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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 2000.
REGISTRATION NO. 333-30884
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
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. S. Brian Farmer, Esq.
Gibson, Dunn & Crutcher LLP Hirschler, Fleischer, Weinberg, Cox & Allen
333 South Grand Avenue 701 East Byrd Street
Los Angeles, California 90071 P.O. Box 500
(213) 229-7000 Richmond, VA 23218
(804) 771-9504
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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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MARCH , 2000
458,005 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
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This prospectus relates to the public offering of 458,005 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. Pursuant to an agreement
among us and the selling stockholders, the number of shares held by the selling
stockholders and offered hereby may be adjusted prior to the time of
effectiveness of the registration statement of which this prospectus forms a
part. For more detailed information, see "Summary -- Recent Developments." 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 March 21, 2000, the last reported sale price of our Class B
Common Stock was $26.50 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.
----------------
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 March __, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY.....................................................................1
THE COMPANY............................................................................1
RECENT DEVELOPMENTS....................................................................2
THE OFFERING...........................................................................4
RISK FACTORS...........................................................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.....................................24
USE OF PROCEEDS.......................................................................24
SELLING STOCKHOLDER...................................................................24
PLAN OF DISTRIBUTION..................................................................25
LEGAL MATTERS.........................................................................26
EXPERTS...............................................................................27
WHERE YOU CAN FIND MORE INFORMATION...................................................27
INCORPORATION OF DOCUMENTS BY REFERENCE...............................................27
</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
We have combined CitySearch and Ticketmaster Online to create 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. Prior to the
merger, Ticketmaster Online was operated as a wholly-owned subsidiary of
Ticketmaster Corporation, a leading provider of live event automated ticketing
services in the United States. We are integrating our local CitySearch city
guides with our Ticketmaster Online live events ticketing and merchandising
distribution capabilities to offer online ticketing, merchandise, electronic
coupons and other transactions to a broader audience of consumers. The
CitySearch city guides provide up-to-date information regarding arts and
entertainment events, community activities, recreation, business, shopping,
professional services and news/sports/weather to consumers in metropolitan
areas. Ticketmaster Online offers consumers up-to-date information on live
entertainment events and a convenient means of purchasing tickets and related
merchandise on the Web for live events in 44 states and in Canada and the United
Kingdom. Consumers can access the Ticketmaster Online service at
www.ticketmaster.com and from CitySearch owned and operated city guides at
www.citysearch.com and through numerous direct links from banners and event
profiles. Subject to specific limitations, Ticketmaster Online is the exclusive
agent for Ticketmaster Corporation for the online sale of tickets to live events
presented by Ticketmaster Corporation's clients.
We intend to accelerate the expansion of different versions of the
CitySearch city guides into new local territories. We include selected
CitySearch editorial content on the Ticketmaster Online Web site, thereby
providing additional information to assist purchasing decisions. We believe that
by expanding our branded network of local city guides and increasing the sales
of tickets sold online, our Web sites will increasingly attract local, regional
and national advertisers and local consumers seeking to transact on our Web
sites. We have recently expanded our Internet offerings by purchasing
CityAuction, Inc., an online person-to-person auction company, two leading
online personals companies, Match.com, Inc. and Web Media Ventures LLC (d/b/a
One & Only Network), and the arts and entertainment portion of Sidewalk.com.
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.
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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 51.5%, of our total outstanding Common Stock, representing
approximately 77.6% 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.
RECENT DEVELOPMENTS
ACQUISITION OF 2B TECHNOLOGY, INC.
On January 31, 2000, we acquired all of the outstanding shares of
capital stock of 2b Technology, Inc., a Virginia corporation. 2b Technology
is a fully-integrated visitor management and ticketing firm targeted at
venues such as higher volume museums, cultural institutions and historic
sites. The initial target purchase price for the 2b Technology shares is
approximately $23 million of our Class B Common Stock. At the closing, we
issued 400,809 shares of Class B Common Stock, representing a value of $16.85
million based upon the average of the closing price of our Class B Common
Stock on the Nasdaq National Market for the five trading days ended January
27, 2000, which was $42.04, to the shareholders of 2b Technology. The number
of shares issued at closing was subject to adjustment based on the closing
price of our Class B Common Stock on the Nasdaq National Market for the five
trading days ended two days prior to the filing of the request for
acceleration of effectiveness of the registration statement of which this
prospectus forms a part; provided that the per share price used to calculate
the adjustment could not be greater than $47.30 nor less than $36.79, which
were the maximum and minimum share prices to be used in that adjustment.
Pursuant to such adjustment, we issued an additional 57,196 shares of Class B
Common Stock to the former shareholders of 2b Technology on March 21, 2000.
We are registering hereby the 458,005 shares of our Class B Common Stock
which were issued to the former shareholders of 2b Technology at closing and
subject to the post-closing adjustment. The remainder of the purchase price
may range from $0 to $11 million, subject to, among other things, actual
revenues of 2b Technology for the 2000 and 2001 fiscal years. The acquisition
will be accounted for using the purchase method of accounting. It is expected
that the acquisition will result in goodwill in an amount approximating the
purchase price that will be amortized by the Company over a period of five
years.
