................................................................... $275,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are a Delaware corporation. Section 145 of the General Corporation
Law of the State of Delaware (the "Delaware Law") empowers a Delaware
corporation to indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
action by or in the right of such corporation), by reason of the fact that such
person was an officer or director of such corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
Our Amended and Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The effect of these provisions is to eliminate our rights and the rights
of our stockholders (through stockholders' derivative suits on our behalf) to
recover monetary damages against a director for breach of fiduciary duty of care
as a director (including breaches resulting from negligent or grossly negligent
behavior), except in certain limited situations. These provisions do not limit
or eliminate our rights or any of our stockholder's rights to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. These provisions will not alter the liability of
directors under federal securities laws.
II-1
<PAGE>
Our Bylaws provide for the indemnification of officers, directors and
third parties acting on behalf of us if such person acted in good faith and in a
manner reasonably believed to be in and not opposed to our best interest, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his conduct was unlawful.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE NOTES
------- ------------- -----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB
Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White,
dated May 31, 1996. (A)*
2.2 Amended and Restated Agreement and Plan of Reorganization, among
CitySearch, Inc., Tiberius, Inc., USA Networks, Inc., Ticketmaster Group,
Inc., Ticketmaster Corporation and Ticketmaster Multimedia Holdings, Inc.,
dated August 12, 1998. (A)
2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by
and among Ticketmaster Online--CitySearch, Inc., Nero
Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele and
Monica Lee as amended. (B)
2.4 Agreement and Plan of Reorganization, dated as of February 8,1999, by and
among USA Networks, Inc., Ticketmaster Online-CitySearch, Inc., Lycos,
Inc., USA Interactive Inc., Lemma, Inc. and Tycho, Inc. (the "Merger
Agreement"), including Form of Certificate of Designations, Preferences
and Rights of Series A Convertible Redeemable Preferred Stock of USA/Lycos
Interactive Networks, Inc. (Exhibit B to the Merger Agreement). (C)
2.5 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate
Holdings, Inc. and Ticketmaster Online--CitySearch, Inc. dated as of
May 14, 1999. (D)
2.6 Agreement and Plan of Reorganization dated June 10, 1999 among
Ticketmaster Online--CitySearch, Web Media Ventures LLC (dba One
& Only Network) and William Bunker, David Kennedy and Glenn Wiggins. (D)
2.7 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft
Corporation and the Registrant, dated as of July 19, 1999. (E)
2.8 Agreement and Plan of Merger by and among the Registrant, TMCS
Merger Sub, Inc., 2b Technology, Inc., Bryan Bostic, Eric
Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and
Kenneth Bostic, dated as of January 30, 2000 (G)
4.1 Specimen Class B Common Stock Certificate. (F)
4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be
delivered upon closing of the Sidewalk acquisition (3,000,000 shares). (E)
4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be
delivered upon closing of the Sidewalk acquisition (1,500,000 shares). (E)
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the
securities being registered.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
</TABLE>
- -------------------------
II-2
<PAGE>
* Confidential treatment has been granted with respect to portions of this
exhibit.
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on September 30, 1998.
(B) Incorporated by reference to the Company's Report on Form 10-K filed with
the Commission on March 31, 1999.
(C) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits," of the Report on form 8-K filed by USA Networks, Inc. (File No.
000-20570) with the Commission on February 26, 1998.
(D) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-81761) filed with the Commission on June 29, 1999.
(E) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits," of the Report on Form 10-Q filed with the Commission on August
16, 1999.
(F) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on November 6, 1998.
(G) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-3 (File No.
333-30884) filed with the Commission on February 22, 2000.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned registrant 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 of 1933, 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; and
(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 this offering.
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE
ACT DOCUMENTS BY REFERENCE
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities and Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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. UNDERTAKING IN RESPECT OF INCORPORATED ANNUAL AND QUARTERLY
REPORTS
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or
II-4
<PAGE>
paid by a director, officer or controlling person of the registrant 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, the registrant 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 of 1933 and will be governed by the
final adjudication of such issue.