INVESTMENT IN ACTIVEUSA.COM
On December 16, 1999, we completed the purchase of 6,031,128 shares of
preferred stock of ActiveUSA.com, Inc. (formerly known as RaceGate.com, Inc.), a
Delaware corporation, an online participatory sports registration and
information company. In connection with and immediately preceding our
investment, ActiveUSA.com, Inc., a Florida corporation engaged in the same
business as RaceGate.com, merged with and into a wholly owned subsidiary of
RaceGate.com and pursuant to the merger RaceGate.com's name was changed to
ActiveUSA.com. The total consideration we paid to ActiveUSA.com for the
preferred stock is valued at $15.5 million, consisting of shares of our Class B
Common Stock with a fixed value of $10 million, $2.5 million in cash, and $3.0
million in services we are to provide to ActiveUSA.com under a distribution
agreement.
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Upon the closing of our investment, we issued 243,620 shares of our
Class B Common Stock to ActiveUSA.com. These shares have been deposited into
escrow and registered pursuant to a registration statement on Form S-3 which was
declared effective by the SEC on February 11, 2000. Pursuant to our agreement
with ActiveUSA.com, the escrow agent will deliver $10 million of the net
proceeds from the sale of the shares to ActiveUSA.com and the remainder, if any,
of the net proceeds will be delivered to us. If the net proceeds from the sale
of the shares are less than $10 million, we will make up the difference to
ActiveUSA.com in cash. In the event the sale of the shares is expected to
generate net proceeds in excess of $10 million, ActiveUSA will elect to sell
only that number of shares which are expected to yield net proceeds of $10
million. At any time prior to the sale of the shares, we have the option to pay
ActiveUSA.com $10 million in cash and have the shares returned to us.
INVESTMENT BY TICKETMASTER CORPORATION
On December 1, 1999, Ticketmaster Corporation purchased 1,302,401
shares of our Class B Common Stock for an aggregate purchase price of
$40,000,000. The purchase price per share of approximately $30.71 represents the
average closing price of our Class B Common Stock over the five trading days
immediately preceding the investment.
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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......................... 458,005 shares
Common Stock to be outstanding after the offering:
CLASS A COMMON STOCK....................... 52,678,110 shares
CLASS B COMMON STOCK....................... 32,829,956 shares
Total Common Stock......................... 85,508,066 shares
Use of Proceeds..................................... We will not receive any
proceeds from the sale of
the shares. See "Use of
Proceeds."
Nasdaq National Market Symbol....................... TMCS
</TABLE>
The information concerning outstanding Common Stock above is as of
February 1, 2000. Each share of Class A Common Stock automatically converts into
one share of Class B Common Stock upon transfer.
Unless otherwise stated, all information contained in this prospectus
excludes:
(1) 1,819,894 shares of Class A Common Stock issuable upon the
exercise of options outstanding at February 1, 2000 at a
weighted average price of $5.05 per share under our 1996 Stock
Plan;
(2) 2,588,977 shares of Class B Common Stock issuable upon the
exercise of options outstanding at February 1, 2000 at a
weighted average price of $24.63 per share under our 1998
Stock Plan;
(3) 2,712,975 shares of Class B Common Stock issuable upon the
exercise of options outstanding at February 1, 2000 at a
weighted average price of $38.95 per share under our 1999
Stock Plan; and
(4) an aggregate of 2,603,356 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 twelve months ended December 31,
1999, respectively. We expect to expend significant financial and management
resources on the roll-out of our service in new CitySearch 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, CityAuction, Match.com, One & Only Network and Ticketmaster Online
services, strategic relationships, technology and operating infrastructure. As a
result, we expect to incur significant additional losses and continued negative
cash flow from operations for the foreseeable future.
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 $315.9 million of goodwill and other intangibles,
$154.8 million of which related to the transaction in which Ticketmaster Group,
Inc. became a wholly-owned subsidiary of USAi, and is to be amortized through
2008, and $161.1 million of which related directly to the merger of Ticketmaster
Online and CitySearch and is to be amortized through 2003. In addition, our
acquisitions of CityAuction, 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 is expected to result in goodwill in an amount
approximating the purchase price that will be amortized through 2005.. To the
extent the amount of recorded goodwill is increased or we have future
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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 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
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 majority 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 Online 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 Online 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 Online Web sites 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 clients upon terms favorable to our
Ticketmaster Online service, to obtain or retain for us the right to sell
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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
February 1, 2000, USAi owned approximately 51.5% of our total outstanding Common
Stock, representing approximately 77.6% 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 and Universal
Studios, two other significant USAi stockholders, Mr. Diller generally has the
right to control the outcome of any matter requiring the approval of USAi
stockholders, other than with respect to specified fundamental changes relating
to USAi or its subsidiaries. To engage in these fundamental changes, the
approval of each of Mr. Diller, Liberty Media and Universal Studios is generally
required. Copies of the governance and stockholders agreements among USAi,
Universal Studios, Liberty Media and Mr. Diller have been filed with the
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 OUR COMPANY AND USAi.
Conflicts of interest may arise between us, including our Ticketmaster
Online 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;
- potential acquisitions or financing transactions;
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- 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 businesses. Subject to applicable Delaware law, USAi is under no
obligation, and has not indicated any intention, to share any future business
opportunities available to it with us except as expressly provided by our
license agreement with Ticketmaster 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 businesses 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 February 1, 2000, USAi's holdings represented approximately
51.5% of the outstanding Common Stock, representing approximately 77.6% 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 market prices for our Class B Common
Stock. USAi is not subject to any obligation to retain any portion of its
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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.
OUR FUTURE OPERATIONS DEPEND ON THE SUCCESSFUL INTEGRATION OF OUR COMPONENT
COMPANIES.
Before the transactions that combined CitySearch and Ticketmaster
Online, these companies operated independently and Ticketmaster Online operated
as a wholly-owned subsidiary of Ticketmaster Corporation and USAi. CityAuction,
Match.com and One & Only Network also operated independently prior to their
acquisition by us. Our future success will depend to a significant extent on the
efficient, effective and timely integration of the operations of these
companies. This integration includes the combination of different business
models, different technologies and personnel with different expertise and
backgrounds and the development of services in which CitySearch's local content,
CityAuction's auction functionality, Match.com's and One & Only Network's
Internet personals technology, 2b Technology's museum and cultural institution
ticketing technology and Ticketmaster Online's live event-specific content and
transactional capabilities are integrated with each other. To the extent we
close additional acquisitions, we will need to integrate those companies as
well.
We are also evaluating our existing technologies and our ability to
support the expanded range of products and services we are expected to offer. We
are currently linking the Ticketmaster Online ticketing service more closely
with some of our CitySearch city guides and promoting CityAuction's, Match.com's
and One & Only Network's services throughout the city guides. We have not
executed this integration in the past, and this integration could require
adaptation of existing technologies or development of new technologies. There
can be no assurance that we will be able to coordinate either operational or
technological integration effectively or efficiently with these entities. If we
do not effectively accomplish the integration of the companies' operations or
lose any key employees from these companies, our business, financial condition
and results of operations could be materially and adversely affected.
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 FUTURE REVENUES ARE DIFFICULT TO PREDICT AND WE EXPECT OUR OPERATING RESULTS
TO FLUCTUATE.
As a result of our limited operating history and the emerging nature of
the markets in which we compete, we are unable to accurately forecast our future
revenues. Our current and future expense levels are based predominantly on our
operating plans and estimates of future revenues and are to a large extent
fixed. For example, the CitySearch business model, particularly in our owned and
operated markets, requires significant staffing to develop content and to create
and maintain relationships with small- and medium-size businesses. We may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues would
likely have an immediate material adverse effect on our business, financial
condition and results of operations. Furthermore, we currently intend to
increase our operating expenses to roll out our CitySearch service in new
markets, to fund increased sales and marketing and customer service operations,
to further develop our technology infrastructure, to integrate our local content
with the event-specific content and transactional capabilities of our
Ticketmaster Online service and to broaden our management personnel. To the
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extent these expenses precede or are not subsequently followed by increased
revenues, our operating results will fluctuate and net anticipated losses in
a given quarter may be greater than expected.
We expect to experience significant fluctuations in our future
operating results due to a variety of factors, many of which are outside of our
control. Factors that may adversely affect our operating results include, but
are not limited to:
- Ticketmaster Corporation's ability to maintain and increase the
number of clients for which it provides online ticketing
services;
- the ability of our partners to meet roll-out schedules for
CitySearch city guide services;
- the timing and amount of license and royalty payments from our
partners;
- our ability to increase the volume of online ticket sales through
the Ticketmaster Online Web site;
- our ability to offer our online ticketing services through our
city guides in our partner-led markets on terms acceptable to us;
- our ability to increase the number of users of the CityAuction
service and revenues generated from auctions;
- our ability to retain existing business customers, attract new
business customers at a steady rate and maintain customer
satisfaction;
- the timing and volume of new business Web site orders and our
capacity to meet such orders;
- our ability to maintain or increase current rates of sales
productivity;
- the announcement or introduction of new or enhanced sites and
services by us or our competitors;
- the amount of traffic on our online sites;
- the amount of expenditures for online advertising by businesses;
- the level of use of the Web and online services and consumer
acceptance of the Internet for services such as those offered by
us;
- our ability to upgrade and develop our systems and attract
personnel in a timely and effective manner;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business and infrastructure,
technical difficulties, system downtime or Internet brownouts;
- political or economic events affecting the cities in which we
operate; and
- general economic conditions.
Unfavorable changes in any of the above factors could adversely affect
our revenues, gross margins and results of operations in future periods. In
addition, we derive a majority of our Ticketmaster Online revenues directly or
indirectly from the sale of tickets and related merchandise for live
entertainment, sporting and leisure events and this revenue is directly affected
by the popularity, frequency and location of these events. Factors affecting the
demand for and attendance of these events include general economic conditions,
consumer trends and work stoppages. Any occurrence or condition that results in
decreased attendance or demand for these
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entertainment, sporting and leisure events would likely have a material
adverse effect on our business, financial condition and results of operations.