E. UNDERTAKING PURSUANT TO RULE 430A
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or Rule 497(h)
under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus 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-5
<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-3 and has duly caused this
Post-Effective Amendment No. 2 on Form S-3 to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Pasadena, California, on the 17th day of May, 2000.
TICKETMASTER ONLINE-CITYSEARCH, INC.
By: */s/ CHARLES CONN
---------------------------------
Charles Conn
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 2 on Form S-3 to the Registration Statement on
Form S-1 has been signed below by the following persons in the capacities
indicated below on the 17th day of May 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -----------------
<S> <C> <C>
*/s/ CHARLES CONN Chief Executive Officer (Principal May 17, 2000
- -------------------------- Executive Officer) and Director
Charles Conn
*/s/ THOMAS MCINERNEY Chief Financial Officer, Executive May 17, 2000
- -------------------------- Vice President, Finance and Treasurer
Thomas McInerney (Principal Financial and Accounting Officer)
*/s/ BARRY BAKER Director May 17, 2000
- --------------------------
Barry Baker
*/s/ TERRY BARNES Director May 17, 2000
- --------------------------
Terry Barnes
*/s/ BARRY DILLER Director May 17, 2000
- ---------------------------
Barry Diller
*/s/ JOSEPH GLEBERMAN Director May 17, 2000
- ---------------------------
Joseph Gleberman
*/s/ WILLIAM GROSS Director May 17, 2000
- ----------------------------
William Gross
/s/ ALLEN GRUBMAN Director May 17, 2000
- ----------------------------
Allen Grubman
/s/ LAWRENCE JACOBSON Director May 17, 2000
- ----------------------------
Lawrence Jacobson
*/s/ VICTOR A. KAUFMAN Director May 17, 2000
- ----------------------------
Victor A. Kaufman
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ DARA KHOSROWSHAHI Director May 17, 2000
- ----------------------------
Dara Khosrowshahi
/s/ BRYAN LOURD Director May 17, 2000
- ----------------------------
Bryan Lourd
/s/ JOHN PLEASANTS Director May 17, 2000
- ----------------------------
John Pleasants
*/s/ WILLIAM D. SAVOY Director May 17, 2000
- ----------------------------
William D. Savoy
*/s/ ALAN SPOON Director May 17, 2000
- -----------------------------
Alan Spoon
*/s/ THOMAS UNTERMAN Director May 17, 2000
- -----------------------------
Thomas Unterman
</TABLE>
* By: /s/ BRADLEY K. SERWIN
----------------------------
Bradley K. Serwin
Attorney-in-Fact
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE NOTES
------- ------------- -----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB
Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White,
dated May 31, 1996. (A)*
2.2 Amended and Restated Agreement and Plan of Reorganization, among
CitySearch, Inc., Tiberius, Inc., USA Networks, Inc., Ticketmaster Group,
Inc., Ticketmaster Corporation and Ticketmaster Multimedia Holdings, Inc.,
dated August 12, 1998. (A)
2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by
and among Ticketmaster Online--CitySearch, Inc., Nero
Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele and
Monica Lee as amended. (B)
2.4 Agreement and Plan of Reorganization, dated as of February 8,1999, by and
among USA Networks, Inc., Ticketmaster Online-CitySearch, Inc., Lycos,
Inc., USA Interactive Inc., Lemma, Inc. and Tycho, Inc. (the "Merger
Agreement"), including Form of Certificate of Designations, Preferences
and Rights of Series A Convertible Redeemable Preferred Stock of USA/Lycos
Interactive Networks, Inc. (Exhibit B to the Merger Agreement). (C)
2.5 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate
Holdings, Inc. and Ticketmaster Online--CitySearch, Inc. dated as of
May 14, 1999. (D)
2.6 Agreement and Plan of Reorganization dated June 10, 1999 among
Ticketmaster Online--CitySearch, Web Media Ventures LLC (dba One
& Only Network) and William Bunker, David Kennedy and Glenn Wiggins. (D)
2.7 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft
Corporation and the Registrant, dated as of July 19, 1999. (E)
2.8 Agreement and Plan of Merger by and among the Registrant, TMCS
Merger Sub, Inc., 2b Technology, Inc., Bryan Bostic, Eric
Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and
Kenneth Bostic, dated as of January 30, 2000 (G)
4.1 Specimen Class B Common Stock Certificate. (F)
4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be
delivered upon closing of the Sidewalk acquisition (3,000,000 shares). (E)
4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be
delivered upon closing of the Sidewalk acquisition (1,500,000 shares). (E)
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the
securities being registered.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
- -------------------------
</TABLE>
* Confidential treatment has been granted with respect to portions of this
exhibit.