As a result of the foregoing, we believe that period-to-period
comparisons of our results of operations should not be relied upon as an
indication of future performance. In addition, the results of any quarterly
period are not indicative of results to be expected for a full fiscal year. The
foregoing factors are largely unpredictable and our quarterly results of
operations may be below the expectations of public market analysts or investors
in some future period.
WE COMPETE IN NEW AND EMERGING MARKETS AND OUR SERVICES MAY NOT GAIN WIDESPREAD
ACCEPTANCE IN THESE MARKETS.
The markets for our services have only recently begun to develop, are
rapidly evolving and are characterized by a number of entrants that have
introduced or plan to introduce competing services. As is typical in the case of
new and rapidly evolving industries, demand and market acceptance for recently
introduced services are subject to a high level of uncertainty and risk. It is
therefore difficult to predict the size and future growth rate, if any, of these
markets.
There can be no assurance that the markets for our services will
develop or that demand for our services will emerge or become economically
sustainable. For example, the success of our Ticketmaster Online service will
depend on the willingness of consumers to purchase tickets to live events and
related merchandise online and our ability to significantly increase online
traffic and sales volume. The success of the CityAuction service will depend, in
part, on users' willingness to post and purchase goods or services online. The
success of Match.com's and One & Only Network's service will depend on the
willingness of single adults to subscribe to online dating services. The success
of CitySearch's city guide service will depend, in part, on the willingness of
local businesses to pay for custom business Web sites developed by us and to
retain the service, which in turn may depend on the popularity of the guides to
consumers and on the actual or perceived revenues attributable to the services.
The success of 2b Technology will depend on the willingness of museums and other
cultural institutions to license 2b Technology's ticketing software and the
willingness of consumers to purchase tickets to such institutions online or via
telephone. If the markets for our services fail to develop or develop more
slowly than anticipated or we are not successful in gaining widespread
acceptance in these markets, our business, financial condition and results of
operations could be materially and adversely affected.
OUR TURNOVER RATE OF BUSINESS CUSTOMERS FOR THE CITYSEARCH SERVICE IS HIGHER
THAN WE INITIALLY HAD ANTICIPATED AND, IF IT DOES NOT IMPROVE, OUR CITYSEARCH
SERVICE WILL SUFFER.
The turnover rate of business customers using our CitySearch 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.
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We cannot provide assurance that businesses will elect to outsource the
design, development and maintenance of their Web sites to services such as
CitySearch. Businesses may elect to perform such tasks internally, particularly
if third-party providers of such services prove to be unreliable, ineffective,
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.
WE DEPEND ON THE CONTINUED GROWTH OF ONLINE COMMERCE.
Our future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the Web and online services as an
effective medium of commerce by consumers. The rapid growth in the use of and
interest in the Web, the Internet and commercial online services is a recent
phenomenon. There can be no assurance that acceptance and use will continue to
develop or that a sufficiently broad base of consumers will adopt, and continue
to use, the Web and online services as a medium of commerce, particularly for
purchasing tickets to live events and related merchandise.
Demand for recently introduced services and products over the Web and
online services is subject to a high level of uncertainty, and there are
relatively few proven services and products to date. The development of the Web
and online services as a viable commercial marketplace is subject to a number of
factors, including:
- continued growth in the number of Internet users and users of
such services;
- concerns about transaction security;
- continued development of the necessary technological
infrastructure; and
- the development of complementary services and products.
If the Web and online services do not become a viable commercial
marketplace, our business, financial condition and results of operations would
be materially and adversely affected.
THE SUCCESS OF OUR CITYSEARCH SERVICE DEPENDS IN PART ON ESTABLISHING AND
MAINTAINING STRATEGIC RELATIONSHIPS WITH LOCAL MEDIA COMPANIES
An important element of our past business strategy with respect to the
CitySearch service was to enter into agreements with local media companies to
establish and support city guides. We have entered into agreements with media
companies to address opportunities. In these "partner-led" markets, we develop
and design a city guide for local media companies and license certain
intellectual property to these companies in exchange for certain up-front and
continuing license payments and royalty payments. These royalty payments are
based on the amount of revenues generated by these companies through the
partner-led city guides. While we do not currently anticipate that royalty
payments from these agreements will constitute an increasing portion of our
revenues in future periods, because of the long-term nature of our agreements
with existing partner-led markets our success will continue to depend in part
upon the ability of our partners to generate revenue through their city guides.
Under the terms of our agreements with our media company partners, we
have very limited control over the amount of time and financial resources that a
partner devotes to the launch of a city guide or over the day-to-day operations
and management of the city guide, including the marketing and sale of business
Web sites to potential business customers. Some of our agreements also grant
exclusivity in certain territories. There can be no assurance that our partners
that are in the process of developing new city guides or any future partners
will launch their sites in a timely manner, or at all, or that if launched, such
sites will generate revenues consistent with our expectations.
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Furthermore, we are unable to accurately forecast our revenues to be derived
from these agreements with the partners. The exclusivity provisions in some
of our agreements also place certain limitations on our ability to license
our intellectual property to other partners. In addition, some of our
agreements with our media company partners may be terminated for failure to
meet performance criteria. Any failure by one of our proposed partner-led
city guides to launch in a timely manner or by one of our existing
partner-led city guides to generate sufficient revenues, or a failure by us
to enter into or to renew agreements with media company partners on terms
favorable to us or early termination of certain existing agreements could
have a material adverse effect on our business, financial condition and
results of operations.
We have entered into a license and services agreement with Classified
Ventures, pursuant to which we license elements of our technology and business
systems to Classified Ventures and provide services in automotive and real
estate classified advertising categories. We receive significant revenues from
licensing and service fees under this agreement. Under this agreement, we are
restricted from entering into certain classified advertising markets and from
licensing our technology and business systems to competitors of Classified
Ventures. Our inability to compete with Classified Ventures or to license
technology to competitors of Classified Ventures may have a material adverse
effect on our business, financial condition and results of operations.
In our owned and operated markets, we have entered into co-promotion or
distribution agreements with a number of television, radio, print media and
online companies. Some of these agreements are of a short duration and there can
be no assurance that our co-promotion or distribution partners with respect to
the CitySearch business will not terminate their agreements with us or that we
will secure additional co-promotion or distribution partners in the future which
could have a material adverse effect on our business, financial condition and
results of operations.
OUR TICKETMASTER ONLINE SERVICE ALSO RELIES ON STRATEGIC RELATIONSHIPS.
Our Ticketmaster Online service is to an extent dependent on its and
Ticketmaster Corporation's relationships with certain strategic partners
relating to the sharing of certain Ticketmaster Online 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 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 city guides. We
depend on our direct sales force to sell business Web sites in these markets.
The creation of new revenue from CitySearch's city guide service and our
roll-out in additional cities requires the services of a highly trained sales
force working directly for us. Accordingly, a shortage in the number of trained
salespeople could limit our ability to sell business Web sites as we roll out
our service in new cities or to maintain or increase our number of business
customers in cities in which we already operate. We have in the past and expect
in the future to experience a high rate of turnover in our direct sales force.
There can be no assurance that turnover will not increase in the future or have
a material adverse effect on our sales, which could have a material adverse
effect on our business, financial condition and results of operations.
In addition, we currently derive a portion of our Ticketmaster Online
revenues from the sale of banner advertising and sponsorships. A shortage in the
number of trained salespeople could limit our ability to sell additional banner
advertising or sponsorships or renew existing sponsorship or advertising
relationships, which could have a material adverse effect on our business,
financial condition and results of operations.
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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 Online 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
Online 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 brand and, to
a lesser extent, the CityAuction 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 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 maintaining the CitySearch brand. Furthermore, not all of our
partners promote the CitySearch brand on their services with a high level of
prominence. In addition, users accessing partner-led market sites that contain
different interfaces from our owned and operated sites may be confused by the
differences in interface or navigation, and 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 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.
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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'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 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 Online'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 only conduct business online, including Tickets.com
and Ticketweb.com. In certain specific geographic regions, including certain of
the local markets in which CitySearch provides or intends to provide our local
city guide service, one or more of Ticketmaster Corporation's and our
Ticketmaster Online service's competitors may serve as the primary ticketing
service in the region. We believe that our Ticketmaster Online 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
Online 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.
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
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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'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 can
be no assurance that we will be able to manage recent or any future expansions
successfully, and any failure by us to do so could have a material adverse
effect on our business, financial condition and results of operations. There
also can be no assurance that our CitySearch, CityAuction, Match.com (including
the One & Only Network) or Ticketmaster Online 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 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's
business customers. Our success also depends on our ability to develop and
integrate compelling content with existing ticketing capabilities on our
Ticketmaster Online Web site.
There can be no assurance that we will be successful in developing new
content and services or enhancing CitySearch's existing local city guide
service, or the Ticketmaster Online, CityAuction, 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's business
customers, Ticketmaster Online's advertisers and sponsors, and CityAuction's,
Match.com's and One &
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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
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 Online 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.
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 local
city guides, CityAuction, Match.com and One & Only Network services, and
Ticketmaster Online'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 Online operations are substantially
dependent upon services and infrastructure provided by Ticketmaster Corporation
that enable Ticketmaster Online 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 Online pursuant to the terms and
subject to
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the limitations of our license agreement. Any discontinuation or disruption
of these services by Ticketmaster Corporation would be disruptive to the
Ticketmaster Online business and would likely have a material adverse effect
on our business, financial condition and results of operations.
We use a custom-developed system for our Ticketmaster Online ticketing
operations and certain aspects of transaction processing. Ticketmaster Online
has experienced temporary system interruptions, which may continue to occur in
the future from time to time. Any substantial increase in the volume of traffic
on our online sites or the number of tickets purchased by consumers will require
us to continue to expand and upgrade further Ticketmaster Online technology,
transaction processing systems and network infrastructure.
The Ticketmaster Online service has experienced, and we expect to
continue to experience, temporary capacity constraints due to sharply
increased traffic for certain events, which may cause unanticipated system
disruptions, slower response times and degradation in levels of service. In
addition, to the extent we experience delays in processing ticketing
confirmations and reporting accurate financial information, our operations
would be adversely affected. There can be no assurance that our Ticketmaster
Online 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
Online 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.