II-8
<PAGE>
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on September 30, 1998.
(B) Incorporated by reference to the Company's Report on Form 10-K filed with
the Commission on March 31, 1999.
(C) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits," of the Report on form 8-K filed by USA Networks, Inc. (File No.
000-20570) with the Commission on February 26, 1998.
(D) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-81761) filed with the Commission on June 29, 1999.
(E) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits," of the Report on Form 10-Q filed with the Commission on August
16, 1999.
(F) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on November 6, 1998.
(G) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-3 (File No.
333-30884) filed with the Commission on February 22, 2000.
II-9
<PAGE>
EXHIBIT 5.1
OPINION OF GIBSON, DUNN & CRUTCHER LLP
MAY 18, 2000
(213) 229-7000
Ticketmaster Online-CitySearch, Inc.
790 E. Colorado Blvd., Suite 200
Pasadena, CA 91101
Re: POST-EFFECTIVE AMENDMENT NO. 2 ON FORM S-3 TO REGISTRATION
STATEMENT OF FORM S-1
Ladies and Gentlemen:
We have examined the Post-Effective Amendment No. 2 on Form S-3 to
the Registration Statement on Form S-1 (SEC File No. 333-81761) (the
"Registration Statement") of Ticketmaster Online-CitySearch, Inc., a Delaware
corporation (the "Company"), filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the offering from time to
time by the stockholders identified therein of 99,714 shares of Class B
Common Stock, par value $.01 per share, of the Company (the "Common Stock").
All capitalized terms which are not defined herein shall have the meanings
assigned to them in the Registration Statement.
For the purpose of the opinion set forth below, we have examined and
are familiar with the proceedings taken and proposed to be taken by the
Company in connection with the authorization and issuance of the Common
Stock, including such corporate records of the Company and certificates of
officers of the Company and of public officials and such other documents as
we have deemed relevant and necessary as the basis for the opinion set forth
below. In such examination, we have assumed the genuineness of all signatures
on, and the authenticity of, all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as
copies. With respect to agreements and instruments executed by natural
persons, we have assumed the legal competency of such persons.
On the basis of the foregoing examination and in reliance thereon,
and subject to the assumptions stated and relying on the statements of fact
contained in the documents we have examined, we are of the opinion that the
Common Stock is validly issued, fully paid and non-assessable.
We render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the United States of America and the
General Corporation Law of the State of Delaware. In rendering this opinion,
we assume no obligation to revise or supplement this opinion should current
laws, or the interpretations thereof, be changed.
We consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and the prospectus which
forms a part thereof. In giving these consents, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act or the Rules and Regulations of the Commission.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
KMD
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No.2 to the Registration Statement (Form S-3 No.
333-81761) and related Prospectus of Ticketmaster Online-CitySearch, Inc. and
to the incorporation by reference therein of our report dated January 26,
2000, with respect to the consolidated financial statements of Ticketmaster
Online-CitySearch, Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1999, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Woodland Hills, California
May 15, 2000