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.
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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.
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, CityAuction, Match.com,
One & Only Network or Ticketmaster Online sites or on sites operated by our
partners. These claims have been brought, and sometimes successfully pressed,
against online services. Although we intend to maintain our general liability
insurance at current levels, our insurance may not cover claims of these types
or may not be adequate to indemnify us for any liability that may be imposed.
Any imposition of liability, particularly liability that is not covered by
insurance or is in excess of insurance coverage, could have a material adverse
effect on our reputation and our business, financial conditions and results of
operations.
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
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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 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.
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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.
Our Ticketmaster Online 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 Online service does
business, including bills that would regulate the amount of convenience charges
and handling charges, are introduced from time to time in federal, state and
local legislative bodies. We are unable to predict whether any such bills will
be adopted and, if so, whether such legislation would have a material effect on
our business, financial condition and results of operations.
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.
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
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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, or the Pacer Cats, to provide teleticketing services
to movie theaters. Plaintiffs also allege that, together with Pacer Cats, they
had planned to begin selling tickets to live entertainment events, and that
Ticketmaster 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 claims. Ticketmaster Corporation filed a motion to dismiss
the amended complaint in April 1997, which is scheduled to be heard on January
28, 2000. 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 court held a
hearing on December 21, 1999, and extended the injunction for six months to June
30, 2000. Ticketmaster Corporation's appeal of the court's decision was denied
by an order entered January 11, 2000.
On July 22, 1999, a class action entitled ANTHONY MASON 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 engages
in unlawful business practices in connection with offering "Entertainment
Weekly" and "Sports Illustrated" 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.
Ticketmaster believes that these allegations have no merit.
On December 17, 1999, a purported class action entitled ADRIANA GARZA
V. SOUTHWEST TICKETING, INC., TICKETMASTER L.L.C., TICKETMASTER GROUP AND MAY
DEPARTMENT STORES was filed against Ticketmaster, alleging that a consumer was
charged a surcharge for using a credit card to purchase ticket at a Ticketmaster
outlet in Hidalgo County, Texas. Ticketmaster offers a discount for cash
purchases in Hidalgo County, Texas. Ticketmaster offers a discount for cash
purchases in accordance with state law. Ticketmaster denies the allegations.
In addition, we and Ticketmaster Corporation are defendants in
litigation filed in the Central District of California commenced by ETM
Entertainment Network, Inc. alleging anti-trust violations and interference
with a contract. Ticketmaster Corporation denies the allegations.
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Ticketmaster Corporation also is a defendant in two actions in federal
court in Texas challenging the cash discounts offered by Ticketmaster
Corporation's outlets in Texas.
There can be no assurance that we, Ticketmaster Online 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, Ticketmaster
Online or Ticketmaster Corporation or our affiliates could limit or prevent
Ticketmaster Online from engaging in its online ticketing business or subject us
to potential damage assessments, all of which could have a material adverse
effect on our business, financial condition or results of operations. Regardless
of its merit, source or outcome, any such litigation, investigation or
proceeding would at a minimum be costly and could divert the efforts of our
management and other personnel from productive tasks, which could have a
material adverse effect on our business, financial condition or results of
operations.
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, 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
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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.
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 March 21, 2000:
<TABLE>
<CAPTION>
- -------------------------------- ----------------------------- ------------------------- ----------------------------
SHARES BENEFICIALLY OWNED NUMBER OF SHARES OFFERED SHARES BENEFICIALLY OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING AFTER OFFERING
- -------------------------------- ----------------------------- ------------------------- ----------------------------
<S> <C> <C> <C>
Bryan T. Bostic (1) 325,184 325,184 --
- -------------------------------- ----------------------------- ------------------------- ----------------------------
Erik K. Martin (2) 107,631 107,631 --
- -------------------------------- ----------------------------- ------------------------- ----------------------------
</TABLE>
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<TABLE>
- -------------------------------- ----------------------------- ------------------------- ----------------------------
<S> <C> <C> <C>
Kenneth W. Bostic (3) 4,580 4,580 --
- -------------------------------- ----------------------------- ------------------------- ----------------------------
Live Oak Holdings, L.C. (4) 18,320 18,320 --
- -------------------------------- ----------------------------- ------------------------- ----------------------------
Clarke Holdings, L.C. (5) 2,290 2,290 --
- -------------------------------- ----------------------------- ------------------------- ----------------------------
</TABLE>
(1) Mr. Bryan Bostic currently serves as the Vice Chairman of 2b
Technology pursuant to an employment agreement with 2b Technology
and us. The 325,184 shares of our Class B Common Stock
beneficially owned by Mr. Bostic include 180,445 shares which are
subject to a lock-up arrangement and may not be sold by Mr.
Bostic until July 30, 2000.
(2) Mr. Martin currently serves as the President of 2b Technology
pursuant to an employment agreement with 2b Technology and us.
The 107,631 shares of our Class B Common Stock beneficially owned
by Mr. Martin include 59,424 shares which are subject to a
lock-up arrangement and may not be sold by Mr. Martin until July
30, 2000.
(3) Mr. Kenneth Bostic is currently an employee of 2b Technology. The
4,580 shares of our Class B Common Stock beneficially owned by
Mr. Bostic include 2,541 shares which are subject to a lock-up
arrangement and may not be sold by Mr. Bostic until July 30,
2000.
(4) Live Oak Holdings, L.C. is a Virginia limited liability company
of which Mr. Bryan Bostic is the manager. The 18,320 shares of
our Class B Common Stock beneficially owned by Live Oak Holdings
include 10,166 shares which are subject to a lock-up arrangement
and may not be sold by Live Oak Holdings until July 30, 2000.
(5) Clarke Holdings, L.C. is a Virginia limited liability company of
which Mr. Martin is the manager. The 2,290 shares of our Class B
Common Stock beneficially owned by Clarke Holdings include
1,271 shares which are subject to a lock-up arrangement and may
not be sold by Clarke Holdings until July 30, 2000.
The shares described above were originally issued by us in connection
with our acquisition of 2b Technology which is described more fully under
"Prospectus Summary--Recent Developments." The shares were issued pursuant to
exemptions from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). The shares are being registered by us pursuant
to the Agreement and Plan of Merger, dated January 30, 2000, by and among us, 2b
Technology, Inc., TMCS Merger Sub, Inc., a wholly-owned subsidiary of ours, and
the selling stockholders. Pursuant to the Agreement and Plan of Merger, an
aggregate of 264,591 of the shares issued by us to the selling stockholders at
closing may not be transferred until July 30, 2000.
PLAN OF DISTRIBUTION
The selling stockholders (and their respective donees, distributees,
pledgees and personal representatives) may, from time to time, offer for sale
and sell or distribute the shares of our Class B Common Stock offered hereby in
transactions executed on the Nasdaq National Market, in negotiated transactions,
private sales or through other means. The selling stockholders under some
circumstances might be deemed underwriters under the Securities Act. As a
precaution against such a possibility, the selling stockholders intend to
deliver prospectuses to purchasers in accordance with Section 5 of the
Securities Act. Sales may be effected at market prices prevailing at the time of
sale or at such other prices as may be negotiated by the selling stockholders.
The shares may be sold by one or more of the following: (a) a block trade in
which the broker-dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchased by a
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broker-dealer as principal and resold by such broker-dealer for its account
pursuant to this prospectus; (c) an exchange distribution in accordance with
the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate in the resales.
In connection with distributions of the shares or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers.
In connection with such transactions, broker-dealers may engage in short
sales of shares of our Class B Common Stock in the course of hedging the
positions they assume with the selling stockholders. The selling stockholders
may also sell shares of our Class B Common Stock short and deliver the shares
offered hereby to close out such short positions. In connection with the
foregoing transactions, the selling stockholders may be required to deliver
this prospectus. The selling stockholders or such other broker-dealers that
require the delivery to the broker-dealer of the shares registered hereunder,
which the broker-dealer may resell or otherwise transfer pursuant to this
prospectus. The selling stockholders may also loan or pledge the shares
registered hereunder to a broker-dealer and the broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may effect sales of the
pledged shares, in each case pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders in amounts
to be negotiated in connection with the sale. Such broker-dealers or agents and
any other participating broker-dealers may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act in connection with such sales
and any such commission, discount or concession may be deemed to be underwriting
discounts or commissions under the Securities Act. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this prospectus. In order to comply
with the securities laws of certain states, if applicable, the shares will be
sold in such jurisdictions only through registered or licensed brokers or
dealers.
The selling stockholders will be responsible for 50% of any fees,
disbursements and expenses of any counsel for the selling stockholders. All
other expenses incurred in connection with the registration of the shares
offered hereby, including SEC registration fees, printer's and accounting fees ,
50% of any fees, disbursements and expenses of any counsel for the selling
stockholders, and the fees, disbursements and expenses of our counsel will be
borne by us. Commissions and discounts, if any, attributable to the sales of the
shares offered hereby will be borne by the selling stockholders. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. We have agreed to
indemnify the selling shareholders against certain liabilities in connection
with the offering of the shares, including liabilities arising under the
Securities Act.
We have undertaken to keep a registration statement of which this
prospectus constitutes a part effective until the earliest to occur of (a) all
shares offered hereby being sold pursuant to the registration statement or (ii)
the twelve month anniversary of the date on which the registration statement of
which this prospectus constitutes a part was declared effective by the SEC.
After such period, if we choose not to maintain the effectiveness of the
registration statement of which this prospectus constitutes a part, the shares
offered hereby may not be sold, pledged, transferred or assigned, except in a
transaction which is exempt under the provisions of the Securities Act or
pursuant to an effective registration statement thereunder.
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. Certain legal matters in connection with the offering will
be passed upon for the selling stockholders by Hirschler, Fleischer, Weinberg,
Cox & Allen, Richmond, Virginia.
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EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of CitySearch, Inc. for the period from September 20, 1995
(date of formation) to December 31, 1995 and for each of the two years ended
December 31, 1997 and the consolidated financial statements of Ticketmaster
Online-CitySearch, Inc. (Ticketmaster Online) (formerly Ticketmaster Multimedia
Holdings, Inc.) for each of the two years ended January 31, 1998 and the eleven
month period ended December 31, 1998 as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration
statement. The financial statements are incorporated by reference in reliance on
Ernst & Young's reports, 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
- Quarterly Report on Form 10-Q for the quarter ended March 31,
1999
- Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
- Quarterly Report on Form 10-Q for the quarter ended September 30,
1999
- Current Report on Form 8-K filed on April 29, 1999
27
<PAGE>
- Current Report on Form 8-K filed on August 3, 1999
- Current Report on Form 8-K filed on September 29, 1999
- Current Report on Form 8-K filed January 28, 2000
- 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
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.
28
<PAGE>
458,005 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
----------------
<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>
AMOUNT
TO BE
ITEM PAID
- ----------------------------------------------------------- -------------
<S> <C>
SEC Registration fee....................................... $4,044
Accounting fees and expenses............................... 5,000
Legal fees and expenses.................................... 15,000
Nasdaq listing fees ....................................... 4,580
Blue Sky fees and expenses................................. 1,000
Transfer agent and registrar fees.......................... 500
Miscellaneous.............................................. 5,000
-------------
Total...................................................... $35,124
=============
</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 +
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).
24.1 Power of Attorney (included on signature page).
</TABLE>
II-2
<PAGE>
- -------------------------
+ Filed Previously
* 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.
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pasadena, California, on the 22nd day of March, 2000.
TICKETMASTER ONLINE-CITYSEARCH, INC.
By: /s/ CHARLES CONN
---------------------------------
Charles Conn
Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints Charles Conn, Brad Serwin and Thomas
McInerney, jointly and severally, his attorney-in-fact, each with the power of
substitution for him in any and all capacities, to sign any amendments to this
Registration Statement (including post-effective amendments), and to sign any
registration statement for the same Offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated below on the 22nd day of March 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- ---------------------------------- -----------------
<S> <C> <C>
/S/ CHARLES CONN
- --------------------------------------- Chief Executive Officer (Principal March 22, 2000
Charles Conn Executive Officer) and Director
/S/ THOMAS MCINERNEY
- --------------------------------------- Chief Financial Officer, Executive Vice March 22, 2000
Thomas McInerney President, Finance and Treasurer
(Principal Financial and Accounting
Officer)
*/S/ BARRY BAKER
- --------------------------------------- Director March 22, 2000
Barry Baker
*/S/ TERRY BARNES
- --------------------------------------- Director March 22, 2000
Terry Barnes
*/S/ BARRY DILLER
- --------------------------------------- Director March 22, 2000
Barry Diller
*/S/ JOSEPH GLEBERMAN
- --------------------------------------- Director March 22, 2000
Joseph Gleberman
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
*/S/ WILLIAM GROSS
- --------------------------------------- Director March 22, 2000
William Gross
*/S/ LAWRENCE JACOBSON
- --------------------------------------- Director March 22, 2000
Lawrence Jacobson
*/S/ VICTOR A. KAUFMAN
- --------------------------------------- Director March 22, 2000
Victor A. Kaufman
*/S/ ROBERT KAVNER
- --------------------------------------- Director March 22, 2000
Robert Kavner
*/S/ DARA KHOSROWSHAHI
- --------------------------------------- Director March 22, 2000
Dara Khosrowshahi
*/S/ WILLIAM D. SAVOY
- --------------------------------------- Director March 22, 2000
William D. Savoy
*/S/ ALAN SPOON
- --------------------------------------- Director March 22, 2000
Alan Spoon
*/S/ THOMAS UNTERMAN
- --------------------------------------- Director March 22, 2000
Thomas Unterman
*By: /S/ BRADLEY K. SERWIN
---------------------------------
Bradley K. Serwin
Attorney-In-Fact
</TABLE>
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 +
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).
24.1 Power of Attorney (included on signature page).
</TABLE>
- -------------------------
+ Filed Previously
* 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.
II-9
<PAGE>
EXHIBIT 5.1
OPINION OF GIBSON, DUNN & CRUTCHER LLP
March 21, 2000
(213) 229-7000
Ticketmaster Online-CitySearch, Inc.
790 E. Colorado Blvd., Suite 200
Pasadena, CA 91101
Re: REGISTRATION STATEMENT OF FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (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 458,005 shares of 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 PUBLIC ACCOUNTANTS
We consent to reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 dated March 22, 2000) and related prospectus
of Ticketmaster Online-CitySearch, Inc. and to the incorporation by reference of
our report dated March 11, 1998 (except Note 10, as to which the date is
September 28, 1998) with respect to the consolidated financial statements of
CitySearch, Inc. for the period from September 20, 1995 (date of formation) to
December 31, 1995 and for each of the two years ended December 31, 1997.
included in its Annual Report (Form 10-K) for the transitional period ended
December 31, 1998, filed with the Securities and Exchange Commission.
We also consent to the incorporation by reference of our report dated January
29, 1999 with respect to the consolidated financial statements of Ticketmaster
Online-CitySearch, Inc. for each of the two years ended January 31, 1998 and the
eleven month period ended December 31, 1998 included in its Annual Report (Form
10-K) for the transitional period ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Woodland Hills, California
March 22, 2000
